Analysis Featured

APIs That Facilitate the Bank Transfers of Online Lenders

Dwolla money transfers

College dropouts either make it in life or end up under a bridge while the MBAs rule the world. Ben Milne has made it, and what’s more, he created a company that has made a spectacular splash in the fintech pool. Dwolla.

Once an early branded payment network, Dwolla has transformed into a SaaS product its creator could only have dreamed of. Here’s the story from start to finish.

Dwolla as a Consumer-Facing Mobile App

Milne owned a manufacturing company while working his way through college. In 2010, he came upon the concept of Dwolla, a consumer-facing mobile app that allowed users to quickly and easily send and receive money without exchange fees. He built the app himself as far as he could then hired a development team to take it the rest of the way. He figured he could monetize it later. Eighteen months ago, however, the company began getting requests from customers to take the Dwolla name off of the product. That’s when Milne came upon the idea of white labeling the app to meet customer demand.

Digital businesses are the primary target. They access Dwolla through an API that connects to the customer software solution.

“We found that companies were facilitating B2B transactions through the app, making disbursements, and making other transfers,” Milne said. “They wanted their name on it instead of Dwolla’s. So we changed the technology to allow software developers to build into the application.”

To date, Dwolla has raised $40 million of venture capital funding from top investors such as Union Square Ventures, Founders Group, and Andreessen Horowitz.

How Businesses Use Dwolla to Move Money

One of Dwolla’s top customers is real estate marketplace lender Patch of Land. Real estate project managers, investors, and other professionals use the platform to borrow money from lenders who provide the funding for their deals. Because Patch of Land funds millions of dollars worth of deals each year, they needed a way to move that money from the lender through the platform to the borrower and move returns back to the various investors. Patch of Land uses Dwolla’s APIs to make those bank transfers.

“Some customers can use the APIs to authorize automated payments,” Milne said. “There is a range of money being transferred during a certain period of time.”

With a product like Dwolla, companies don’t have to build and support their own bank transfer operations, which saves them in development costs. Some of Dwolla’s customers build their own admin panels into the system. Dwolla provides the integration support for those companies. Others want real-time chat rooms. Dwolla can make that happen, too. Through Dwolla’s analytical interface, companies can see how much money is going through their software, how many customers are transferring money, and what’s trending.

Companies using ACH have to negotiate their terms. If you want same day transfers, you’ll pay more. With Dwolla, you get a little piece of text, Milne said, that allows you to designate same-day transfer, same window, and other parameters. The time to market is much faster for the money movement.

So what kind of business can benefit from Dwolla’s transfer access APIs? Virtually any kind of business that makes transfers. That can include backend treasury systems, mobile app developers, governments, big businesses, banks, and more. Even online lenders.

How Dwolla Maintains a Competitive Edge

Dwolla was a pioneer in bank transfers. That gives them an edge over most of the competition. Milne said it’s not the cheapest solution on the market, but he’s accustomed to working with well-funded companies trying to improve on execution. At that stage of development, they’re wondering if they should build it themselves, partner with a bank, or work with stand-up technology infrastructure like Dwolla. He’s hoping many of them will choose the latter.

“If you do it yourself,” he said, “you’re looking at a six to 12 month commitment. If you work with us, it’s a couple of weeks. It’s much cheaper in the short-term.”

That’s good news for companies that need to watch their cash flow.

Another selling point for Milne is the track record his company brings to the table. He believes his company can teach businesses the best practices of bank transfers based on his seven-year history of doing it. That too can save companies a lot of money in trial-and-error expenses.
Dwolla has a dedicated account management protocol as well as dedicated software support. And they have a financial crime unit that combats fraud and other cybercrimes. Customers are given options in how to manage fraud if it’s found, which can then be extended into their own applications. Dwolla also has a variety of specialty teams to service its customers, which include FIU, BSA, in-house legal, information security, marketing, sales, and more.

Dwolla’s Growth and Expectations

Dwolla’s revenue has grown substantially over time. They have a few more than 100 customers currently using their access APIs while Milne and his team focus on onboarding the next 100. They’ve got billions of dollars flowing through their platform with varying charges based on the customized needs of the customer. Milne said that’s proof his technology works and will continue to work.

Service fees fees begin at $1,500 and go up from there. Rather than charge per transaction, they opted for the flat fee model and offer instant account verification as well as three different account types. Customers choose the features they want and Dwolla negotiates the final price for the customized package.

“This approach allows us to get engineering support if necessary,” Milne said. “We ask if the client wants to build their own or have us help. We want to make sure we approach the problem the right way for every customer.”

When Dwolla was an upstart bank transfer network and application, they were infused with 50,000 small businesses signing on to send money. Many of those are still using the product in some capacity, Milne said. That’s a testament to the company’s staying power.

Where Do We Go From Here?

The Fed is making a lot of functional improvements to payment systems, Milne said. Along with that, ACH is doing a lot to keep the economy going. But new payment systems are coming along and making things faster. Technically, Dwolla looks like a private ACH system.

“Functionally, the idea of sending money to a private company instead of the Fed is a big deal.” He sees technology moving into the future having a compound effect, but he’s not sure how to measure it.

One thing Milne has noticed is that companies want to grow their businesses. Many of them want to move beyond their core competencies. Dwolla wants to be there to grow with them. To do that, Milne and his team need to focus on their core competency—moving money.

“There’s no silver bullet,” he said. “We can’t get distracted. It’s time to execute our mission rigorously.”


Allen Taylor
Allen Taylor


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