Dwolla Readies Pilot for Near-Instant Funds Movement with 16 Financial Institutions

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Dwolla Corp. is preparing to begin testing with some 16 financial institutions the first stage of what it calls a “disruptive” system aimed at dramatically speeding up funds transfers on the automated clearing house network. When fully integrated, Dwolla says the system will permit virtually real-time movement of money for its online and mobile payments platform.

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The private beta, as Dwolla dubs its test, will open up to consumers within “ a couple of months,” Charise Flynn, the Des Moines, Iowa-based company’s chief operating officer, tells Digital Transactions News.

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Dwolla hopes to have “a couple million users” on the system “in the next few years,” Flynn told an audience of bankers last week at a conference in Las Vegas sponsored by the Bank Administration Institute.

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About 60 people are involved in the test currently, Flynn says, though most of the 16 participating financial institutions will come on stream over the coming weeks leading up to the public release this summer. While the institutions haven’t been identified, they are located across the country, Flynn says.

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The system, called FiSync, will allow consumers to move funds from a bank account to a Dwolla account with real-time or near-real-time effect. Currently, this movement can take anywhere from overnight to two or three days on the ACH. Once a user has funded his Dwolla account, he can pay merchants or other Dwolla account holders instantaneously, using either a PC or mobile device. He can also share payment details with friends through an integration with social networks.

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Pricing for the transfers will remain at Dwolla’s current 25-cent level, Flynn says, with the receiver of the money paying the fee. Participating banks will pay Dwolla and reprice the service to their customers who are Dwolla users.

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Flynn and other Dwolla officials are vague about how the transfers from bank accounts are expected to work, preferring to keep the particulars under wraps for now. But, while details are sketchy for the time being, officials say that when fully operational FiSync could operate as an alternative to the ACH for financial services at participating banks and credit unions. FiSync, however, requires some level of integration by the participating institutions, whose programmers will write code based on application programming interfaces from Dwolla. “We’re building out our APIs, building out an API toolset to open up to the world,” Flynn says.

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Founded in 2008, Dwolla has been working on the concept of FiSync for some time. In December, founder and chief executive Ben Milne told Digital Transactions News the goal of the concept is to replace the ACH’s batch-processing operation with APIs and so-called Web Services, a term that refers to protocols for computer-to-computer communication.

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Milne said the company had begun work on the system after experiencing frustration with slow transfers between users’ bank accounts and their Dwolla accounts. That frustration is shared by enough other payments executives that NACHA, the governing body for the ACH, has proposed rules for same-day clearing and settlement. NACHA’s comment period for the rules closed in December. A ballot on the rules is expected to go out to NACHA members next March.

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Dwolla no longer releases statistics regarding usage or number of accounts. As of two months ago, it had 8,000 merchants accepting payments, up from 3,000 in early December, and 80,000 users, up from 70,000.