Digital Transactions Authoritative, insightful and timely information for payments professionals
By John Stewart
Dwolla Inc. announced Thursday morning it is eliminating its 25-cent transaction fee, effective immediately, on all transactions types. The fee, which has applied to transaction values exceeding $10, is typically paid by the receiver of the money.
Des Moines, Iowa-based Dwolla processes person-to-person payments as well as payments from consumers to businesses. The 7-year-old company will not disclose how many users and merchants are in its network. It has had the 25-cent fee in place on transactions above $10 since December 2011. Before that, the fee applied to all transactions.
The company says its intent now is to make money by charging for specialized services it provides that, it says, create value clients will be willing to pay for. “We’re providing value rather than taxing transactions,” Jordan Lampe, a communications executive at Dwolla, tells Digital Transactions News.
Such services include next-day settlements, high-touch customer support, and the ability to set transaction limits and manage multiple payment streams within a single account, according to a blog article posted Thursday by Dwolla founder and chief executive Ben Milne and headed, “No more 25 [cents]. No more transaction fees.”
Monthly subscription fees for access to these services will fall into three tiers and will range from a low of $25 up to $1,500, Lampe says. The new fee structure, however, will not apply to the real-time payments system, known as FiSync, which Dwolla developed and has been marketing to financial institutions. Its first major bank client, Houston-based BBVA Compass Bank, went live on the system commercially in April.
Nor will the new charges apply to such Dwolla services as mass payments and recurring payments or to usage of the company’s application programming interface to build custom payment programs, according to Lampe.
Dwolla, a long-time critic of transaction fees, never intended its per-transaction levy to be permanent, according to Milne’s blog post. “I have said time and time again that I believe there will be a moment when transaction fees become less valuable than what can be built on top of the network,” he says in the post. “That time has come.”
Officials say the new revenue stream will also allow Dwolla to develop more new products and services. “This gives us a platform to start rolling out cool features only we can do, or can do better,” Lampe says.
It has been a week of news regarding payments networks nixing fees. Earlier this week, Visa Inc. told Digital Transactions News it is eliminating permanently a set of tokenization fees it established last year but had put on a temporary hold. The fees had applied to the creation of tokens, or random strings of data that replace actual card credentials, in response to requests from issuers participating in programs such as Apple Inc.’s Apple Pay mobile-payment service.
