Veridian Will Be First Institution to Switch on Dwolla’s Real-Time Transfer System

Dwolla Corp. announced this week that Veridian Credit Union, Waterloo, Iowa, will be the first financial institution to use a system for real-time funds transfer that Dwolla has been working on for months and testing since earlier this year. A Dwolla spokesman says more financial institutions around the country are expected to adopt the system after Veridian. “We’re in talks, there’s a pipeline we’re excited about,” he says.

Veridian is expected to switch on the system, called FiSync, on June 4, according to a blog entry posted on the Dwolla site by Ben Milne, the company’s founder and chief executive. Any Veridian member who also has a Dwolla account will be able to switch funds between the accounts in real time, or under 10 seconds, the spokesman says. That’s in contrast to the two or three days a transfer takes on the automated clearing house network, the system 4-year-old Dwolla has relied on up to now to fund its users’ accounts.

Des Moines, Iowa-based Dwolla, which allows its users to make person-to-person payments as well as pay merchants, developed FiSync after growing frustrated with the time it took for users to fund their Dwolla accounts with draws on their bank accounts. “What worked well back when disco and rotary phones were a good idea doesn’t work well now,” Milne notes in his blog post.

Dwolla’s FiSync application programming interface (API), which the company is making available to financial institutions at no charge, allows banks and credit unions to create a link between their core systems and Dwolla’s servers so banks can verify funds availability on request and credit customers’ Dwolla accounts. “We can do these transactions in real time because our platform can talk to that bank in real time,” the spokesman says.

He adds that plans include a white-label service that will allow financial institutions to use FiSync among themselves, without the involvement of Dwolla. In these cases, the company will collect a fee of anywhere from one-tenth to three-tenths of a cent per transaction, he says.

While the spokesman will not identify the banks Dwolla is talking to, they include some 16 institutions around the country that have been testing an earlier version of the system that enabled instant verification of account ownership and funds availability but not funds transfer. The new version of FiSync that Veridian is adopting adds the real-time transfer engine, he says. Veridian’s investment arm, Veridian Group Inc., invested $1 million in Dwolla in December 2010 along with The Members Group, a Des Moines-based credit union service organization.

Dwolla allows its users to pay each other as well as participating merchants using either a PC or a mobile device. Transactions under $10 are free. Transactions above that threshold carry a 25-cent charge, payable by the recipient on mobile payments and by either  the sender or the recipient on payments originating from a PC.