A one-year-old start-up company based out of Des Moins, IA, known as Dwolla is all over the news these days. Launched by 28-year-old entrepreneur Ben Milne, Dwolla is a mobile payment platform that has the very real potential to turn the credit card industry on its ear. Milne was just included in the finance portion of Forbes Magazine�s annual �30 under 30� list. Equally impressive is the fact that Milne happens to have no educational background in finance.
Dwolla was born out of a self-described �obsession� with figuring out how he could escape paying interchange fees that Mine developed while he was running his own speaker manufacturing company.
�I was losing $55,000 a year to credit card companies�So I thought, how do I get paid through a website without paying credit card fees,� Milne revealed in a recent interview with SF Gate.
Dwolla enables customers to pay for purchases using their smartphone at the point of sale. The money to cover the transaction is taken from a prefunded account and the merchant incurs no fee greater than 25 cents for any transaction exceeding $10. Recently Dwolla did away entirely with the merchant fee for all purchases totaling less than $10.
And Dwolla is not done yet: they just revealed an additional groundbreaking payment service known as �Instant.� As long as an Instant user is able to connect to the internet via their mobile device, they can have access to up to $500 worth of cash any time anywhere they wish. Dwolla Instant subscribers must pay $3 monthly for the service. Should they not repay their debt to Dwolla by month�s end, a $5 penalty fee will be incurred.
Milne has indicated that he would like Dwolla users to regard Instant as a short term credit solution and emphasize that borrowers would be best serving themselves by paying down the debt in its entirety each month. For the moment, the company will make use of traditional credit scoring systems to determine the creditworthiness of users interested in Instant. However, in the future, Dwolla plans on using their own data compiled on user behavior to assess a borrower�s potential risk.
As for shifting the bulk of the fee burden onto the shoulders of consumers as opposed to merchants, it is Milne�s belief that as long as costs are kept entirely transparent users will be able to understand why they have to pay.
�There�s a cost to the network and we think everything should be apparent and upfront to everyone,� Milne explained recently, as reported by online news source All Things D.
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