Dwolla’s Direct Debit Debut

Dwolla on June 18 announced plans to provide individuals and organizations a “direct” way to transfer funds securely through its network by alleviating the need to register for a free full Dwolla account.

With the announcement, Dwolla intends to give its users a week to acclimate their end users to the experience before going live with it on June 25, Jordan Lampe, Dwolla spokesperson, tells PYMNTS.com. The new service supports sending funds, but users require a full Dwolla account to receive money, he said.

By enabling users to access and send money from their existing bank and credit-union accounts through the automated clearinghouse (ACH) system, Dwolla says it is lowering the barrier of entry into the network while also helping to digitize paper checks.

As with all payments made through Dwolla, transfers cost nothing up to $10 and just a quarter per transfer of higher amounts.

“We’re trying to get out of our own way here and provide a tool that we think will be valuable to both the sender and the receiver,” Lampe tells PYMNTS.com. “We wanted to create a check-like experience to allow someone to send a payment from their bank account without having a full a Dwolla account.”

To create a Dwolla Direct account, applicants provide Dwolla an e-mail address and a password. These credentials will serve as a “a padlock” to protect their banking information by not only providing a new layer of security to the users’ checkbooks, but by allowing users to return and easily send payments without having to re-enter their payment information, according to Dwolla.

Once applicants have provided their e-mail address and password, Dwolla invites them to verify their bank or credit union account instantly and complete the payment. To do so, they can click on their bank from a lost of 14 banks within Dwolla’s system noted in a scroll-down menu and sign in to their online banking account.

Dwolla contends the launch of Dwolla Direct should be especially attractive to small businesses, non-profits, and government agencies looking to replace

and digitize their check operations, which are costing them more than a combined $13 billion annually. Last month, Dwolla announced the launch of a faster B2B funds-transfer service, enabling recipients to have transferred funds via the ACH system in their accounts available within two days.

In its June 18 announcement, the company also cited data from the Association for Financial Professionals that suggest that, among top three barriers to the adoption of electronic payments are difficulty convincing customers to pay electronically, cited by 82 percent of survey respondents; difficulty convincing suppliers to accept electronic payments, 74 percent; and shortage of IT resources for implementation, 71 percent.

“Simply put, people simply do not want to sign up for ‘yet another account’ in order to pay with Dwolla and, if they do, cannot afford the costs of an ACH solution or its IT implementation,” Dwolla said. “‘Direct’ addresses these concerns by reducing the amount of information required, instantly validating senders’ bank accounts, and cleverly marrying a first-time payment experience with account creation to help endorse repeat usage.”

One of the reasons Dwolla chose to launch Direct is because the technical, legal, or payment knowledge needed to understand ACH can be daunting and prove to be cost-ineffective. “This is a simple way that [small and midsize businesses] can access and leverage the ubiquity and low-cost of ACH to their business advantage today,” the company said.