Dwolla Speeds Up B2B Funds Transfers

Dwolla on May 29 announced the launch of a faster B2B funds-transfer service, enabling recipients to have transferred funds in their accounts available within two days.

In conjunction with the announcement, the online funds-transfer network released survey data suggesting that 66 percent of the nation’s small and midsize businesses spend on average $858 annually maintaining paper check operations. Such costs include labor, supplies, maintenance and wait-times.

“What we’ve found is checks still have a stranglehold over these small businesses and government entities,” Dwolla spokesperson Jordan Lampe said in a PYMNTS.com interview ahead of the announcement.

The company’s new Next Day Transfers initiative, which improves bank transfer speeds in and out of the network to as little as two business days in total, are designed to reduce such costs. Moreover, a new Business Payments Toolkit Dwolla is making available can help small businesses to more simply convert to digital-check payments.

Funds transfers via the automated clearinghouse (ACH) system, which the company is using, traditionally can take up to two to three days to get deposited, and then the recipient may have to wait another two or three days before the funds become available, Lampe noted. “Essentially we’re moving forward those timeframes for all users,” he said.

Approved “trusted parties,” which include businesses, nonprofits and government entities, can qualify for next-day deposits through Dwolla. Recipients then may have funds available to them the day after, for a combined two-day transfer solution, Lampe said.

“For all members, it has a potential to cut wait times in half for bank transfers and provide three-times-faster withdrawals and deposits for those trusted parties that get next day deposits,” he said. Transfers between Dwolla accounts continue to be immediate.

Transfers exceeding $10 continue to cost just 25 cents; those less than that amount are free. “That’s less than the cost of a stamp,” Lampe said, noting one of the chief expenses businesses incur sending invoices and checks via paper-based systems.

Indeed, small businesses write $13 billion worth of checks each year “for a process that does nothing but cause headaches and hurt their bottom line,” Anne Driscoll, Dwolla vice president of marketing, said in the company’s product announcement. “Issuing paper checks is an old and manual process that clouds a business’s ability to make real-time decisions and get paid faster, but existing platforms have been too expensive and complicated to set up and integrate for the small or non-tech businesses.”

Dwolla commissioned SurveyMonkey to conduct an online survey of 700 small and midsize U.S. business decision-makers between April 23 and 30 to get a better understanding of company use and views of check-based activities. Among the chief findings:

Men (56 percent) and women (60 percent) younger than 30 preferred digital payment options, while those older than 30 preferred writing checks (men 66 percent, women 59 percent). Moreover, nearly 18 percent of respondents spent $100 or more on the materials needed to write and issue checks, and 17 percent spent at least five hours each month to maintain check operations. In addition, 25 percent of female respondents would rather spend time with their family instead of writing and issuing checks, while 30 percent men would prefer spending more time closing deals.

Dwolla continues to have its own direct-transfer network and FiSync, which competes with ACH as a faster alternative, but Dwolla also recognizes the value of the ACH system, Lampe said in the interview. “We don’t want to sit idly by and ignore ACH,” he said. “Small businesses need an ACH-style workaround for paper checks, and we’re hoping to satisfy these small-batch payouts and large enterprise payouts as well.”

Through Dwolla’s mass-payments application programming interface, companies may send payments en masse, with a cap of 2,000 transactions. There’s also a $10,000 limit on transfers, though certain entities, such a government operations, can qualify for higher limits, Lampe said.

Dwolla continues to keep transactional and other milestone data to itself, preferring to focus on “the right numbers, which aren’t as sexy as the others,” he said. Such information includes fraud rates, proprietary statistics for analysis, risk-mitigation techniques and success rates. The vast majority of Dwolla’s volume is B2B sales.

“We own both sides of the network, so we see what comes in and goes out the other side,” Lampe said. “We can gauge the network to those priorities.”

In the product announcement, Ben Milne, Dwolla CEO and founder, noted that the ACH systems plays a critical role in processing tens of trillions of dollars to settle payments made via checks, debit cards, and even credit card payments, but it’s often seen as slower alternatives and more difficult for small and midsize businesses consumers to use daily. “Dwolla helps anyone tap into ACH’s strengths, like ubiquity and low cost, while providing easy-to-use tools, the same next-day speed the biggest businesses get access to, and new security measures, like tokenization, to help modernize ACH,” he said.

Dwolla provides organizations and individuals with free turnkey solutions to send and collect money from existing checking accounts or Dwolla balances. To help small businesses convert to digital,  the company has bundled its benefits and tools in its new Business Payments Toolkit.

As for FiSync, Lampe says the system is “still chugging along,” and the company hopes to announce two new partnerships later this year. The focus is on practical-use cases, putting a finger on what application to bring to market that makes the most sense, he said.