With MassPay, Dwolla Takes On PayPal By Offering Lower Fees, Support For More Recipients

Following a recent partnership with mFoundry which saw digital cash network Dwolla introducing more tools for banking partners, the startup is on the move again with the launch of a new service designed to encourage adoption among business customers. Called “MassPay,” Dwolla’s latest addition offers businesses a faster and simpler alternative to check-writing and wire transfers, by allowing them to pay up to 2,000 people at once.

As of launch time, Dwolla has lined up 10 partners who have agreed to integrate MassPay into their current business practices. Many of these are startups, like parking space rental service Parking Panda, which will use MassPay to pay its own partners (garage and lot owners). Meanwhile, social car-sharing service Getaround will use the service to pay car owners, Flashnotes will use it to pay note sellers, and Fancy Hands will pay assistants, to name a few. Other partners include Major League Gaming, Splash, VHX, HTML5.com, Webmasterchecks, and Scripted.

MassPay is powered by Dwolla’s cash payments network, and as per usual, that means costs of $0.25 per transaction over $10, while transactions under $10 remain free. Because of the way Dwolla’s system works, businesses are able to make these payments without having to store customer’s sensitive financial information on their own servers.

To use the service, the partner businesses create a Dwolla account, then upload a CSV file with two columns: the amount they want to pay and the email address, phone number or Dwolla ID of the recipients.

The introduction of Dwolla’s MassPay service is a clear shot across the bow of payments giant PayPal, whose own Mass Pay offering supports up to 250 recipients, and charges 2% for each payment, capped at $1 per payment. Like Dwolla, PayPal also offers a web upload function, in its case a text file or tab-delimited file like Excel. However, PayPal also offers an API for this feature in order to automate the payments, which means the recipient limit is not as much of a concern, since there doesn’t necessarily have to be as much manual labor involved for businesses that operate at scale.

In order to kick off the service’s launch, Dwolla is offering businesses the ability to try Mass Pay for free, and will reimburse the first 5 payments made between now and November 30th.

[youtube http://www.youtube.com/watch?v=hzARLFqAxGM?feature=player_embedded&w=640&h=360]