Payments network Dwolla has been trying to change how money is moved around electronically, with services meant to replace traditional bank technologies, such as the days-long process of ACH transfers. But today’s announcement of a new service called Dwolla Direct is an admission of sorts that ACH transactions aren’t going away any time soon.
With Dwolla Direct, the goal is to make the sign-up process for first-time Dwolla users easier and quicker, allowing them to send a business money from their bank account, without having to first establish a Dwolla account via the company website. But then that money is moved through “whatever method is the fastest,” which, sadly, is still ACH.
A number of businesses today already let you make payments from your bank account, an option you’ll often see on websites for big companies like your cable TV provider or mobile carrier, for example. So the underlying technology Dwolla is rolling out isn’t exactly new.
Instead, what’s “new new” here is the sign-up experience. Before, to start using Dwolla, you would have to first establish an account using Dwolla.com’s site, where you would enter your banking credentials. Now, you’ll be able to do a similar but more streamlined account set-up right on the business’s website, and then be able to reuse those same credentials going forward on any other Dwolla-enabled site or service.
What’s especially clever here, however, is that many users won’t even need to provide their routing or account numbers to make this initial payment. Instead, thanks to how this process now works, the company is able to verify bank information in a way that’s similar to something like Mint.com – where you just authenticate your banking credentials to get going. (The company verifies your bank using a third-party provider, which it can’t disclose. We’d speculate it’s something like Yodlee or a competitor if we had to guess.)
The first time you use Dwolla Direct on a supported site, you’re presented with a list of banks to choose from, as an alternative to having to enter routing and account information. You then establish a Dwolla ID and password, which can be used again on other supported sites.
The company today is targeting the service to small businesses and nonprofits — companies that would otherwise use PayPal (which has higher fees), have to accept credit cards online, or wait for a check in the mail.
Dwolla says it has around 35,000 small to medium-sized businesses on its platform today, as well as state governments. The latter has been a big focus for Dwolla, in fact, and the company expects to have more announcements around government services in the months ahead.
Dwolla Direct will be rolled out automatically on June 25 to all those who have already integrated with Dwolla previously. It will become the default experience going forward for its various integration points, including its Form Builder tool, shopping cart plug-ins, invoicing options, or Dwolla Buttons, as well as the Offsite Gateway API.