Payment Network Dwolla Picks Up A Strategic $9.7M Led By CME Group

On the same day that eBay announced that it plans to spin off its payments business PayPal, a smaller payments competitor has quietly announced another round of funding to continue building out its own platform. Dwolla — the startup that is disrupting payments services by giving users an independent platform to pay each other and avoid high money transfer and bank payment fees — has raised a further $9.7 million in funding led by a new strategic investor, the CME Group.

Publicly-traded CME was formed in 2007 with the merger of the Chicago Mercantile Exchange and the Chicago Board of Trade, and it has made other tech investments — for example as part of a $30 million Series B round for secure messaging app Wickr.

Existing Dwolla investors Andreessen Horowitz, Union Square Ventures, and Village Ventures also participated in this round.

The investment is significant because it opens the door wider for Dwolla’s enterprise activity, and the idea of using its platform as the backend for transactions elsewhere — for example in CME’s own exchanges.

Dwolla up to now has made some significant moves to expand how its platform can be used by consumers and merchants — for example, earlier this year establishing Dwolla Direct to add in an option to link a traditional bank account to a Dwolla account, using a light infrastructure based around APIs to integrate with partners. Having a strategic investor like CME on board, highlights a different and bigger kind of focus. From Dwolla founder and CEO Ben Milne:

“There are a variety of applications for Dwolla’s real-time payment infrastructure, many of which stretch beyond consumers, mobile payments, and government relationships; the true value of what we’ve built is just beginning to be realized. CME Group’s timely involvement investment in Dwolla recognizes the exponential impact that a modernized payment system can have on an economy and its participants. With 150 years of industry leadership, CME Group brings institutional knowledge and a rare perspective on innovation that will help Dwolla accelerate the arrival of these opportunities and solutions to the marketplace.”

The potential of where Dwolla’s infrastructure can be used was also what interested CME. “We believe Dwolla’s real-time infrastructure solutions can benefit the financial ecosystem within which we exist,” said CME’s Mark Fields, who is the MD of its strategic investments operations. Fields is joining Dwolla’s board as part of the investment.

From what we understand, this is not about a pivot for the company: Dwolla will continue to launch more services and partnerships in the markets that it already services. Other partnerships include tie-ups with GoDaddy to power e-invoicing, and more news along these lines should be coming out in the next couple of months.

We’re asking Dwolla for details on how the investment will impact its valuation, and for any details about how specifically it will be working with CME Group — including how it will price transactions in new services. Today the transaction fee for a Dwolla payment is a flat $0.25 for transactions above $10, or free for those under that amount.
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