Move Over, Visa/MC/PayPal - There's a new player in town that sidesteps you both

[housewolf]

and it's a "credit card killer" and "Square rival"

New Payment System Sidesteps Credit Cards

...
Dwolla was founded by 28-year-old Ben Milne; it's an innovative online payment system that sidesteps credit cards completely.
Milne has no finance background yet his little operation is moving between $30 and $50 million per month; it's on track to move more than $350 million in the next year.

Unlike PayPal, Dwolla doesn't take a percentage of the transaction. It only asks for $0.25 whether it's moving $1 or $1,000.

...

How does Dwolla work and how is it different from PayPal?

With Dwolla, payments are made directly from your bank account. No credit or debit cards are allowed. And because they don't exist in the system, we don't have to bring the fees into the system. You can spend any amount of money and when you do that, the person on the other end doesn't have to pay 1, 2, 3 or 4%. They only pay $0.25 a transaction, which is especially helpful when it's $1,000, $2,000 or $5,000 transactions. Obviously PayPal becomes very cost prohibitive with those larger transactions.

The biggest difference between ideas like this and a PayPal — and PayPal is a phenomenal idea, Square is too — is that those are built on top of networks like Visa and MasterCard. We're building our own.

Can users only send money to Dwolla members?
No, you can send money to anyone. Only the person sending it has to have a Dwolla account to initiate the transaction. The person receiving it will have to sign up for an account, but we've been surprised at the conversion there. It's worked relatively well. We leverage social networks really heavily as contact lists, which is one thing we do really different. You can send money with an email address or with a phone number, but the most popular way to do it is to connect to Facebook and type in a friend's name.

We think, in the long term, sending money should be as easy and effortless as finding a friend on Facebook. That's really a behavior we try to mimic when it comes to peer-to -peer payments. When someone does not have a Dwolla account, they get a wall post that says, "You've got money." If a friend sent that to you and it was their name and their face, you would have a different emotional connection to that than an arbitrary email

more...

http://www.thefiscaltimes.com/Articles/2011/11/11/The-28-Year-Old-Out-to-Kill-Credit-Cards-and-PayPal.aspx#page1

[rfranklin]

1. People use credit cards because it doesn't come out of their bank account...

Often they don't have the funds to cover the purchase.

[Cronus Protagonist]

7. That was the old way of doing it. Now that cash is king....

I haven't had a credit card since 2003. And I won't be able to get one either. I know I'm not alone. :P

[MedicalAdmin]

21. Take it one step further.

For many of us who wave been dug down into a hole. We can't even get a credit card.

This is a really good idea. Flat fee transactions.

[KurtNYC]

23. eventually it DOES, and with interest n/t

[cui bono]

26. Also because you can more easily recoup any false transactions

done on a cc since you can contest it and not pay it. If someone gets access to your bank account they could empty it out leaving you without the money. And I think it's harder to get it back.

I like not giving my bank info. When I sign up I might use a separate checking account just for this.

[MADem]

2. This sounds a LOT like hawala--Islamic money transfers.

http://en.wikipedia.org/wiki/Hawala

[The Doctor.]

3. Heh, thought of something like this about a week ago.

Had no idea how to go about it, but I'm glad someone did.

[bhikkhu]

4. Just checked them out - it looks pretty good

https://www.dwolla.com/default.aspx

is their website. I'll probably sign up soon enough...25 cents is easier than calculating percentages, and less than most any transaction fees, I think.

[lbrtbell]

5. It, and other PP alternatives, were featured in this article

http://lifehacker.com/5821634/why-you-should-ditch-paypal-and-use-these-other-services-to-send-people-money

Definitely worth a read.

[Webster Green]

11. The Amazon service looks interesting.

It's free.

[housewolf]

18. Good article!

Thank you! I didn't know all those services are available

[grasswire]

6. some people don't want to use a bank account OR credit card...

...and that's why they use paypal.

This service requires a bank account, right?

[Webster Green]

10. I thought that a PayPal account had to be tied to a bank account.

That's how it was when I got my PayPal account many years ago.

You could not get a PayPal account until they verified the bank account.

[housewolf]

13. I don't know if that's the case any longer

I've had my Paypal account for a long time, and like you, had to have my bank account verified before I could use it.

But now you can pay by credit card through Paypal, so I don't know if a bank acct # is required there any longer.

The big difference here is that this service charges only to bank accounts and it's fee is way lower than the fee that PayPal charges.

It's a way of opting out of dealing with credit card companies and fees.

[grasswire]

14. I thought there were different levels of paypal service...

...and some transactions wouldn't require a bank account. Example: simply transferring money from one paypal account holder to another without a credit card would result in a balance that could be spent within the paypal system or transferred to another account, or used to pay bills or purchase items/services. Does that make sense?

[housewolf]

17. Oh, that may be the case

I haven't had an occasion to do anything like like that, so I'm not familiar with that functionality. All of my transactions have been out of or into my checking account.

[grasswire]

19. paypal pays anyone with an email address...

...by mailing a paper check if that's what the recipient wants. Or it can go into a bank account, or it can be withdrawn using a paypal debit card that debits the paypal account (although I believe the member has to have his/her paypal account verified with a bank card to obtain a paypal debit card).

So many variables!

[housewolf]

12. Yes, it does

For those who prefer/need to use a credit card, it won't fit their needs

But for those with a high enough bank account who can afford to / want to pay cash, the fee is only $.25 for the transaction no matter how large or small it is. Paypal charges recipients a percentage plus a flat fee.

It's an option, and can be used for things like payments over your phone to merchants. So you could walk into a coffee shop, order you coffee and pay for it immediately over your phone (for a $.25 charge, of course).

[Gregorian]

8. Max Keiser was endorsing Bitpay on his show.

https://bit-pay.com/

[Lionessa]

9. Okay, this is beyond cool! WE NEED TO GET THE WORD OUT TO Businesses we

like so it can grow quickly and be available nearly everywhere. I remember when Discover started out. We happen to have liked it right at first anyway, so everywhere we went we made sure to ask first if they took Discover Card. After a while most places were saying yes.

[tavalon]

15. I'll admit I haven't used this yet, but I heard about it in facebook

My contacts on there are all pretty much liberal.

[freshwest]

16. No way I'm linking anything directly to my checking account.

[certainot]

22. that's what i'd worry about- anyone out there suggest why it's an irrational worry?

[freshwest]

24. If one has experienced identity theft by mail, one's online banking information being sold to

Unknown crooks billing one's account, allowed automatic debits from businesses who just kept taking it out a year after they closed their doors and couldn't be reached to stop them, then had to work with the bank to research, investigate, and close account numbers several times to get them out, or to block it...

As I have, to the tune of tens of thousands of dollars on the identity theft and have known other people who have undergone the same... No, it's not an irrational fear. There's a lot of theft and my credit card acts as a buffer. The bank checks those very closely and calls me if they haven't seen the company before, to avoid fraud.

[certainot]

25. ta....

[cui bono]

27. Especially if you can access it by signing into Facebook!

FB is notorious for hating our privacy.

[provis99]

20. a dandy idea, but the name "Dwolla" is a really bad one.

PayPal is a catchy name; Dwolla as a name won't fly, people will think it is a type of dandruff or ear wax or something.

[glinda]

28. Paypal is now holding payments from Ebay sellers (and I was told ANY sales) at their

discretion. I am looking into other methods of payments other than Paypal. They are screwing small business people, seniors, unemployed, etc...... by hanging onto any funds that appear to be sales related, for up to 31 days (or 21 to infinity I was told also.)

[jmowreader]

29. CheckFree was doing this in the 1980s...

The difference is, CheckFree charged an arm and a leg and Dwolla is, so far, not. But it's still plain-vanilla Electronic Funds Transfers between bank accounts, so it should work fine.