

Dwolla launches Dwolla Credit – Real-time payments without interchange - danielbru
http://blog.dwolla.com/real-time-payments/

======
asciimo
I started to sign up for this to see what it was all about. It looks exactly
like a credit card to me, backed by a bank. Here's the introduction to the
standard terms and conditions you get with any credit card application:

> Prior to applying for a Dwolla Credit Account, Comenity Capital Bank
> requests your consent to provide you important information electronically.

The APR stated in my "prescreened" offer was 24.99%, which is staggering
compared to my existing revolving credit accounts. There must be some subtle
feature that makes this product novel, but I don't know what it is.

~~~
PeterisP
This is why the interchange is not going away from the marketplace - any new
CC-like product w/o interchange will be more expensive for 'cardholders' than
the current creditcards, simply because credit card issuers can earn their
money from the interchange fees that only the merchants care about.

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abuehrle
The post is light on details, unfortunately.

As far as I can tell, it's more similar to BillMeLater than it is to a credit
card. The only other information I could find on Dwolla Credit is a support
FAQ[1]. Interestingly, the credit provider is Comenity Capital Bank, which is
also behind BillMeLater[2].

I still don't completely understand the difference in models between something
like Dwolla Credit (or BillMeLater) and a credit card. Why do credit cards
cost the merchant 2+%, while Dwolla Credit only costs 25 cents? It seems like
the same risks apply.

[1]
[http://help.dwolla.com/customer/portal/articles/1330333-cred...](http://help.dwolla.com/customer/portal/articles/1330333-credit-
faq)

[2]
[https://www.billmelater.com/help/index.xhtml](https://www.billmelater.com/help/index.xhtml)

~~~
andrewfong
If I had to guess, one thing that makes services like Dwolla less risky than
traditional credit cards is that credit card security is built around end
users keeping secret a string of numbers written on a plastic card that they
hand out to random strangers on a regular basis. As a secondary fraud-
prevention measure, merchants may ask you to sign a receipt that may or may
not match the one on the back of your card.

To be fair, there are a number of fraud detection algorithms at play as well,
but those algorithms often have wholes in them or come into play only after
the fraud has occurred.

As an online service, Dwolla requires users to authenticate directly with
them, where they can take steps to mitigate fraud by requiring two-factor
authentication, etc. Authentication with merchants is handled via a token-
based method. In addition, fraud detection may also be substantially easier
because Dwolla is privacy to additional information about its users (IP
address, purchase details, cookie tracking, etc.) that may not be available to
traditional credit card providers. Dwolla may also be privy to additional
information that allows them to assess the credit-worthiness of their
customers and minimize the danger of default.

This probably doesn't totally explain how Dwolla dropped the cost of fraud
detection down to a flat 25 cents (e.g. it doesn't explain why PayPal charges
a percentage-based fee), but I bet it's part of the story.

------
Johnie
Related: BillMeLater Draws Federal Scrutiny

[http://www.bloomberg.com/news/2013-10-22/ebay-probed-by-
regu...](http://www.bloomberg.com/news/2013-10-22/ebay-probed-by-regulator-
over-loans-pioneered-by-payday-lenders.html)

EBay Inc. (EBAY) is facing a probe by the Consumer Financial Protection Bureau
over a loan program that mimics a structure used by high-interest lenders to
evade state rules before the practice was stamped out by regulators. The
program, called Bill Me Later, is a service of the online marketplace’s PayPal
unit that relies on Salt Lake City, Utah-based Comenity Capital Bank to make
loans that are then purchased and managed by EBay, according to regulatory
filings. Under federal law, banks can lend in any state without being licensed
there, or complying with local interest rate caps.

<and> In 2008 EBay acquired Bill Me Later, which also lets users finance
purchases in online markets run by Wal-Mart Stores Inc. (WMT), The Walt Disney
Co. (DIS) and Apple Inc. (AAPL) Customers can avoid the annual 19.99 percent
rate by paying off the loan before the end of a six-month promotional period.
If they pay later, they incur accumulated interest and fees that effectively
raise the annual rate.

------
traskjd
When Dwolla goes international this will get interesting. Until then a lot of
us just shrug. That's not intended as an insult -- I just wish they'd go
global already.

Signed, A New Zealander.

~~~
fatca
The deliberate balkanization of all finance in fiat money will backfire big
time. The dinosaurs are simply herding everybody in the direction of bitcoin,
and there will be no turning back ;-)

~~~
klipt
Sure, bitcoin is free to transfer for now, but soon exchanges will have to
start charging a fee.

Currently the "proof of work" kills two birds with one stone: it allows
transfer of the currency and also mines new coins for the exchanges doing the
transfer. But that only lasts until the 21 million cap is reached; after that,
no mining, no free money for exchanges, but since someone still has to do the
work ... it'll be for a fee.

~~~
yebyen
Bitcoin does not require exchanges!

It's also not a cap, it's a target. "Reaching" the target means either:

1) all of our speculative bitcoin money becomes worthless as miners stop
mining because it ceases to be profitable, so new blocks are not produced, so
transactions don't flow.

2) miners stop processing transactions below a certain size or without a
certain fee included, so only poor peoples' money becomes worthless as they
can't afford the fees, don't meet the size limit, etc. or

3) the algorithm works, all of the money is fungible, and fees that are a
fraction of what you and I would consider money today are enough for miners to
make a living, as long as they are contributing a fraction of a percent of the
hashes that sustain the whole network globally.

There's nothing "Free" about the miner fees. The subsidy of block rewards are
meant to compensate early adopters for their hardware and electricity costs.
If miners don't horde bitcoins to themselves, they don't "need" the money to
be viable, once their investment is paid off they can just as well unplug the
machines and let them sit on a shelf, assuming it's not worth their time and
electricity to go on mining.

Bitcoin is "free to transfer" at exchanges because exchanges collect their
fees through other vectors than transfer... eg, trade fees, merchant fees,
venture capitalist infusion, ... there's no free money, and if you think there
is, ask anyone who's already become rich on bitcoin how many they're keeping
"in case the value goes sky high" eg. so others can make money off of us all.

------
fatca
If nobody seems to be "excited" about this new "opportunity", there is only
one explanation possible: bitcoin does all of that and more and better ;-)

~~~
andrewfong
Except that there are merchants who prefer to be paid in USD and customers who
want to pay in USD.

------
nahname
>We’re starting with eCommerce and then rolling out to other retailers.

Isn't it illegal to charge the customer before the goods are shipped. Do they
handle pre-auth and settlement?

~~~
Ataub24
No it's not illegal to charge before shipping, why would you ship something
out that costs $$$ when you run the risk that the card will not be good?

~~~
ok_craig
That's what an auth step is, like nahname mentioned. Many (most?) credit card
charges come in two parts: the auth, which appears on your statement and kind
of verifies that your payment won't be rejected, and the settlement, which
actually finalizes the charge. When you buy something from a large online
retailer like amazon, they immediately do an auth, and then only settle when
the item is shipped. At least I think that's how it works.

------
Romoku
After Dwolla banned Bitcoin transactions I lost most of my interest. Bitpay
and Coinbase have much better merchant programs and their fees are much lower.

------
TomGullen
Anyone getting phsihing warning from Chrome?
[http://i.imgur.com/MSESJYS.jpg](http://i.imgur.com/MSESJYS.jpg)

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intelliot
I scrolled down and had a look at the comments on Dwolla's blog post. I was
shocked to see that they're all about bitcoin!

~~~
TomGullen
I think they were ambushed a little by Reddit
[http://www.reddit.com/r/Bitcoin/comments/1p69z7/so_this_is_w...](http://www.reddit.com/r/Bitcoin/comments/1p69z7/so_this_is_why_dwolla_stopped_all_bitcoin_related/)

------
wmf
How are chargebacks handled in this system?

~~~
toomuchtodo
Chargebacks don't exist in the Dwolla universe. Its not a credit card.

~~~
Ataub24
We have disputes though.

You can read about them here:
[http://help.dwolla.com/customer/portal/articles/1203299-how-...](http://help.dwolla.com/customer/portal/articles/1203299-how-
do-i-dispute-a-transaction-)

and here:
[http://help.dwolla.com/customer/portal/articles/87923-file-a...](http://help.dwolla.com/customer/portal/articles/87923-file-
a-dispute)

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EGreg
How is this different than PayPal credits or any other credits?

You don't prepay?

~~~
Ataub24
It's more like mastercard, visa, amex, discover line of credit. Not prepaid- a
line you can pull from to use.

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jruffer
nice

------
Ataub24
nooice!

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ascordato
Go Dwolla, go!

------
artia
Slowly takin over ...

