
It’s Instant - sant0sk1
http://blog.dwolla.com/its-instant/
======
latchkey
You pay $3/month for the privilege of allowing them to front you cash for up
to a month. If you are late, they charge you $5. No broken legs, no threats,
just $5.

According to one of the images 'simple terms apply'. What are those terms and
why aren't they listed right now? That seems shady to make a big announcement
and not clearly list all the terms.

I've got a few questions: How much cash can I borrow? What happens if I'm late
multiple months? What prevents me from closing my account and just walking
away?

I don't know, this seems like an awful idea to me. Rife for abuse. Dwolla will
be one the receiving end of a lot of fraud really quickly and will be spending
all their time and resources chasing down deadbeats.

UPDATE: A 3rd party has more details than their own site [1]. Up to $500.
Still seems rife for fraud to me because now they are going to have to chase
down a lot of people for only $500.

If my credit is good and my money management is sound, why would I need to pay
$3 a month for the privilege of allowing me to get a loan for up to $500?

[1] [http://www.siliconprairienews.com/2011/12/dwolla-
introduces-...](http://www.siliconprairienews.com/2011/12/dwolla-introduces-
instant-gives-users-instant-access-to-line-of-credit)

~~~
colinsidoti
Because they're avoiding "credit" entirely.

I suspect this is the start of their own implementation of "credit", and
they're comfortable with losing some money at the beginning. In the long run,
the traction they gain from the good customers could/should be worth more than
the money they lose.

For the consumer, $3 on $500 is incredibly low interest.

~~~
gojomo
$3/month on $500 isn't 'incredibly' low: it's $36/year, on a net carried
balance that's probably close to zero at least as often as it's close to the
maximum $500.

If you could time it just right, so that your balance was $499 29 days of
every month, and $0 the one day that it needs to be, the effective rate would
be around 7%, a fair but not great consumer credit rate. But if your balance
is often closer to zero, and you ever trigger the late fee, the effective rate
becomes much, much higher.

It does compare favorably to foreign-ATM access fees.

~~~
latchkey
Thank you for saying what I was just about to say. The real point here is that
there is that no reason, for a responsible consumer (ie: someone who isn't
running into debt each month), to use this 'service'. Since it is tailored to
people who have good credit, I don't see how this is going to be popular at
all.

~~~
betterth
Because the point is far more than just a credit line.

The name is "instant".

How exactly is everyone missing the entire "instant" part of the feature.

Instant costs $3/mo, and includes the credit line feature.

But the fronting of cash isn't the ONLY feature in 'instant', and thus not the
only thing you're being charged for!

I like the idea of instant transactions -- a lot. If I could use Dwolla
instead of a debit card, you better believe I'd pay $3/mo to have all of my
transactions post immediately.

------
mikkom
(I'll just copy my answer from reddit below)

That was an odd article from northern european perspective.

You really haven't had direct bank payments via web in US before this? We had
those before web credit card payments and they are implemented by the banks
themselves (it's a standard here, I have actually implemented some of this
stuff with our company)

The article also talks about rent payments.. You don't have automatic
recurring payment option in your web bank interface? can you make payments
from one bank account to other via web interface at all?

(then someone answered that there are not bank-to-bank transfers or more
advanced stuff like direct payments don't exists and I continued...)

Wow that's odd.

Just for comparison, people here would probably revolt if transfering money
from one account to other would cost something. That's how everyone here pays
bills. Before people would go to banks and make transfer form account to other
to pay bills there, some 10-20 years ago banks themselves started to move all
this to their web interfaces to reduce the need for physical locations
(basically to cut costs).

The whole europe is now moving to "SEPA" system where all bank accounts are
standardized so from now on this can be done europe-wide.

Sepa also has this new "e-payment" system that makes all kinds of things like
direct billing possible EU-wide.

[http://www.europeanpaymentscouncil.eu/article.cfm?articles_u...](http://www.europeanpaymentscouncil.eu/article.cfm?articles_uuid=BCFC9AFD-
BDA2-FC9C-B434859EC6A9CC95)

~~~
gcb
i feel you. in 3rd world Brazil we had all that.

here, i kid you not: \- they are just getting chips on credit cards \- you pay
your credit card that your own bank manages by transfering money from one
account to credit card account... and that can take DAYS to show up. so I
usually have to pay my credit card some 20 days before i would. \- most bills
came with an envelope for you to mail your check. \- most people i know pay
annuity on cc.

~~~
dotcoma
Not Brazilian here, but I wouldn't call Brazil Third World, and especially not
their banking system.

~~~
gcb
it was a thong in cheek joke (which i can make because i'm brazilian :) ok
that was another bad joke, but this one i blame on seinfield.

anyway, i wouldn't consider it's banking system so good if you account it's
the most profiting bank system in the world, if the fees arena.

it's modern, ok. but i wouldn't go singing love balads just yet for them.

------
rokhayakebe
When Dwolla does this for consumer to consumer, internationally (US->other
countries), they will eat Moneygram & Western Union's lunch, and diner, and
breakfast, and snack.

~~~
dangrossman
Or they themselves will be eaten by fraud of all scales coming from a million
different places, like most of PayPal's competitors 10 years ago. The odds are
not weighed in their favor.

~~~
rokhayakebe
Paypal, and other companies, have a pretty good handle on fraud now. They can
aggressively hire security engineers from the industry.

------
latchkey
I'm sorry, but there is nothing that is so compellingly 'Instant' about
'Instant' that it begs my $3/month ($36/year) for me to use it.

As it stands now, if I want to buy something, I have several options. Use
paypal, wepay, dwolla (regular) or some other similar provider, use a credit
card, use a debit card, use cash, get someone else to buy it for me. None of
which costs me anything to do the transaction.

Sure, there is some noise about charging for debit cards, but that noise
turned into massive backlash, so I don't think that'll happen anytime soon.
Plus, there are still other options, like another bank with a debt card that
doesn't cost me anything.

Sure, a credit card has a fee associated with it and I probably end up paying
that fee either in the price of the item I'm buying or directly. But at this
point, is the total sum of those fees >$3/month? Maybe, but who really cares
anymore? There is a cost to doing business and it can't be entirely free. That
said, I'm going to support companies, like WePay, who are at least trying to
put a good customer service experience on things and keeping their fees
straightforward and relatively low.

I can see how Dwolla is trying to disrupt the whole industry. I like that and
I sure believe that it needs to happen. The credit card companies are
essentially just another evil empire. ;-) That said, I don't think 'Instant'
is the right product for this disruption. It isn't being marketed correctly at
all. The documentation is missing from their website and the whole $500 thing
seems like a gimmick that is only going to get them into a lot of fraud
trouble.

~~~
eridius
I dunno. I get an ATM charge once every month or two because I need cash so I
can buy things at places that don't accept credit cards (or at places where I
want to buy <$10 worth of stuff). I always end up drawing far more cash from
the ATM than I want just to reduce the occurrence of these fees. Even one ATM
fee per month will be more than Dwolla Instant (usually $2-$3 for the ATM and
another $2 from my bank). If this feature encourages more stores to accept
Dwolla, then it may become cost-effective to turn on Dwolla Instant and use
that instead of carrying cash.

~~~
latchkey
There are banks that offer refunds for atm fees on their accounts. You should
consider switching.

A quick google found this [1], I'm sure there are more.

[1] <http://www.bankfox.com/c/no-atm-fees/>

------
thinkcomp
It looks like I'm just going to echo the sentiments of others on this thread,
but I feel compelled to issue this warning:

Stay away. This "feature" could bankrupt even a respectable company. Do not
trust your money to any company offering credit that cannot or will not
provide a balance sheet to back it up.

Yes, I'm a competitor, but there's a very good reason my company did not and
does not offer this service. We thought of it long ago, and long ago
determined that even with small amounts of credit, the risk to the operator is
astronomical.

Stay away, stay away, stay away.

~~~
chc
I don't quite understand. It sounds like you're saying this is weighted too
heavily in favor of the user, so why are you telling the user to stay away?
Shouldn't the warning be directed at Dwolla?

~~~
pbreit
The warning goes out to anyone who is or will be owed money by Dwolla (ie,
mainly the merchants, or payers who pre-fund their Dwolla accounts).

PayPal performs a similar service but backs it with a credit card.

The risk is fraudsters setting up phony bank accounts, piling up a bunch of
Dwolla credit, paying themselves and disappearing.

~~~
ricardobeat
In that case they only hurt Dwolla, not any merchants or payers. Their money
seems to be legally secure:

    
    
        Dwolla warrants funds property of their respective
        account holder. Warranty is only respective of Dwolla
        balance amount under FDIC or NCUA insured funds covered
        by financial institutions holding funds on your behalf.
    

I don't know what it's like in the USA, but setting up a "phony bank account"
depends on a small list of crimes to be commited before...

~~~
pbreit
I believe if Dwolla had a rash of stolen funds, the insurance of its partner
bank would not cover it (since the insurance covers the bank, not Dwolla).

The US is _much_ different from the rest of the world as far as I know. There
are thousands of banks and even more non-banks that have established ACH
routing numbers. Fraudsters look for banks or companies with the laxest
account opening procedures.

There are some notable payments companies that went out of business because of
fraud (NextCard, BankOne EmoneyMail). When that happens, there's a very real
possibility of customers losing money.

------
dazbradbury
Disclaimer: I've not read details on ALL the different payment platforms that
are around, or the regulations when dealing in this market.

With that said, why don't the platforms make it easy for merchants to pass
these saving back onto the consumer. You can pay by credit card, but that
would cost you 4% more than [insert payments system].

In that way, I'm incentivised as a merchant (more sales/discount with no
loss), and as a consumer (real discount).

~~~
oneplusone
I believe that is against the terms of service for Visa and Mastercard. If you
were to offer such a discount they would simply cut off your access to credit
cards.

Edit: From the visa terms ([http://www.fivecentnickel.com/2010/02/26/visa-
credit-card-ac...](http://www.fivecentnickel.com/2010/02/26/visa-credit-card-
acceptance-guidelines/))

Merchants must always treat Visa transactions like any other transaction (with
a minor exception). They may not impost a surcharge for using a Visa card, but
can offer a cash discount. This discount cannot be offered for use of a
“comparable card” such as a different credit card.

~~~
gregwebs
There are indirect ways of rewarding someone for not using a credit card -
like providing a coupon for their next purchase (I saw that at Ikea before).
Although if these loopholes gain in popularity the credit card companies could
always revise their terms.

~~~
narcissus
Similar to how Canadian Tire gives 'Canadian Tire Money' when paying some way
other than credit cards.

The bonus is that a fair number of 'mom and pop' shops will accept Canadian
Tire money as cash...

------
angryasian
My question to merchants would be..

Would you actually risk sales at not offering credit card payments and only
offering dwolla? With companies like square they make the entire process
incredibly easy.

Would you actually list two different prices on all your items or services
based on paying with credit card vs dwolla, or would you just standardize and
swallow the 3% or whatever it is ?

~~~
wingspan
As someone mentioned in a previous thread on dwolla (re your second point),
you don't list two different prices. When the customer is checking out, you
give a cash discount if you use dwolla (e.g. 3% off your purchase if you use
dwolla to pay!).

~~~
eridius
Are you even allowed to do that? I thought stores don't currently do that
because the credit card companies have rules saying that you can't. Or does
that not apply if you use Square?

~~~
marquis
Have you ever bought a plane ticket in Europe or Australia? They offer free
transactions that are not credit-card based. It's fairly common to have an
extra fee in a lot of non-US online and off-line stores.

~~~
radicalbyte
> They offer free transactions that are not credit-card based.

If you're referring to RyanAir (and the other low-cost airlines), then they
only offer free transactions on obscure payment types. From what I've seen the
'free' transaction type changes whenever a more obscure and impractical
payment system becomes available.

They do that so that they can legally advertise lower prices that they charge
in practise.

~~~
marquis
I'm referring to most travel agents outside of the U.S. and perhaps Europe,
and many restaurants, shops, boutiques. They pass the credit card fee directly
to the customer in many instances, which I'm usually fine with. Larger stores
will eat the fee but many smaller businesses can't do that.

------
SolarUpNote
Does anyone know if this is correct?

If someone pays me $1000 with a credit card, I pay Visa $25 (2.5% transaction
fee)

If someone pays me $1000 with Dwolla, I Pay Dwolla 25 cents.

That's what I could figure out, but it seems too good to be true.

~~~
wmf
Yes, that's correct. Keep in mind that Dwolla is based on ACH which has lower
fees than credit cards; besides that it's just statistics.

------
singingwolfboy
So what? Why would I use Dwolla instead of a credit card?

~~~
jessegavin
I can't think of any reason a consumer would benefit from this over a credit
or debit card. Except maybe if they regularly overdraft and prefer a $5 fee to
whatever their bank charges.

~~~
pbreit
It's targeted more for situations where credit/debit cards are not currently
accepted. For example, large transactions for professional services. Think of
it more as replacing checks, not cards.

~~~
miles_matthias
That is one of the goals but the other goal is reducing the cost for the
merchant. Merchants will prefer you to pay with Dwolla as opposed to a credit
card because they don't give up as big of a fee on each transaction, this
earning them more revenue.

~~~
pbreit
Maybe. But 2-3% is about the right price for a financial txn between
strangers, especially when not face-to-face.

~~~
eridius
Why? Why should there be a percentage-based fee at all for financial
transactions? This is an idea that credit card companies have pushed onto the
world, but there's no reason it needs to be accepted as fact.

~~~
pbreit
I didn't really mean all. I did say between strangers and especially when the
two are not face-to-face. Two other qualifiers: 1) when "good funds" need to
be transferred immediately and 2) for dollar ranges from around $10 to $1,000.
This makes up the vast majority of retail commerce for which credit cards are
so well suited and widely used.

Best approach is to look for areas where credit cards are not widely used
instead of trying to displace them in areas where they work really (really,
really) well.

------
gmaster1440
I don't understand how they actually send you the cash immediately. Does it
generate a temporary Debit card?

~~~
walkon
I believe if you are enrolled in Instant they will spot the money for any
purchases you make beyond the amount you already have in your account, up to
$500 worth. So it just enables you to use Dwolla for purchases without having
to wait for a slow ETF transfer (around 3 days) from your bank to fund your
Dwolla account.

------
Vivtek
OOOooohh, when Dwolla goes international I'm so very much saying goodbye to
PayPal.

------
regularfry
Hmm. If I'd been able to use this for margin on mtgox a few months back...

------
verroq
International users need not to apply.

