Dwolla Loans Users $500 to Make Instant Payments Through Facebook and Twitter
Online payment startup Dwolla has attracted more than 70,000 users with money transfers that are both less expensive and, it says, safer than traditional credit cards. Now, it's further challenging the plastic in your wallet by allowing you to make such transactions instantly — and on credit.
Dwolla users make payments through Twitter, Facebook, SMS and other virtual channels by connecting their bank accounts to their Dwolla accounts. The service integrates with social networks to alert payment recipients that there is money waiting for them in their own Dwolla accounts that can be transferred to their bank account. Payments of up to $10 are free and anything larger costs $0.25. Up until Thursday, however, there was no way to use Dwolla to make instant payments because the transfer between banks and Dwolla usually takes two or three days.
"Instant," the new opt-in feature Dwolla launched Thursday, solves this problem by spotting users as much as $500 when their accounts are empty. The feature costs $3 per month no matter how many times it is used, and late fees are $5 per month.
Sound like an instant target for scammers? Preventing it from becoming so is part of what Dwolla considers its secret sauce. One reason the startup is able to offer payment transfers with lower fees than big credit card companies is that purely digital transactions present fewer opportunities for data theft than physical swiping. In theory, Dwolla will deal with fewer expensive fraud cases than its traditional counterparts.
The startup is backed by financial services firm The Members Group, which deals with card processing, payment solutions and prepaid cards. The firm has been helping Dwolla develop screening methods that assess risk of new members before they're accepted.
Still not convinced? If Dwolla continues piling on transactions at its current rate, you might be soon. In December 2010, the company was processing about $500,000 of transactions per week. By June 2011, they were processing $1 million per day.
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