1. This site uses cookies. By continuing to use this site, you are agreeing to our use of cookies. Learn More.

Paypal Killer:28-Year-Old's Startup Is Moving $350 Million $ Wants To Kill Credit Cards

Discussion in 'BlackHat Lounge' started by MiLiTARYiV, Nov 15, 2011.

  1. MiLiTARYiV

    MiLiTARYiV Senior Member

    Joined:
    Jan 9, 2008
    Messages:
    959
    Likes Received:
    595
    Occupation:
    Webmaster
    Location:
    The Office
    Finally something that won't take a huge percentage of your money when sending/receiving payments . They are doing 30-50Million monthly now
    Read more -->>http://www.businessinsider.com/this-28-year-old-is-making-sure-credit-cards-wont-exist-in-the-next-few-years-2011-11?page=1

    ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



    There's a tiny 12-person startup churning out of Des Moines, Iowa. 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.
    We interviewed Milne about how he is building a credit card killer and Square rival from the middle of the nation where VCs and press are scarce.

    BI: We hear you're making credit card companies angry. How are you doing that?


    Ben Milne:
    Ultimately we're trying to build the next Visa, not the next PayPal. We're building a human network based on how we think the future of payments will work. The current model needs to be blown up.
    Dwolla started out of my old company. I owned a speaker manufacturing company and we sold everything directly through a website. I got really obsessed with interchange fees and how not to pay them. Every time a merchant gets paid with a credit card they have to give up a percentage. In my case, I was losing $55,000 a year to credit card companies. I felt like they were stealing from me -- I was getting paid and somebody was taking money out of my pocket.
    So I thought, how do I get paid through a website without paying credit card fees? We pitched a bank, and amazingly enough they said, "We'll give it a shot."
    That was three years ago, so we've been working on the project for a really long time. In December of last year we figured out how to legally do what we do.
    How many transactions are you doing?

    The average transaction volume for Dwolla is right around $500 dollars. We move between $30 and $50 million per month.

    What's your story?

    I'm 28. I started my first company, Elemental Design, when I was 18. I dropped out of University of Northern Iowa and built that.
    I started college because I thought that's where I was supposed to go. I applied to one college, I got in, went, and realized it wasn't for me. I had customers so I stopped going to class.

    We grew that company from a $1,200 investment to over one million in revenue in four years with three or four people and without outside investment. The company was running itself and I wanted to work on another project.

    You don't have a finance background and yet you built Dwolla?

    It's been helpful in some strange ways. I think the first financial institution we went into only listened to me for entertainment. They let me get in to pitch the full executive team at the bank.
    I don't look like a banker, they knew I didn't have a banking background. They actually agreed to work with Dwolla after two hours of arguing with me and me scribbling on a whiteboard about how the whole thing could work.
    Had I been more typical, maybe they wouldn't have listened to me. In that respect, I think that not knowing how the mechanics worked was good — we just knew the way we wanted them to work.

    What did you do for the first two years when Dwolla wasn't technically legal?
    Well it was legal, we just couldn't operate outside of Iowa. For the first two years we built out the platform. We did a sh*tload of testing on a small scale because legally we couldn't launch Dwolla nationwide. We spent two years inside of Iowa fine-tuning Dwolla with the financial institutions, building out some of the initial models, and trying to figure out how to legally do what we do.

    How'd you find a legal loophole?

    Moving money is an exceptionally regulated business. We're in Iowa, which is sort of conservative — I don't know if that helped us or hurt us, but in the long term I think it helped us. We figured to do this legally, we had two options: we could take in a tremendous amount of money and go out and get licenses, which is how most people do it. But we didn't have access to that kind of capital here.
    The other option was to bring in really strategic investors, which is what we did. One of our investors is a financial institution; one is a financial services company.
    Our investors do credit and debit processing for banks. So when you get a credit card from your bank, it's being issued by companies like them. Our investors are also distributing our product to financial institutions. So we've been building a payment network, and we can do it legally because of who our investors are.
    We launched in December of last year and started moving $50,000 a week. Now we're hovering around $1 million a day. We hit that milestone in June or July.
    Now we've quieted things down. We had to tap the brakes because the way you handle money needs to be managed correctly. We have some new partners on board and we're going to hit it hard in December again. We've got some stuff coming out in December that we think should be really big.

    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 . We're building our own.

    Continued-->http://www.businessinsider.com/this...nt-exist-in-the-next-few-years-2011-11?page=1

    Interesting
     
    • Thanks Thanks x 26
    Last edited: Nov 15, 2011
  2. bushbabie21

    bushbabie21 Executive VIP Jr. VIP Premium Member

    Joined:
    May 27, 2010
    Messages:
    459
    Likes Received:
    165
    Wow that is amazing..However, as a merchant i think it will really have to gain popular tracktion in order for small businesses to really be able to rely on it as hooking up a bank account is an extra step for buyers and in my opinion a bit scary from a merchant point of view (ie. being too much work for the buyer, hence loosing the sale) But i am very interested to see where this goes.
     
    • Thanks Thanks x 2
  3. t0mmy

    t0mmy Moderator Staff Member Moderator Jr. VIP

    Joined:
    Jun 5, 2011
    Messages:
    6,252
    Likes Received:
    12,479
    Location:
    Ireland
    Home Page:
    very interesting! hope it gos full throttle
     
  4. wolf1880

    wolf1880 Junior Member

    Joined:
    Sep 28, 2011
    Messages:
    107
    Likes Received:
    10
    This has a big chance of overtaking paypal.
     
  5. eBayMafia

    eBayMafia BANNED BANNED

    Joined:
    Jun 22, 2010
    Messages:
    460
    Likes Received:
    284
    I hope it makes it because something makes me feel good inside about a company from my home state becoming huge.

    Unfortunately, I don't think this will last. Theres incentive for merchants, but unless the merchants advertise that they offer a greater savings for paying with dwolla, I do not think this will work.
     
  6. MiLiTARYiV

    MiLiTARYiV Senior Member

    Joined:
    Jan 9, 2008
    Messages:
    959
    Likes Received:
    595
    Occupation:
    Webmaster
    Location:
    The Office
    Did most of you read the part where it says they do 30-50 million dollars monthly!..lol
     
    • Thanks Thanks x 2
  7. Dan Da Man

    Dan Da Man Elite Member Premium Member

    Joined:
    May 31, 2011
    Messages:
    1,850
    Likes Received:
    937
    Occupation:
    Duh
    Location:
    San Diego
    Home Page:
    Great stuff man. Looks really interesting. Thinking to give it a try. Paypal can suck me d!
     
  8. seoexpert2010

    seoexpert2010 Junior Member

    Joined:
    Mar 8, 2010
    Messages:
    116
    Likes Received:
    36
    So currently he roughly makes $20.000 USD from moving lets say 40 million bucks per month if its split up in $500 USD transactions where he makes 0,25 CT per transaction.
    This definitely has potential to expand and fast once people get the hang of it
     
  9. Sliar

    Sliar Regular Member

    Joined:
    Sep 11, 2009
    Messages:
    344
    Likes Received:
    41
    God I hate this happens and goes big. Also would be nice if they didn't mind adult transactions :p
     
  10. scraper1

    scraper1 Regular Member

    Joined:
    May 28, 2011
    Messages:
    214
    Likes Received:
    207
    Location:
    Kontiki
    Home Page:
    Average transaction: 500$, each transaction at 0.25$, 30 mil$ processed monthly.

    So, their profit would be around 15000$ a month. I don't know how many people are in the team and the maintenance costs, but it seems promising. From this point they can only grow, and I do hope so, because many are pissed off at the existing services.
     
  11. kelso

    kelso Regular Member

    Joined:
    Nov 30, 2009
    Messages:
    474
    Likes Received:
    275
    *PayPal screams of shock and awe*
     
  12. wisdomkid

    wisdomkid Jr. VIP Jr. VIP

    Joined:
    Jun 20, 2011
    Messages:
    2,593
    Likes Received:
    750
  13. Corrupt

    Corrupt BANNED BANNED

    Joined:
    Sep 15, 2011
    Messages:
    805
    Likes Received:
    412
    It'll have a hard time spreading to other countries, but lets hope it does :D
     
  14. eterxx

    eterxx Junior Member

    Joined:
    Mar 25, 2011
    Messages:
    119
    Likes Received:
    45
    Occupation:
    a little bit of this, a little bit of that
    Wow nice, Paypal is too greedy, time to change... I hope it will grow fast and come to my country
     
  15. howard_hughes

    howard_hughes Elite Member

    Joined:
    Jul 23, 2009
    Messages:
    5,048
    Likes Received:
    3,684
    Occupation:
    Just Another Digital Marketer!
    Location:
    "Insta Rank"
    Home Page:
    Fuck paypal, yes do it!!
     
  16. moeatwa

    moeatwa Regular Member

    Joined:
    Jul 23, 2011
    Messages:
    486
    Likes Received:
    475
    Occupation:
    Material Engineering Undergrad Student/ Blackhat I
    Location:
    Land of the Nile
    Sadly, it doesn't seem likely that this'll become global... Visa and Mastercard already have the upper hand in that they've been around almost as long as E-money has. Even being first movers, it took almost 2 decades for Credit to become a mainstream GLOBAL phenomenon. The idea has potential, but seeing as to how it's dealing directly with banks, trying to get it to take off globally, essentially involves unifying the financial policies of the ENTIRE WORLD... =D
     
  17. Roparadise

    Roparadise BANNED BANNED

    Joined:
    May 25, 2011
    Messages:
    786
    Likes Received:
    1,417
    So basically its a system that allows merchants to accept wire transfers? Hasn't this been around for several years?
     
  18. dheer

    dheer Jr. VIP Jr. VIP Premium Member

    Joined:
    Jul 24, 2009
    Messages:
    2,443
    Likes Received:
    1,029
    Home Page:
    when this company opening doors for the rest of the world. can't wait. an awaited payment system.
     
  19. portalweb

    portalweb Supreme Member Premium Member

    Joined:
    Jan 7, 2010
    Messages:
    1,415
    Likes Received:
    547
    Occupation:
    Hard Core Engineer
    Location:
    New York
    Many thanks for the important link.

    For developers - check out here:
    https://www.dwolla.com/dev/

    I believe this Dwolla payment system concept is a huge milestone - for the mobile/eCommerce payment services.

    This important part here is what I'm very interested:

    "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. "

    The payment opportunities for utilizing the Dwolla payment system is truly infinite, especially for the developers.

    The only challenging part would be the payment terminals connected to their cash register/POS systems, which needs to developed.

    Thanks, MilitaryIV for posting this valuable info.
     
    • Thanks Thanks x 1
  20. beest123

    beest123 Junior Member

    Joined:
    Jul 1, 2011
    Messages:
    134
    Likes Received:
    91
    I doubt this will beat paypal/visa...