Media
Iowa's Dwolla: Making money, moving money
Jul 11, 2010
Des Moines Register, by Karen Mracek
The online money transfer site with a funny-sounding name is well-known to social media gurus in Des Moines.
Now the founders of Dwolla want the company to become a household name nationwide.
The name comes from combining the words "dollar" and "web." It is a fitting name for a startup company that hopes to rival PayPal and revolutionize how online consumers send and receive payments.
"It's a way to move money electronically without the interchange fee or the costs associated with other services," said co-founder Ben Milne.
Dwolla launched in Iowa in December, and is on the brink of a national rollout that Milne says is coming soon. He expects to have 25,000 users by the end of the year, and more than 1 million in the next four years.
"The national release is just so significant for us," Milne said. "It's so mind-blowing what's possible inside the U.S., with cell phones, computers, internet protocol between servers and banks, the possibilities are unbelievable. And being able to start capitalizing on those ideas instead of just talking is an opportunity I am really looking forward to."
Dwolla is the second online venture for Milne, 27, who started Elemental Design, an online speaker dealer, while he was a student at the University of Northern Iowa. The business grew to $1.5 million a year in revenue. More important, it convinced Milne that there needed to be a better, cheaper way to transfer money online.
Interchange fees — the 3 to 5 percent cost that retailers pay credit card companies to process transactions — were eating a large part of Elemental Design's revenue. Those fees, along with shipping costs, made up a lot of the company's expenses.
"The more we started looking, the more we realized there wasn't a service that would do what we wanted," Milne said.
So the Cedar Falls native started asking questions: How does money move? How could it move? What options do consumers and retailers have? How can we make it cheaper?
He turned to Iowa bankers, accountants and other business leaders for advice and mentoring. Help came from Bankers Trust chief Suku Radia, Christian Renaud of Palisade Systems and J.D. Geneser, an accountant with LWBJ who is now Dwolla's chief financial officer.
"Des Moines has really taken ownership of the project once we put an address here," Milne said. "That's been extremely helpful."
Based on ideas that came out of those meetings, Milne and his partner, Shane Neuerburg, designed software that would integrate with the banks and reduce the cost of transferring money.
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