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Business Insider has an interesting piece about Dwolla, a Des moines-based startup described as “an innovative online payment system that sidesteps credit cards completely” as well as facilitating B2B and person-to-payment cash transactions.

The company was founded by Ben Milne, a 28-year-old with no financial services 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.” Which is appealing to both consumers and retailers who believe that banks are taking far too much in terms of transaction fees.

Two excerpts from an interview with Milne:

“We think, in the long term, sending money should be as easy and effortless as finding a friend on Facebook.  That's really a behavior we try to mimic when it comes to peer-to-peer payments.  When someone does not have a Dwolla account, they get a wall post that says, ‘You've got money.’ If a friend sent that to you and it was their name and their face, you would have a different emotional connection to that than an arbitrary email from  It's a totally different interaction and one that's been really helpful for us in converting users into the system.”

“We do pretty well in B2B; 11% of our business is person-to-person, and the large majority is business-to-business, consumer-to-business, and business-to-consumer.  The platform was originally built for taking in payments through websites, and we have APIs that allow you to do that.  We haven't experienced the scale on those quite yet.  Where we've seen a ton of transactions right now is with people paying monthly rent.  If I'm a landlord and I want to collect it, taking a credit card payment means missing out on 3% of an $1800 charge.  Dwolla is $0.25 cents.”

The entire story can be read here.
KC's View:
One of the likely results of all the attention that has been paid to transaction fees - previously hidden, now on display for everyone to see, which I think is for the better - is that lots of entrepreneurs are going to come up with new business models that will threaten banks’ traditional dominance. Which also, I think, is a good thing.

Of course, there may be some downsides to all this...