Dwolla Review

Pros

• White label payments
• Developer tools available
• Extensive customer support options

Cons

• Potentially expensive
• No credit card acceptance
• Limited feature set

Overview

Dwolla used to be a P2P bank transfer platform that also catered to businesses. But it’s been a few years since I looked at Dwolla in-depth — and when I came back to check the company out, I didn’t recognize it as the same at all.

That’s not to say that Dwolla isn’t still offering bank transfers. It does. That’s the core of its services. But instead of a PayPal-esque platform that uses ACH rather than credit or debit cards, Dwolla has become more of a developer-friendly software option for high-tech businesses that want to integrate white-label bank transfers into their systems.

Dwolla isn’t a merchant account provider. Nor is a it a third-party processor like Stripe, PayPal, and Square. Technically, it’s an agent of the banks and credit unions that the company has partnered with: Veridian Credit Union and Compass Bank. That means that its contract terms and obligations as a service provider are different.

Despite the company’s claims about being extremely developer-friendly, I wouldn’t go so far as to call Dwolla the Stripe of ACH payment options. For one, a pay-as-you-go direct processing model (for merchants who just want to accept payments from customers) is still in beta. For everyone else, Dwolla works more on a contract/SaaS model that it claims allows for predictable pricing, but honestly seems like it could be very expensive compared to other options.

The platform isn’t exactly feature-rich like Stripe, but Dwolla has tailored its platform to a sophisticated, tech-savvy clientele, and there’s certainly some advantages to relying on bank transfers over credit transactions for online businesses.

Looking for the best or cheapest way to accept ACH bank transfers? Take a look at our post about ACH payment processing.

First, bank numbers change far less often than credit or debit card numbers, which means a business won’t have to deal with as many failed transactions resulting from updated account numbers. Second, Dwolla’s business model makes it possible for you to send, receive, and hold funds in a digital wallet, so you can do more than simply accept funds from customers. The company also offers merchants next-day and same-day ACH transfers for its clients, meaning super speedy processing.

I certainly think Dwolla could potentially be a good solution for some businesses, such as B2B enterprises and billing/utility services in particular. Dwolla’s existing client base has used the platform for gig economy apps, employee reimbursement apps, marketplaces, plus real estate investment and lending. It’s a flexible platform that allows for moving money around in ways that lots of credit card processors don’t support. I also like that you can combine Dwolla with credit card processing options if you want.

I don’t have enough information about Dwolla to give it an accurate rating, so for now I am going to call this Not Yet Rated. That could change in the future, especially as we get more chatter from merchants who have used the platform.

Read on for my full assessment of Dwolla’s payments platform! If you have questions or experience with Dwolla (especially recently!), we’d love to hear from you! Leave us a comment with your thoughts.

Features

Dwolla’s concept is simple: ACH payments. You’re not going to find card acceptance, crypto-currency, PayPal, or any of the other assorted online payment alternatives that have cropped up. Just pure, simple, bank transfers.

That said, Dwolla is actually fairly versatile as far as ACH payments are concerned, and it’s built on a developer-friendly platform. It’s not just about accepting payments — here’s what you can do as far as moving money around:

• Receive payments
• Send payments
• Receive and send payments
• Facilitate payments

If you’re wondering what “facilitate payments” means, it means you can build a platform that allows users to send funds to one another without requiring you, the merchant, to do anything. (Additional note, you can also charge a facilitator’s fee for the transaction to monetize the platform.)  You can also hold balances within Dwolla, like a digital wallet.

Dwolla User Accounts 

An important step with Dwolla that you won’t experience with most credit card processors is the need for users to verify their accounts. Dwolla offers two options to do this: Instant Account Verification (IAV) and micro-deposits. IAV requires users to login to their online banking accounts using a secure window. Mico-deposits instead send a tiny sum to a bank account to verify the information. Obviously micro-deposits take a bit longer to initiate and clear (up to a few days), but it’s up to you (and/or your customers) to decide which method you prefer.

Dwolla separates these user accounts into three tiers: Receive-Only, Unverified, and Verified. Receive-only customers provide the least amount of information, but as a result are only able to receive payouts. They do not go through any kind of verification process. They cannot hold balances within a Dwolla wallet.Unverified accounts can both send and receive funds, but are limited to sending $5,000 per week. Unverified accounts collect just the customers first and last name and an email address. However, at least one party in an ACH transaction needs to be verified, so if customers are sending funds to each other, at least one party has to be verified. Unverified customers also cannot hold balances within Dwolla.

Verified accounts are further sub-divided into two categories: personal and business. A verified business account can send and receive funds with a limit of up to $10,000 per transaction; a verified personal account can send and receive up to $5,000 per transaction. In both cases, the customer can hold a balance within Dwolla (perfect for marketplace setups).

Other Features 

A couple of additional features with Dwolla are recurring payments and on-demand payments. Recurring payments is pretty obvious — a subscription management tool where your customers pay the same amount each moth. On-demand payments work with metered billing so that you can charge a variable amount every month based on usage. This is ideal for utility billing in particular, but any sort of usage-based product can use on-demand payments.

One of the struggles with ACH payments is that unlike credit card payments where the networks check whether there’s a sufficient balance on the card before authorizing a transaction, ACH transactions don’t have any sort of native, built-in process for that. So merchants may encounter NSF (Not Sufficient Funds) transactions that end up costing more in fees and result in non-payment. Dwolla has developed a feature called bank account balance checks, where you can ask your customers to give you permission to check the balance on their account before debiting funds. This can only be enabled with Instant Account Verification (IAV), not micro-deposit verification.

Security 

Dwolla helps keep transactions secure in a few ways: first, you can implement Dwolla.js, a client-side Javascript that will transmit information (including bank account and routing number) without the information passing through your servers. That shifts some of the security burden away from you the same keeping secure information from passing through your own system removes you from PCI compliance scope.

Second, Dwolla also offers tokenization. Rather than transmitting actual account numbers, the data is encrypted and replaced with another number before being sent over the network. Tokens have limited use and so even if they are intercepted, they cannot be used again. Plenty of POS systems and even some online credit card processors have started to implement tokenization too, so Dwolla building this into its system is a good step forward.

Integrations & Add-Ons 

As far as integrations goes, Dwolla says it is technology-agnostic and works well with other services that you may want to integrate. However, it doesn’t have a list of specific, ready-made integrations to choose from, which makes me think everything will be totally custom built. However, Dwolla does mention two out-of-the-box integrations: Plaid and Sift Science. Now, these are pretty cool, especially for large enterprises that want to improve their information. Plaid allows users to link and verify their bank accounts within Dwolla — all the users need to do is log into their online banking accounts via Plaid. Plaid tokenizes and stores that data, meaning merchants don’t have to worry about storing financial data within their own systems. It’s pretty clear that Plaid handles some major aspects of Dwolla’s service but if you check the pricing page you’ll see just a vague note that both Plaid and Sift are optional and “fees may apply.”

Sift Science (also stylized sift science) is a fraud-monitoring platform. Similar to Kount or Stripe’s native tools for fraud monitoring, Sift analyzes leverages its machine learning and knowledge of past transactions to evaluate each transaction and analyze its likelihood of being fraudulent or otherwise suspicious.

Fees & Rates

Dwolla technically offers three pricing plans: Start (a pay-as-you-go model), Scale (structured, predictable fees), and Enterprise (completely custom). The Start plan is still in beta, so it’s not widely available. However, you can sign up for the waitlist if you’re interesting. This will be the option that will appeal to merchants who want to process transactions directly.

Start Plan:

• $0 monthly fee
• 0.5% per transaction
• $0.5 minimum. $5 maximum

The Start plan does come with limitations: you can’t access certain features (such as next-day and same-day deposits, facilitating payments, on-demand payments, and balance holds). Merchants on this plan also get more limited customer service — no phone or Slack access, and no dedicated account rep or integration engineer for support.

Scale Plan:

• Starting at $2,000/month

That’s all the information that Dwolla discloses. However, we do know that the monthly fee is consistent and not based on the number of transactions processed in a given month. So even if you have a busier-than-average month, you’ll pay the same for as long as your contract is in place. Overall volume probably does play some extent in determining your monthly fee (with higher volumes paying more), but Dwolla doesn’t give specifics on how prices are assessed.

You should keep in mind that you are paying for more than just ACH transfers. Dwolla is giving you a whole service package with some bonus features. In addition to a dedicated customer support rep, you’ll also get integration assistance directly from Dwolla so that you can implement a payments system more quickly.

Also, the Scale plan includes the ability to facilitate payments and collect a fee for it. The Start plan doesn’t support this. Dwolla says the facilitator’s fee must be at minimum $0.01 and can be up to 50% of the transaction amount, so it is possible to recoup some of your monthly processing costs. Other features available on the Scale plan but not the Start plan include the ability to hold balances within Dwolla and to establish “verified customer” accounts. The verified customer records can actually be very important especially for certain industries that must comply with Know-Your-Customer (KYC) requirements.

Finally, with the Scale plan, you can access next-day and same-day ACH transfers, though at an additional cost. The site doesn’t specify what that additional cost is, but if you check out the terms of service, you can see that next-day transfers come an additional $25/month and same-day transfers at $250/month. I don’t really know how I feel about this pricing or its fairness, but I do feel obligated to point out that Stripe also charges extra for expedited ACH payouts on its Connect platform (1.5%, minimum $0.50 per payout).

Enterprise Plan: 

• Custom Pricing

With the Enterprise Plan, you get custom pricing (contact sales for a quote) and everything offered in the Scale plan. In addition, Dwolla offers a few extra perks to enterprise clients, including technical support and information security support, as well as prioritized support and assistance with feature development.

Other Fees:

The good news is that Dwolla doesn’t have a load of hidden fees or account fees built in. The expedited payment processing isn’t so surprising, given that ACH takes 3-5 days regularly.  The only other fees are a $15 reversal fee (similar to a chargeback), which is disclosed in the terms of service, and a small one-time onboarding fee for your customers (the actual amount isn’t given and the fee itself is only casually referenced in a blog post).

Transaction Limits:

I like that Dwolla is up front about transaction limits, with the information stated pretty clearly in the terms of service:

4. Transaction limits.

4.1 Account limits. You are limited on the amount of money that can be sent from your Account per transaction. The per transaction limit varies based on your Account type. Personal Accounts are limited to sending $5,000.00 per transaction. Business, Non-profit, and Government Accounts are limited to sending $10,000.00 per transaction. We reserve the right to decrease your sending limit at any time, for any reason.

4.2 Increased limits. You may apply for an increased sending limit here. Approval is solely in Dwolla’s discretion and may be reassessed and/or revoked at any time.

A maximum $10,000 transaction size should be good for most businesses, but you can increase the limit if you typically deal with much larger numbers. That’s something you’ll want to talk to Dwolla about from the get-go, obviously.

For context, Square claims that the maximum transaction size it supports is $50,000. The reality is transactions much smaller than that get flagged as suspicious and can lead to an account hold or termination. There’s no data on how well Dwolla handles this, but with the Scale and Enterprise plans you can require users to go through additional steps to verify your customers’ identities, which should reduce some of the trouble.

All of that said, I don’t love Dwolla’s pricing model. A whopping $2,000/month to start means that Dwolla better add a LOT of value in its support and additional services to be able to justify the cost, because the cost of processing itself isn’t nearly that much.

At 0.5% per transaction, a $20,000/month volume would charge just $100 in processing fees. Stripe, charging 2.9% + $0.30 per card transaction, with the same monthly volume and an average transaction of $100, would charge $640 in fees. Stripe charges 0.8% for ACH, so the fees would be $160 for ACH transactions.

But let’s say that we’re looking at a higher volume to begin with. At $50,000/month and 0.5% per transaction, Dwolla’s transaction fees would be $250; Stripe’s fees for credit cards would be $1600, assuming $50,000 in volume and an average ticket size of $100. For ACH, it would be $400.

Now that’s not a completely accurate picture of the costs associated with either platform, but it’s a good starting point for comparison.

If you choose to use Stripe’s marketplace suite, called Connect, you’ll incur monthly charges per every user account and their monthly balance, as well as other costs. And I think that’s part of where Dwolla’s value might make up for its monthly fee — you won’t have to pay as many per-transaction and separate fees for the marketplace tools Dwolla offers. There’s just that “small” undisclosed onboarding fee.

While I’m certainly interested in seeing how Dwolla’s Start plan fares and whether it does become a viable option for merchants who just want to accept ACH payments for their goods or services, the Scale plan is a bit harder to recommend all around. It has a lot of great uses — just not for standard eCommerce. If you want to build a platform to facilitate payments or help with paying out of expenses, or even offering financing and investment, Dwolla makes a lot of sense. But I don’t necessarily think it’s the most cost-effective solution. If you prioritize having great customer service and hands-on assistance with development and implementation, Dwolla might be perfect. But if you don’t have boatloads of cash on hand, or your development team is very capable, you can possibly find better pricing elsewhere. In some some cases, you might sacrifice the quality of customer service, but that’s not necessarily the case with all other providers.

Contract Length & Cancellation

Excluding the Start plan that is pay-as-you-go, Dwolla isn’t super clear about whether it’s a month-to-month processor or if it locks merchants into yearly contracts. Reading the terms of service and looking at the pricing page, it’s easy to make an educated guess that Dwolla works on a contract basis.

A little bit more digging and I managed to find a page on the Dwolla website that mentions 12- to 24-month contracts. That sounds reasonable for the business model, considering credit card processors that don’t operate on a month-to-month basis typically offer 3-year contracts. A month-to-month agreement is preferable, but given the effort you’re going to sink into Dwolla (and vice versa), it makes sense that they’d want a reasonable guarantee that you’re going to stick around for a while. There are no specifics about contract termination, unfortunately, and no data online about what happens if you try to break the contract.

A “day in the life” blog post from one of Dwolla’s “business development representatives” (that’s a fancy term for salespeople, folks) also specifically mentions proposals and contracts, which leads me to think that you’ll run into some back-and-forth and maybe even some potential negotiation.

It’s also worth mentioning that Dwolla doesn’t have any sort of exclusivity clause in its contract, so you can implement other payment options alongside Dwolla. If you want, for example, to allow people to make credit card as well as ACH payments and then handle payouts strictly via ACH, that’s absolutely an option.

Sales & Advertising Transparency

I can’t find a lot of information about whether any merchants have encountered any hidden fees or misleading sales reps. Dwolla appears to be fairly straightforward in how it operates, but there are a few issues. First, obviously, is that pricing isn’t clearly disclosed. Dwolla’s sales reps will tell you “well it depends on a lot of factors,” which is exactly the excuse some of the largest credit card processors use to avoid disclosing rates. I’d love to get a breakdown of what that $2,000/month fee includes besides payment processing.

Second is that Dwolla’s previously gotten in some trouble with the Consumer Financial Protection Bureau for misrepresenting its data security practices. In early March 2016, Dwolla was fined $100,000 in addition to being called out for its misconduct. These days, Dwolla claims to be very gung-ho about its information security. Apart from keeping information away from your app or your servers and tokenizing data, I don’t see a lot of discussion about this. The only other evidence I see is a SOC2 certificate from the AICPA. Dwolla isn’t super clear on what else it does to help with security. Since we’re dealing with ACH here, not credit cards, PCI-DSS security compliance that most merchants are used to dealing with does not apply.

Customer Service & Technical Support

Unlike most tech-savvy processing companies, Dwolla isn’t located in Silicon Valley or Seattle or somewhere on the east cost. It’s not even in what you would consider a large city — Dwolla is based in Des Moines, Iowa. The company promises “Iowa nice” customer support, playing on the idea of Midwestern sensibilities and friendliness.

If you’re on the Start plan, you get very limited options for customer support — namely, email and the developer forum (more about that in a minute). But if you start with the Scale or Enterprise plans, Dwolla will apparently bend over backwards for you, with a dedicated account manager as well as access to an integration engineer. Your support options include:

• Phone support
• Email support
• Dedicated Slack channel
• Developer forum

Dwolla doesn’t post support hours, but given how small the company is, you can guess that it’s probably standard business hours unless your sales rep wants to go above and beyond.

Obviously, Dwolla also offers developer documentation and guides. I’m not the best judge of quality because I’m not actually a developer, but the documentation seems fairly thorough and is available for multiple programming languages. The developer forum is active and people are giving answers, which is nice to see. It indicates that there’s a community of interested developers who want to support one another.

Dwolla also has a help center, but it’s definitely one of the least-helpful self-service knowledgebases I’ve ever seen. It appears to be a work in progress, but it’s going to take a lot of work to make the help center even remotely useful. Most likely, you’ll do better if you go directly to the developer forum, or contact support directly.

I like the addition of a Slack channel — as a Slack user myself, I think it’s a very powerful, effective communications channel and I think it shows the dedication Dwolla has to give you consistent access to support.

Negative Reviews & Complaints

There isn’t a whole lot of data about Dwolla in general, and most of it is old or from customers, rather than merchants, who were asked to use Dwolla and did not understand the platform.

Of the relevant complaints, I’ve seen chatter about accounts being terminated because Dwolla no longer supports their model (the timing suggests these merchants got caught in the transition period). There are just 9 complaints on the BBB, and most of them from 2016. All of the BBB reviews are negative, but other user-generated reviews across the web are more of a mixed bag.

It’s hard to say anything definitively here in the absence of recent, relevant information.

Positive Reviews & Testimonials

Dwolla is happy to showcase its successful clients with various case studies. And I like these case studies because they showcase Dwolla’s capabilities better than any other piece of copy on the website.

However, finding other positive reviews across the web is a challenge. There are a couple, but they’re not in-depth or informative. We’ll need more time to rack up some reviews for Dwolla. If you have experience with the new Dwolla (good or bad), we would love to hear it! Leave us a comment with your thoughts below!

Final Verdict

Dwolla is certainly an interesting platform. It’s not super advanced, but it has just enough features to make it stand out compared to other ACH payment platforms — and certainly compared to credit card processors that also throw in ACH processing as a bonus. For some businesses, it could be exactly what you need.

At the same time, I am a bit wary of Dwolla’s pricing model. A direct, pay-as-you-go plan is only in beta, and the other plans are priced as a monthly SaaS package. I am not sure it’s really all that competitive, and part of that is because Dwolla isn’t super upfront about how some of its services are priced or what its contracts are like. “It depends on the business” isn’t a great excuse for not disclosing any information, not anymore. I also get the feeling that Dwolla is probably more interested in chasing whales — elite, high-value clients with tech-driven, disruptive ideas. So it remains to be seen whether the beta plan will eventually expand or eventually be open to everyone.

Dwolla’s tendency to go after those metaphorical whales means that I haven’t seen a lot of chatter from Dwolla merchants. Most of what’s out there now extends back to Dwolla’s transition period, when the pricing plans and business model changed, but even so the number of reviews and comments is still quite small. With the lack of information about the contracts and the general lack of information from merchants, I have a hard time giving an accurate rating. For that reason, Dwolla remains Not Yet Rated.

However, that doesn’t mean you should cross Dwolla off your list. If you think Dwolla could be a good solution for you, I certainly encourage you to explore it! Feel free to drop us a comment based on your experiences with Dwolla! We are always happy to hear from you!

If you’re looking for a way to accept ACH payments without all the fancy tools and marketplace setup, we recommend National Processing (read our review). You can also get free ACH transfers using QuickBooks Online (read our review) with Quickbooks Payments (read our review). And of course, if you’re looking for more advanced, developer-friendly tools with ACH processing built in, you can check out Stripe (read our review) and Braintree (read our review).

Thanks for reading!