What is Dwolla and Why Should Online Merchants Care?

At Gorilla, we are constantly keeping an open eye for changes to the marketplace as it relates to ecommerce. As we serve as the hub with many of our client’s ecommerce channels, we hear various viewpoints on ecommerce platforms, modules, plug-ins, complaints, suggestions, and disruptive new technologies on the horizon.

Talking about disruptive technologies is like that band that you claim you knew was going to be famous before a major label picked them up and now you brag to your friends about how you saw them play open mic night.

One of these disruptive technologies – soon to be opening for the headlining band at Madison Square Garden –is Dwolla. Dwolla presents itself as an alternative to credit cards, debit cards and checks, and is about as close as you can get to using cash when paying online. 

Their core value proposition is their industry-rattling low fees, which amount to $0.25 per transaction, paid on the part of the recipient, regardless of the transaction’s size. This puts Dwolla in direct competition with the major credit cards, PayPal, Square and Google wallet. Each of those payment providers charge their merchants a percentage of each transaction, ranging from 1.5% to 3% off the total transaction value.

Consider that many of our clients have average order values in the $100 range. Multiply those transaction fees by orders per week and that amounts to a significant cost going out the door. (Let’s do some math, assuming $10,000 in online sales at an average transaction total of $100. With a 2% credit card processing fee, a merchant would owe $200. With Dwolla, the same transactions would cost the merchant $25.) Multiplied across total annual sales, the savings for merchants can easily run into the tens of thousands of dollars, or more. 

With Dwolla offering the same convenience of paying online at a fraction of the cost, etailers could use the savings to improve their SEO, SEM, Customer Service staffing, or their ecommerce channel—investments that bring real value to the bottom line.

Similar to how Magento has been a disruptive force in the ecommerce platform space, Dwolla threatens to do the same in the online payment arena. The lower cost to merchants, without sacrificing functionality or security, is the same value proposition that drove Magento to become the fastest growing ecommerce platform in the world for the past 2 years. And coincidentally, or not, Dwolla has built a Magento extension that allows for seamless integration between the 2 platforms. And with the Dwolla service rolling out nationwide in coming months this should be a feature every Magento merchant should consider offering to their customers.

While we at Gorilla don’t claim to have a Crystal Ball, Dwolla is a technology to watch out for in 2012. With significant funding from VC’s and major corporations like John Deere, the prospects seem bright for this technology. To learn more about Dwolla, check out their website www.Dwolla.com, or checkout this video from NBC Chicago.