Payments On Fire

ACH

Episode 153 – How to Make B2B Payments in a Few Lines of Code – Brady Harris and Adam Steenhard, Dwolla – Payments on Fire® Fintech Series

The fintech phenomenon and the ability of software developers and their enterprise customers to embed payments capability into business processes relies on multiple forms of access.

  • First, there is the establishment of the business and contractural relationship necessary for access to a payment system. The rules of payments schemes, i.e. payment networks, say that you have to be a financial institution to be a direct participant. Non-bank third parties must be sponsored into the network by a member bank. That requirement is in the network rules.
  • Second, technical access is necessary. We’re all familiar with APIs, those application programmer interfaces, that companies like Stripe, PayPal, and others have built to simplify access to card network rails (primarily) and open up access to millions of new payment acceptors.

But there are other important payment systems. In the US, the automated clearing house (ACH) is systemically important because it is ubiquitous and carries far more value than cards, cash, and check. Because of that, the pandemic, and the secular trend to digital, ACH is hot as is connectivity to bank accounts through firms like Plaid and GoCardless (podcast link).

The US also has the fast payments network the Real Time Payments Network (RTP) from bank processor The Clearing House. While connected to far fewer financial institutions, its 24/7 availability and instant push payment capabilities are opening up new use cases in payroll and B2B payments (podcast link).

Programmatic access to non-card rails is the focus of this Payments on Fire® episode. Dwolla is a specialist in the programmatic access to the ACH and now TCH’s Real Time Payments (RTP) Network.

Founded in 2008, Dwolla has gone through some pivots. At one time it built a real-time payment switch with the ambition to connect all banks to it. Dwolla’s helped with the Fed’s Faster Payments Task Force and the Gates Foundation’s Mojaloop switch for e-money systems in developing markets.

Dwolla has always been a bit ahead of the market but now the market is catching up as interest in the use of non-card payment methods grows and the API-based proposition has become a foundational business modality.

In this episode, Brady Harris, Dwolla’s CEO, and Adam Steenhard, Senior Director of Corporate Strategy, join Glenbrook’s George Peabody and Elizabeth McQuerry to discuss the growth of digital B2B payments and enterprise interest in fast payments.

Brady and Adam speak to their experience with important capabilities built in RTP including the request for payment message type and the ISO 20022 payment data representation standard. They also discuss how partnering with other fintech providers gives them the ability to offer a broad capabilities set that would otherwise take years or be impossible to build.

This “multiplayer fintech” model relies on the assembly of capabilities offered by platform providers and offerings designed to address what a specific market requires. Dwolla uses the multiplayer fintech model to expand its offering into a comprehensive set of capabilities – a rich payments-as-a-service platform. TripActions has taken payments- and banking-as-a-service platforms and applied them to travel and expense management (podcast link). More on multiplayer fintech ahead!

George Peabody:
Welcome to Payments on Fire, a podcast from Glenbrook Partners about the payments industry, how it works, and trends, and its evolution. I’m George Peabody, partner at Glenbrook and host of the podcast.

George Peabody:
The fintech phenomenon and the ability of software developers and vendors and their own enterprise customers to embed payments capability all relies on programmatic access to payments systems. And it’s not simple to get that access to a payment system. The rules of payment systems generally say, particularly in the US, that if you want to have access to it you got to be a financial institution. You have to be a bank. And if you’re a non-bank third party, you’ve got to have a sponsoring bank, a partner, if you will, who will risk-manage you, who will bring their compliance expertise to bring this third-party participant into the payment network.

George Peabody:
Now, we’re all familiar with APIs, those application programmer interfaces, that companies like Stripe, PayPal, and others have built to simplify access to card network rails and have opened up access to millions of new payment acceptors. Now, around the world, we’ve got faster payment systems, wholly new core payment systems being deployed. And here in the US, we’re seeing them in the form of Zelle, well, a redeployment of an existing system with push-to-card from Visa, and MasterCard, and their competitors. And then, of course, we’ve got the clearing house’s real-time payments network.

George Peabody:
So, to continue this part of the discussion, I’m delighted to welcome Elizabeth McQuerry, partner at Glenbrook, who leads our faster payments work. Elizabeth, great to have you here on Payments on Fire.

Elizabeth McQuerry :
So fun to be back here, George, and great to be talking with colleagues from Dwolla today.

George Peabody:
Yeah. So, we’re going to tee up Dwolla right now. So, to illustrate these changes, particularly in this world of APIs and access to bank rails, to core system rails like the automated clearing house, and now the clearing house’s RTP network, we are talking about Dwolla. Dwolla’s our guest today.

George Peabody:
Dwolla is a really interesting company. We’ve been watching it for a very long time. They were founded in 2008. They’ve gone through several pivots. They’ve always been a bit ahead of the market. But now it strikes us, it strikes me anyway, that the market’s kind of catching up to the proposition that direct access, programmatic access, to non-card rails is becoming really important. And this API-based proposition is really essential.

George Peabody:
So, joining us are two folks from Dwolla today. Brady Harris, who’s Dwolla’s CEO, and Adam Steenhard, who’s senior director of corporate strategy. So, welcome guys. Really glad to have you here.

Brady Harris:
Yeah, thank you for having us. Appreciate the invite.

Adam Steenhard:
Yeah, thank you.

George Peabody:
So, let’s get into it. Dwolla’s always been about moving money faster, building a… actually you built, a decade ago, an instant payments switch. Way ahead of its time. Well before banks realized that they too needed to really speed things up. Dwolla’s also helped the Fed’s Faster Payments Task Force and the Gates Foundation’s Mojaloop switch for e-money systems in developed markets. So, I’ve provided a bit of background on Dwolla. What did I leave out? Where are you today? What’s the elevator pitch.

Brady Harris:
Yeah, that’s a great question. So, you’re right. Dwolla has pivoted. We’ve stayed in the B2B space after the original P2P transfer product. In all things B2B, Dwolla has really focused on taking ACH as a legacy technology and trying to modernize it in, as you said, programmable ways. So, we’ve created what we think is a world-class ACH product that has all kinds of really exciting peripheral technology around that core, what we say beachhead, which is ACH. That peripheral technology and access to the entire Dwolla product or tech stack, you can get entry to that via an API.

Brady Harris:
One additional thing that we’ve done in the last six to nine months is we’ve also deployed a low-code solution where via drop-in components, whether you’re looking for a payment solution for an app or for your software or whatever platform you might be using, you can integrate via drop-in components with access into our payment rails via API. And you can do that in a really frictionless, low-code environment. In fact, one metric we’re tracking recently is the average days to do a full integration, where historically, and with a lot of our competitors, are in the 100-plus day kind of category. We’re seeing Dwolla clients as recent as the last few weeks integrate in single-digit days.

Brady Harris:
So, a lot of really exciting things. API-based. Low-code solution. And ACH is the beachhead with a lot of really exciting peripheral technology around that.

George Peabody:
Yeah, that’s very cool. You’ve really abstracted that complexity yet again. You said B2B. Who are your customers?

Brady Harris:
Yeah. Why don’t I let Adam talk for a little bit? Otherwise, I’ll monopolize the conversation.

Adam Steenhard:
Yeah. So, our customers are, I mean, honestly, anybody with a business idea that requires a payment solution to support it. So, business customers choose Dwolla because they want to build. They have their roadmap. They want to build their product. They want to appeal to their customers, and a portion of that is a payment solution.

Adam Steenhard:
So, they choose Dwolla as a trusted partner because we make it simple for businesses to integrate with the banking infrastructure. What that means is we really focus on how do we make that business experience as simple as possible so that they don’t have to worry about all the complexities that you mentioned, sponsorships, all of those types of things that come along with the payments landscape when it comes to non-card modalities. So, our customers-

George Peabody:
So, are you selling to ISVs, to independent software vendors, in particular verticals?

Adam Steenhard:
Yeah. So, our payments platform spans across 18 different verticals, but really our bread and butter are fintechs that are looking to, whether it’s an accounts payable solution where they want to offer a solution where businesses can pay vendors, where businesses can pay contractors, so gig economies. Ride share. Typical ride share, sellers on marketplaces, all of those types of scenarios, where they want a simple solution to be able to do that.

Adam Steenhard:
I’ll use an example. Rally Rd. So, Rally Rd. offers the ability to do micro-investments within high-end cars for folks to invest and get a small portion of those proceeds. And we basically help with the money movement of that so that they can focus on it. Initially, it was cars. Now, it’s collectibles. Now, it’s all the different type of things folks would want to invest in as kind of a share to earn, I guess, the benefits of those investments. So, they really leverage us so that they could focus on how do they expand that concept that they’ve built with the collectible automobiles, and how do they expand that to everything to collectible sets of baseball cards to be able to do that [inaudible 00:07:38].

George Peabody:
Well, Elizabeth knows, because we’ve taught together, that whenever I talk about the automated clearing house, I always say I love it because it’s cheap. It’s really inexpensive. And we’re talking about the account to account transfer system. And I know you guys are supporting same-day, so it’s fast enough. But there’s this other thing that’s shown up, this clearing house real-time payments network. And I know Elizabeth has got a bunch of questions for you about the RTP network. So, Elizabeth, why don’t you start the interrogation?

Elizabeth McQuerry :
Happy to. Thanks, George. Yeah, I always look for kind of analogies in my own mind to understand what somebody is doing. And we talk about banking as a service today, but really strikes me is you guys are focusing in on payments as a service, if you can comment on that, but all types of digital payments, at least on the retail basis. And that’s really exciting. And it’s also exciting to see the addition of your guys’ connection to RTP. Really love to hear more about how you approach that and what the RTP addition brings to your suite of payments as a service, if you ascribe to that or you recognize yourself in that description.

Brady Harris:
Yeah, no, that’s well said. I’ll let Adam speak to the maybe payment as a service and RTP aspect. I’ll just make a quick comment.

Brady Harris:
So, I’ve been in payments about 20 years now. And all but the last year has been on the Visa/MasterCard side, so on the card rails. So, don’t challenge me, but I could probably rattle off all 280 interchange categories for you right now. But one thing that was really interesting in looking at Dwolla and this idea of ACH is there’s a lot of prejudices against ACH and this notion that it’s a legacy, archaic payment rail that the old, stuffy, non-modern banks use to send two to three-day deposits.

Brady Harris:
And when I lifted up the hood on the Dwolla product, what immediately stood out to me is if you consider the space that the market that exists between cards and between ACH, there’s this monstrous TAM, this huge total available market, that either cards is not addressing, ACH is not addressing. So, people get pulled to one side or the other. Sometimes both. But this monstrous TAM in the middle has largely not been addressed.

Brady Harris:
One of the reasons it’s not been addressed or ultimately tapped into is because of a couple things. First is deposit time. The allure of a card transaction is you can authorize, and settle, and in many cases get same-day or next-day, usually next-day deposits. Usually two or three days. The problem on the ACH side has always been the deposit time. So, RTP, as you call out, Elizabeth, is a quantum leap forward in bridging the gap between those payment rails.

Brady Harris:
And what Dwolla has done in terms of first-mover advantage is with the clearing house and eventually FedNow, we have figured out how to give businesses access to those RTP rails with one line of code, a single line of code that you can integrate and you’re ready to move money over those rails. That’s really, really exciting to us because we’re bringing to the fight what the card side has always been able to do, but, George, as you called out, we can do it for pennies on the dollar using the ACH networks.

Brady Harris:
A point of validation that we had… so, I don’t mind sharing this. RTP originally wasn’t even going to be on our roadmap until Q3/Q4 of this year. Late last year, we got a phone call from, I wish I could say the name, but we’re under NDA currently, but we got a call from a global fintech, somebody that does $9 trillion in money movement globally. And they said in hushed tones to us, “We believe instant payments or RTP, we have a very strong business thesis that it is going to become the primary payment modality over the next five years.” And when we look at our own capabilities, they wouldn’t have been able to get the configuration of RTP to market unless there was intensive development work. And they estimate a two to two and a half years of engineering time. That’s with the full weight and resources of a global fintech. So, they came to Dwolla, I think Adam actually took the phone call, and said, “What would it take for us to partner in a really deeply integrated way with Dwolla, where we help you build out the final stages of your RTP product, and instead of building it for ourselves, we can white-label this and sell it under our own name in the US domestic market?”

Brady Harris:
So, it validated a couple things for us. One, there’s something to this RTP product, if there are global fintechs shifting their entire focus there. And two, that we had built, and ultimately we’ve now completed, a configuration of RTP that will be really attractive to the marketplace via these singular APIs and lines of code.

Brady Harris:
So, I mention that. That’s really exciting. I think it validates what you said, Elizabeth, that this TAM and this modality is… push-to-debit’s cool. These different modalities are really neat. RTP, we’re talking kind of quantum leaps now from where ACH has historically been.

Brady Harris:
Let me get off my soap box. Adam, speak to payment as a service a little bit, and then fill in the gaps on RTP for Elizabeth.

Adam Steenhard:
Elizabeth, how you mentioned payment as a service. We were really looking at the B2B space because that’s where we operate, so business payments. And when you look at business payments in the industry, there’s folks, in pre-COVID, they were looking to do digital transformation into a digital payments option. And when businesses are looking at that, paying the percentage on a card transaction can be extremely expensive when it’s a regular accounts payable type of payment. So, that’s really where we see the traction moving now is towards the non-card space, so implementing RTP as an option to unlock the captive network that the clearing house has built. It’s expanding. They’re doing a great job of gaining adoption and what that looks like with over… I believe it’s 60-plus percent of DDA accounts in the domestic market. So, what we wanted to do is unlock the power of that alongside an ACH option to give businesses the flexibility to provide economical rails for them to do B2B payments that could be tens of thousands of dollars and not have to pay a percentage on top of that.

Adam Steenhard:
So, we established a relationship with one of those bank sponsors. And I really like the term “payments as a service” because we really look at that that way of saying like, “Hey, we want to unlock these different payment modalities and really allow our businesses to flux between those with a simple line of code switch.” So, if there needs to be a vendor payment on the weekend, they can leverage RTP. If it’s a vendor payment that’s on a Monday, maybe they’ll use ACH or same-day ACH because it’s actually more economical for their business and the time delays aren’t as much of a challenge.

Elizabeth McQuerry :
Walk us through a transaction with this anchor client that you’re working with, hypothetically. How they would access you and then the RTP network. So, what’s the anatomy of a transaction there?

Adam Steenhard:
So, the anatomy of a transaction for the businesses that use the Dwolla platform is they only have to focus on how do they integrate with the Dwolla platform. So, they send through simple instructions through our API that say, and I’ll use an example, “Send $5,000.” And they either specify it’s ACH or they specify it’s RTP. And it’s simply just switching the channel. As we refer to it, it’s a processing channel within the API.

Adam Steenhard:
And what that does is then we leverage those instructions to say, “Okay, do we send it through as an ACH?” And then we provide all of the bells and whistles from an API perspective, as far as the webhooks, to make sure they know the payment status. If they choose RTP, we send it through the RTP rails and they get that real-time feedback around was the payment successful. Obviously, they’re irrevocable, so returns aren’t as much of a challenge as far as from the RTP side.

Adam Steenhard:
So, it’s actually allowed us to leverage the same rails or the same API experience we’ve built with all of the webhooks, all of those types of things that developers just want in a payments experience and really just have them do it once. And we unlock ACH, RTP, push-to-debit, same-day, all of those capabilities behind the scenes.

Elizabeth McQuerry :
No, that’s a pretty straightforward process. Very exciting. One of the things that as we transition into this, I’ll call it instant first world because we’re kind of in that transition phase. We’re in migration at the moment. What are some of the concerns that your business customers have about transacting on RTP? You mentioned irrevocability. We don’t have a national directory to know that such and such account number is actually the Glenbrook account, which you’re free to test if you’d like [inaudible 00:17:49], but we won’t get into that. So, what are the things that you need to work with, help your customers through to help them through this transition?

Adam Steenhard:
Yeah. So, there’s definitely a learning curve from that perspective, Elizabeth, because… and I’ll continue to say that irrevocability, when you send that payment, you need to be confident that it’s going to be sent to the right account, especially because of that real-time aspect of it.

Adam Steenhard:
So, Brady had mentioned the drop-in components. And some of the work that we did to make the experience more simple, a lot of that is geared towards what are those tools to verify that bank account for that receiver? So, the example is we’ve extended through, we call it Dwolla.js. It’s a very technical product name, but what that allows them to do is, through a library, be able to capture instantly bank account verification. And so, that would prompt you, if we’re adding that Glenbrook account like you had mentioned, our customers would be able to prompt you to provide authentication or credentials to basically say, “This is my account,” to be able to do that.

Adam Steenhard:
So, we equip the businesses to provide those user experiences. So, if they’re onboarding a new, what we call an end user, they can authorize that bank account. Obviously, we have things within the API that… idempotency is the term that allows you to send transactions through an API and not have to worry about sending a duplicate payment.

Adam Steenhard:
So, we have a lot of those tips, and suggestions, guidance that we’ve seen through the network that we pass on to our clients to say, “Hey, here’s the things to help you, knowing that this rail is a real-time payments rail, here are the type of things that you can accompany your integration with to make sure that you minimize the impact of the irrevocability,” and those type of things that folks aren’t accustomed to on the ACH side.

Elizabeth McQuerry :
Yeah. So, that account authentication of the number, that’s an out-of-band, I guess, communication in the sense that it’s not clearly on the RTP network. It’s within Dwolla, I guess.

Adam Steenhard:
Yeah. And that’s a good point. So, Brady had mentioned a lot of the things that we have built and kind of getting the RTP portion of it being across the finish line. And it’s mainly because we’ve operated an ACH and bank-to-bank transfers and authorizations. So, a lot of those things that we currently had from an ACH standpoint just were able to transition to RTP. So, from our standpoint, it was very complimentary to what we already do from an ACH standpoint.

Adam Steenhard:
And, in working in conjunction with our banking partner, we were able to get to a pilot within a quarter. So, as Brady had mentioned, the two and a half years that we had heard in the industry, we were able to expedite it just because we had a lot of the expertise, whether it’s through faster payments initiatives, whether it’s through Mojaloop and some of those learnings, we were able to directly apply those to a faster payments experience.

George Peabody:
Let me ask a question because I’m always interested in the security side of this. You’ve given your customers the tool to push basically a prompt that says, “Enter your bank account information here to receive this payment,” right?

Adam Steenhard:
Correct.

George Peabody:
And how enduring is that data? And who stores it?

Adam Steenhard:
So, we provide instant account verification or micro-deposits is our two avenues to be able to do that. Everybody loves micro-deposits because they’re a legacy experience where you have to wait for it to show up in your account, but it works. So, we provide both of those.

Adam Steenhard:
And from the credential standpoint, we basically leverage third-party trusted partners in the industry that do the bank account verification. And from that point-

George Peabody:
Okay. So, you’re calling out to Plaid or somebody like that as the provider.

Adam Steenhard:
Yeah. I mean, we know kind of our wheelhouse, and it’s payments as a service. The bank verification, we look for trusted partners to be able to provide that. And at that point, it’s just a tokenized experience from our standpoint. So, all of the sensitive information is extracted. So, a example is our businesses aren’t sending routing and account number or any of the sensitive information when they’re sending payment instructions. They’re sending a tokenized ID. So, that information is not being passed with each transaction.

Elizabeth McQuerry :
I’m sure that provides a lot of comfort for the new users in particular. So, that’s fantastic. If you’re focusing on the business segment, you really must also be getting ready to do the request for payments. Are you doing that yet? I know it’s just, if you will, coming into the market, but have you had experience with that yet on RTP?

Adam Steenhard:
One of the challenges we see, and Brady I’ll let you also jump in on how we’re handling some of those things. But one of the challenges we see, Elizabeth, is just the adoption in the industry for requests for payments. So, right now we have it on our radar to be able to provide that experience. And I know the clearing house is doing a lot to promote the usage of requests for payments. So, they’re really wanting to get that full stripe experience from that standpoint.

Adam Steenhard:
So, we have it on our radar, but right now the bank adoption of it and being able to support it, there’s a lot of challenges about making it clear, like does this bank support it? If they do, what’s that experience look like for that customer within that bank application, within the experience they have at their bank to be able to support it?So, I would just say we’re exploring how do we that on top of what we currently provide today, but we’re kind of observing what does that adoption look like, and how can we make sure that it isn’t a fragmented experience for our businesses.

Brady Harris:
One thing to add on top of that. As we learn more about RTP, as Adam said, we have a growing list of feature requests that [inaudible 00:24:10] clients or FI partners, I’ve referenced the global fintech, that ultimately we think the market is going to start to signal what they’d like to see in an ever-evolving RTP product.

Brady Harris:
So, one thing that we’re really proud of is the configuration and the scope of RTP as we’ve currently built it is light years ahead of what exists in the marketplace today. And it’s going to cover the vast majority of use case requirements from clients out there.

Brady Harris:
But as you know, Elizabeth, there is a lot of really creative things, appendages to RTP or ways you can further evolve that modality over time. So, we’re going to continue to set aside significant parts of our roadmap and our resources to respond to those requests, stack rank them, and continue to build out over time. It might get to your example. That’s something that we’ve considered. But I want to kind of put that finer point, that it’s going to be a fluid product that continues to take shape over the next few years.

Elizabeth McQuerry :
Yeah. One of the sort of big questions in my mind, just philosophically, is even how long does it take for a new payment method to truly take hold? Of course, there’s so many unanswered variables or unknown variables in that. The folks that I’ve been talking to and asking this question to lately, they’re really saying there’s a consensus around five years for all the chicken and the eggs to come together. And that’s not the answer anyone wants to hear. Five years could be a long time in that regard.

George Peabody:
You were both pointing out that there are other features available here, not just for moving money account to account, but there are things like that request to pay message type. There’s also, I think one of the things we all agree on that this faster payments rails promises is the ability to haul the remittance data. And we spoke on ‎Payments on Fire earlier in February with Steve Ledford of The Clearing House. And he reported then that interest in ISO 20022 that format for representation of that remittance data is still really early days. What are you seeing?

Adam Steenhard:
Yeah. I mean, we’re really excited about the capabilities for… and we refer to it as contextual data. So, for our businesses to do… like the example, our business is to do invoicing. So, I mentioned kind of the payout scenario where it’s a contractor or a gig economy. Being able to provide the contextual information around what is in that payment, and being able to expand that. All the placeholders are there, George, and they’re much more expansive than what we’ve seen with an ACH. ACH has addenda, has those types of features, but really looking to add onto that.

Adam Steenhard:
One other thing is, Brady mentioned about just the roadmap and that type of thing, is we wanted to make sure we look at this from an iterative approach. So, we wanted to make sure we didn’t hold up the value of being able to push a transfer through the RTP rails. And then we’re planning to continue to add the contextual data, the invoicing, all of those things through our API, and just make that experience super simple for our customers.

Elizabeth McQuerry :
I imagine the pick-up around the actual usage of the ISO format and of course the remittance data will gain some steam with the transition to FedNow. We’ll have more and more providers actually, well, programming with that message format, but then will take still longer for the long tail there to actually be using it. But we may never get to full usage because the service providers are doing it so well for us all right now.

Adam Steenhard:
And you had mentioned FedNow, Elizabeth. We’re continuing to talk to the folks at FedNow around that and what that would look like. So, we truly see that just being part of our ecosystem and adopting that as a solution alongside what we’ve done with real-time payments and ACH. We really want to provide the options for that. Just knowing that the clearing house has… the product’s been out since 2017. Wanted to make sure that we offered those in parallel.

Adam Steenhard:
So, we’re excited about what the FedNow team is doing and how they’re thinking about items like the directory a little bit differently than some of the things we see in the industry today. We’re just really excited that faster payments is moving at the trajectory it is now because we’ve obviously been excited about faster payments for a very long time at Dwolla.

Elizabeth McQuerry :
Well, just later today, we’re having a session in the US Faster Payments Council Conference, their spring conference online. We did some research for them on what the industry is expecting around interoperability. Too bad we didn’t reach out to you guys for some inputs there, but we will make sure to share the findings as they’re [crosstalk 00:29:35] available.

Adam Steenhard:
Yeah, we’d love to hear that. That’s exciting. Yeah, would love to see what y’all come up with.

Elizabeth McQuerry :
It’s not a spoiler alert, but people think it’s a good idea.

Adam Steenhard:
I mean, yeah, all the tools are there with the messaging formats being the same and all of those types of things. All the chess pieces are in place. So, we’re excited to see how it all [inaudible 00:30:00].

George Peabody:
So, let me just step back to Dwolla’s business for just a second before we wrap this up. You connect to ACH rails. You support same-day ACH transactions. You connect, of course, now to the RTP network. And you also do push-to-card. One of your customers can do a disbursement out to a gig worker, for example, and push the funds right onto their debit card, which is a debit card is we think of it as an alias to their real bank account. Do you integrate directly to each of the card networks to make that happen? Or do you work with another party who provides the single interface for this purpose?

Brady Harris:
So, Adam, why don’t you share a little bit about our graph? The graph is what we reference internally as we speak to investors and FI partners.

George Peabody:
Oh perfect.

Brady Harris:
Yeah. It kind of illustrates how we’ve created our ecosystem, that the consumer, the customer experiences that they’re interacting and interfacing with Dwolla through every step of integration and post-integration.

Brady Harris:
As Adam kind of touched the surface on earlier, there’s a number of technologies, either the various payment modalities that you call out or the different functionality of our core tech stack, that we’ll leverage at either financial institutions or other partners, that we’ve essentially done all the work to configure that right into a single experience. But, Adam, why don’t you just speak on the tech side in terms of how that ecosystem has been built?

Adam Steenhard:
Yeah. And like I mentioned before, we try to make it as easy as possible for our business partners to unlock any of the features of our banking relationships. So, Brady referred to it as… internally we’re calling it “the graph” because what we’ve built is a series of banking relationships to support different features with those that we’ve gone to and said, “They really have a fantastic offering in this space.”

Adam Steenhard:
So, George, you had asked about push-to-card or push-to-debit. We leverage a relationship with MetaBank to be able to provide that to our customers. So, the example of that is really focus in on MetaBank as a fantastic card provider. That’s been their area of focus over the years. And when we were looking to add that on to the platform, really looking at who’s the right banking relationship to have.

Adam Steenhard:
So, we’re continuing to expand our banking partner relationships because we want to make sure that we’re bringing the right banks, or right credit unions, any of the financial institutions or partners, bringing the right, world-class solutions that are out there to be able to offer it, and basically offer it in conjunction with the other ones that we have today. So, we’re intending to continue to expand that, whether it’s FedNow down the road from that standpoint, whether it’s different modalities, but really leveraging those banking relationships to extend that to our clients.

George Peabody:
Got it. So, just a quick comment. You guys, to me, are… first of all, you led the duck for years. I’m glad the duck has finally caught up with you in terms of the marketplace, with your programmatic access. Two, directly to banking rails.

George Peabody:
The other thing I’m really appreciating here is that you’re really exemplifying the business model that’s now enabled, which would have been impossible five years ago, where not only have you partnered with banks who have particular expertise and has access and sponsors for you into individual payment rails, like Cross River for RTP. But you’ve also reached out to the other functional providers in the fintech space, like Plaid and others. You yourself do the coordination of all of those pieces so that you can expose their services as well as your own through your API. So, great example of the new model.

George Peabody:
One thing that completely jumped me, and this is the last question I’ve got, is I was on your website and looking at your pricing model. And, Brady, yeah, that’s pretty different from the card world that you came from. You’ve got a subscription model. It’s just different. Take us through it.

Brady Harris:
Yeah, yeah. It’s pretty cool. So, as you called out, in the SaaS world, as most know, you either pay for a per user or it’s more of the contracting is usually done through a subscription fee, not a fixed static amount.

Brady Harris:
One thing that Dwolla has done, and like most, we’ve tried to optimize our pricing packages to reflect what we think our clients want, and that gives us a competitive advantage in the marketplace. As you called out, historically, on the card side, you pay a discount rate, a percentage of the total transaction, transaction fees, authorization fees, batch settlement fees. I think you’ve got 70 or 80 generally in there. What Dwolla did is they said, “In order to create a consumer experience where they don’t get mired down by fees, whether it’s per items or discount rates, let’s do just a flat subscription amount.” And that gives them access to certain premium features. It might give them an allotment of say 10,000 transactions per month. And what that ultimately does is one, it’s really easy from a billing standpoint, but two, it gives our customers the ability to scale in to whatever their pricing packages allow and not have to worry about racking up excessive transaction fees or overage charges. So, that’s something that we’ve had a lot of success with.

Brady Harris:
We’ve also recently incorporated a product-led growth distribution channel. This would be akin to a Slack, how Slack is an asynchronous onboarding product, you don’t interact with a human being, you self-select how you engage and use that product. We’ve also done that with Dwolla with its own very unique pricing model, which is PAYGO, pay as you go. So, that PAYGO pricing model, it facilitates a new startup-type client. They can do a full integration in single-digit days. And as they grow in scale, we can grow in scale with that customer to continue to optimize their pricing packages that match what the business needs.

Brady Harris:
As you know, new technology and payments startups, BAS companies that we work with, are super cost-sensitive. And so, I think we’ve done a really good job to say, “Hey, we can give you access to a world-class ACH product. You choose, of all this peripheral technology, what you want to use. And then we’ll wrap that up in a really clean pricing model that’s predictable, it’s scalable, and you can grow and scale with it over time.”

George Peabody:
So, just to add a little color to that, clarity for me, is that you will wrap up that subscription price based on really how the customer is anticipating using Dwolla’s services.

Brady Harris:
That’s correct, yeah.

George Peabody:
Because I instantly went to, oh, you’ve got a customer who’s doing a lot of push-to-card. The economics around push-to-card are different, push-to-debit are different than ACH origination.

Brady Harris:
That’s right. And oftentimes if we have a customer say, “Hey, we anticipate 25% of our total transactions will be push-to-debit and 25% will be RTP. And we want to take advantage of our BANs product, our balance account numbers, our virtual account numbers.” We can look at the totality of that and say, “Okay, if you were to pay for this on a transactional basis or based off of their [inaudible 00:37:56] fees or pay as you go, you’re going to see some wild swings in your bill. And you also could get really expensive really quickly, depending on how those various modalities come into play. Or how about we just charge you $1,000 a month? It’s a fixed subscription fee. It gives you access to everything that you need. And you can run in whatever ratios you like, same-day, next-day, RTPs, BANs, push-to-debit.” And that just gives our customers a lot of flexibility around how they ultimately choose to use our payment technology.

George Peabody:
Well, thank you very much. It’s been a lot of fun to catch up with Dwolla. And Elizabeth and I have both been in the business a long time, and we’ve been watching Dwolla since 2008. And it’s really exciting to hear where you are in the market and how the market is really fitting what your proposition has been for a long time.

Brady Harris:
Yeah, we super appreciate that. Hot off the presses. We’re really proud of this. This morning. One metric we track is gross payment volume. We had done about a little bit under 20 billion last year in payment volume. We were thinking 25 billion this year in payment volume. March gross payment volume was close to 3 billion in monthly. So, to your point, we’re seeing a lot of good activity around some of these payment modalities as the market catches up to us. But we appreciate the invite here and yeah, the friendship.

George Peabody:
Well, look, I’m sorry, what you just said just made me go to a question I wasn’t going to ask, but I get to. I got to believe that this… I mean, yes, you’re doing great work, but I also have to believe that a component of your growth has actually been sort of the secular shift to digital that’s been accelerated by the pandemic.

Brady Harris:
Yeah, definitely. Yeah. Right industry. Right time. The tailwinds and that shift that you call out has really benefited us.

Brady Harris:
One thing that’s super cool is we’ve not really started to capture yet the RTP volume that will be [inaudible 00:40:01] to our platform. So, we’ve internally set a goal that we want to move at least a billion dollars this year in RTP volume. And we think we’ll probably blow past that number. So, that’s all the [inaudible 00:40:13].

George Peabody:
Well, Brady, you sound like a guy who’s on his third funding round and that you said you were [inaudible 00:40:18]. Well done.

Brady Harris:
I’m in the mode, yeah.

George Peabody:
You’re in the mode, yeah. Very good. Well, look, Elizabeth, first, thank you so much for joining me. Brady and Adam, really appreciate your time and look forward to your success going forward.

Brady Harris:
Yeah. Thank you, George. Thank you, Elizabeth. Great being with y’all.

Adam Steenhard:
Yeah, thank you both.

Elizabeth McQuerry :
Bye.

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