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Comment by patio11 | Hacker News Reader

For historical reasons, ACH is approximately as fast as airmailing someone money. When all the stars line up correctly, it is as fast as Fedexing money. Credit cards are like emailing money (and Paypal was, very explicitly,about emailing money). Dwolla is based on ACH.

There's probably a lot that can be done with cheap, user-friendly ACH in an API, but I don't know if folks really understand the "Your transaction takes 100 hours to settle" bit.

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I organize conferences (Strange Loop, Clojure/West). I pay at least $10 per person in credit card fees (multiply by 500-1000 people). Personally, having the transaction clear a few hours later is hugely unimportant to me vs paying $10 less per transaction.

But aren't most of your attendees traveling on their company's dime, meaning they need to use their corporate credit card in order to pay? If so, this wouldn't work.

In fact, American Express's big market share in the corporate card market is the main reason it is accepted anywhere, given its higher merchant fees.

I'd imagine once they have ACH on lock they'd start issuing their own plastic.

I think they try to get around this by allowing you to 'preload' your account. What they've built is an electronic checking account.

I only write checks to pay my rent and I don't carry cash. If I had to get cash, I couldn't. I don't know the pin numbers to my debt or credit cards. This is something I would use if I knew more people accepted it and I didn't have to divide transactions between a credit card and this. I'd miss the cash back on the CC side though.

CCs are convenient but the dark side is that every transaction you make is being recorded, with a certain probability of being held against you at some point in the future.

NACHA records are held for 7 years.

Isn't that the problem Dwolla is really trying to solve? Making ACH much quicker than it is now?

I think so. I know they have a "big announcement" in 15 days, so I expect it to be related to this. Previously there has been some news about a service I think was called "CU link" where credit unions can offer Dwolla as a sort of service and the ACH is accelerated. I sent an email to my CU bugging them to get this and they gave me an answer like, "we pay attention to what is going on". My CU has some sort of ties to Members Group and I use Dwolla for online payments so my fingers are crossed.

But Dwolla is not in a position to either fix or replace the ACH system.

I see differently. They have a good sized network of credit unions as guinea pigs and are already masters of ACH.

> But Dwolla is not in a position to either fix or replace the ACH system.

On the contrary, based on the little PR that they have made, I feel that replacing the ACH system is their primary desired endgame. They are actively selling their payment network as an alternative to ACH for their member institutions.

Yup. Further complicating things, ACH isn't truly settled for a 6 months! ACH's can be charged back for 180 days and there is no adjudication process, like with credit cards. If an ACH gets charged back, you lose the money, that's it.

The other major complication with ACH is that most Americans use credit cards for the credit (70% hold a balance). That is something that won't be solved. Others like the benefit of rewards (miles, dollars, whatever). To get payers on board, you need credit, rewards, and exclusivity (i.e. is this the only payment method available at somewhere where I want to shop). The last 2 meaningful companies were paypal and discover card. PayPal had millions of Ebay sellers using PayPal AND they initially paid people to become members. Discover card started the cashback movement and was the only electronic payment option at Sears (largest retailer in the world at the time).

More details and discussion in a previous article: http://news.ycombinator.com/item?id=3238880

ACH's are essentially free - there are some costs but Dwolla is part-owned by a credit union which probably helps lower the costs. They have major fraud-related costs, but given that fraud under $10 should be very small, their costs aren't much

Dwolla is not part-owned by a credit union. It has an investor that has credit unions as customers. From what I can tell, the company has encouraged this false impression to escape regulatory scrutiny.

ACH is also not free.

It seems quite clear in multiple locations that Dwolla does in fact have a credit union as an investor, what is your source that it doesn't?

http://www.chubbybrain.com/companies/dwolla/investors-fundin...

https://www.veridiancu.org/

http://kb.veridiancu.org/veridiancu/consumer/kbdetail.asp?kb...

http://www.themembersgroup.com/news/dwolla-investment-announ...

"About The Veridian Group The Veridian Group is a wholly-owned subsidiary of Veridian Credit Union, based in Waterloo, Iowa. As a credit union service organization (CUSO), The Veridian Group is committed to providing valuable financial services to credit unions and credit union members."

The distinction between a "credit union" and a CUSO matters. If the credit union is extending its charter to cover Dwolla, Inc., then that makes a big difference in terms of regulatory implications. As far as I can tell, The Veridian Group, Inc. (which does not have a charter) has invested in Dwolla, Inc., and Veridian Credit Union (which does have a charter) owns The Veridian Group, Inc.

> The other major complication with ACH is that most Americans use credit cards for the credit (70% hold a balance). That is something that won't be solved.

I doubt Dwolla needs to solve this problem to be profitable. I'm pretty sure there are still a very large number of cash and debit transactions occurring daily.

> Others like the benefit of rewards (miles, dollars, whatever).

I've seen this argument raised a few times and I still don't understand it. Couldn't merchants (especially online merchants) discount sales that don't use credit cards? The money saved by not offering rewards has to go somewhere.

I believe that the merchant accounts require merchants to charge the same price.

It seems like it's mostly a tax on those who pay in cash.

You can give discounts for particular payment methods - the thing you aren't allowed to do is add a surcharge for using credit cards.

I hear this, but then see it in places. When I went to get my license plate there was a 3% "convenience fee" to use your debit or credit card.

Is it something in the wording?

I've seen "convenience fees" for credit card usage a few times, specifically when renewing car registration or paying parking tickets online. But there, credit card payment was the only option.

As for enforcement for B&M shops, I think it all comes down to wording and appearances. Card companies will accept a gas stations offering a cash discount because that isn't being portrayed as a card tax (negative connotation).

When gas stations advertise $3.69 in giant numbers over the highway, and only when you pull off the highway and into the station do you see $3.79 for credit card or $3.89/$3.99 for plus/premium, I do view that as a card tax. Maybe the CC companies don't, but as a consumer, that's how it feels.

Because it is tied to the checking system, where checks were routinely flown across the country from bank to bank before they could be settled? (Even after we had electronic systems that should make this unnecessary?)

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