Groundswell In Middle America

Within a 5-mile radius of Des Moines there are 500 to 700 business that are using mobile payments through Dwolla. The company works kind of like a payments version of Foursquare. You check at the register in the store using your phone and a pre-loaded Dwolla account. Currently, Dwolla only uses pre-loaded accounts for retail environments at this time but it is likely that the company will be able to partner with banks and financial institutions in the near future to go straight from a bank account to the retailer. The CEO of Dwolla, Ben Milne says that the company is looking at the, "cumbersome effects of having to pre-load" and will be trying to ease the pain points of consumers and merchants using the system.

We talk a lot about these "pain points" when it comes to retail and payments, mobile or otherwise. Right now, in Dwolla's infrastructure, the pain points are pre-loading and then making sure that merchants are set up on their end to handle the processing system. The latter is actually the easy part. With its FiSync, Spots and Proxi programs, the threshold for instituting Dwolla at the point of sale is actually not all that difficult. It also helps that Dwolla is a local company and can physically enter merchants' stores to assist with the process.

Dwolla sees itself more like Visa than PayPal. EBay may actually disagree with that considering that it is pushing very hard into the mobile wallets segment of the mobile payments industry and Dwolla operates in much the same way. Dwolla wants to position itself as a go-to resource for financial institutions to create a mobile payments infrastructure in communities such as Des Moines. Square, with its recent Card Case update, is also playing in this space.

Dwolla is processing about $1 million in payments each day with about $150,000 of that coming specifically from Des Moines, according to Milne.

"We think that it is a little ironic that it is in Des Moines and not Los Angeles," Milne told ReadWriteWeb.

Benefits To Consumers, Retailers

Consumers benefit from Dwolla because of the location and social features of the platform. In June of this year, we called Dwolla's Grid API the "Facebook Connect for mobile payments." All sensitive personal information of the user is stored within Dwolla. An interesting quote from Milne in that article:

"If Visa could blow up their current payment model and start over today, would they build a network that forces consumers to expose critical financial data in order to buy a bagel?" said Milne.

The benefit of Dwolla is that it is basically electronic cash. This is one of the truest "mobile wallets" concepts. What do you do when you leave the house in the morning? Open your wallet and make sure there is some cash in there. What is stopping you from doing the same with your smartphone?

Proxi was released by Dwolla in August. It allows users to open the app and see what merchants are accepting mobile payments via Dwolla in their vicinity.

There has been no large marketing program tied to the Des Moines rollout of Dwolla. Milne stresses that the company is an active participant in the community, educating both merchants and consumers about where and how mobile payments can be used.

The cash perspective of Dwolla is an interesting one. The company can position itself to be both the front end and back end of the payment process. As such, Google Wallet, Square, Intuit GoPayment (or any of the other dongle-based competitors) could theoretically tie into it as a backend. Dwolla is setting itself up not for competition, but for partnerships. As we have seen with Urban Airship in the mobile infrastructure space, that approach tends to work better than trying to crush potential enemies.

What can the rest of the mobile payments ecosystem learn from Dwolla? Let us know in the comments.

This is the third installment in ReadWriteWeb's Evolution of Mobile Payments Series. Check out the first two installments: "How Mobile Payments Will Evolve In the Next Several Years" and "How Soccer Star Rio Ferdinand's App Shows the Future for Mobile Payments." Also, we are going to name this series eventually. Let us know in the comments if you have a good name for the series.