June 15, 2012 at 13:13 PM EDT
Dwolla’s First FiSync Banking Customer Goes Live, Eliminates ACH Delays With Real-Time Bank Transfers
A major milestone for disruptive payments platform Dwolla : the company has just switched on FiSync, its real-time money transfer system which aims to replace the outdated - and much slower - ACH process. ACH, or Automated Clearing House, is the traditional means for making electronic payments here in the United States. A 40-year old system, ACH enables money to move from Bank A to Bank B, but the transactions take two to five days to complete. FiSync basically blows that system up, offering banks, credit unions and service providers access to a real-time alternative.
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A major milestone for disruptive payments platform Dwolla: the company has just switched on FiSync, its real-time money transfer system which aims to replace the outdated – and much slower – ACH process. ACH, or Automated Clearing House, is the traditional means for making electronic payments here in the United States. A 40-year old system, ACH enables money to move from Bank A to Bank B, but the transactions take two to five days to complete. FiSync basically blows that system up, offering banks, credit unions and service providers access to a real-time alternative.

Dwolla announced the updated FiSync integration for financial institutions back in March, and is only a few days behind its promise of the go-live date for its debut banking partner. Originally, the plan was to bring Waterloo, Iowa’s Veridian Credit Union online on June 4. It’s mid-June today as Veridian goes live, but that’s not a major delay by any means, especially when you’re talking about building an entirely new money transfer system from scratch.

According to the company’s blog post, the Veridian integration will switch on the real-time transactions for over 160,000 banking customers. The system is not only quicker than ACH, Dwolla explains, but actually protects customers better due to a verification process that allows banks to protect clients by requiring that other financial institutions verify account information prior to engaging in transactions. Banks can also hold deposits, if need be.

Also, unlike ACH, FiSync doesn’t take banking holidays or weekends off. It’s real-time, 24/7. (Finally.)

Veridian is the first banking partner with access to the real-time transactions portion of Dwolla’s FiSync system. The company previously signed up a number of banking partners to a system also called “FiSync” (for example), but that earlier version of the product did not include the real-time component. In other words, this is the first bank to sign up for what’s essentially a very different service than what was available before. Dwolla’s communications director, Jordan Lampe even just admitted to me that they really should have branded this new, real-time version of FiSync something else, to eliminate confusion. (I made some suggestions, too. Let’s see if they use them!)

The company outlined several of the benefits of the new system and Dwolla itself, including the following:

  • Free real-time bank transfers: FiSync members can move funds to and from their bank accounts to the Dwolla platform, friends or businesses for no cost and without the traditional 2 to 3 day wait times.
  • Improved security and safety: With PINs, passwords, email notifications and other authentication processes, FiSync adds new layers of security not embedded in traditional bank transfer networks.
  • Harmless transactions: Removing the sensitive financial information, or “data exhaust,” from its transactions, Dwolla users and merchants exchange money without many of the liabilities associated with card networks (e.g. card theft, data breaches, etc.).
  • Business friendly: Free or 25 cents per transaction, as well as near instant liquidity allows online, retail or business to business merchants to stay competitive.
  • Mobile payments: Dwolla users are able to purchase goods and services or share money with their friends via the network’s Android and Apple applications. (Note: A new business using Dwolla for electronic cash payments is NY’s GetTaxi, for example)
  • Pay friends or family: Dwolla users securely send money to Facebook friends, Twitter followers, LinkedIn connections, SM-enabled phones, nearby devices and email addresses.
  • Free distribution and integration: FiSync is freely available to financial institutions and service providers at fisync.dwolla.com. Interbank transactions are comparable to traditional ACH costs.

As you can see from the above, FiSync is only one piece to the network that Dwolla is building. The company is designing what money management (mobile, banking, transfers, peer-to-peer, payments, etc.) would look like, if it was built today, without having to take into account legacy systems. By designing its payments network from the ground up, Dwolla has been able to eliminate a number of issues, like the ACH delays, that come from having to support legacy systems, hardware, processes, and their associated challenges.

According to Lampe, Veridian is only the first of Dwolla’s FiSync banking partners that will use the new system. Others will arrive in the “next coming few months,” he says.



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