Online and mobile digital cash network Dwolla is partnering with mobile banking and payments service provider mFoundry, the companies are announcing today at the BAI conference in Washington, D.C. This is Dwolla’s first publicly announced partnership with a financial service provider, and the deal opens its service up to mFoundry’s 800+ banks and credit unions using its cloud banking platform known as Fin.X.
The two companies first began talking at the Finovate conference two years ago, but began to actively pursue this partnership following this year’s conference.
While some may know of mFoundry as the company powering one of the biggest and most successful mobile payments program to date, Starbucks Card Mobile, the company is also the provider of a SaaS-based mobile banking solution to hundreds of institutions across the U.S. In December 2011, when the company had just raised another $18 million in funding, it reached over 500 banks and credit unions in the U.S. Today, it reaches 800, including Bank of America, PNC Bank, Zions Bank and more than one-third of the top 50 U.S. institutions.
The partnership, then, is a significant step in bringing real-time, peer-to-peer (p2p) payments to a large number of U.S. banking customers. With the Dwolla integration, mFoundry’s Fin.X customers can now choose to offer their banks’ customers a low-cost, p2p money transfer service. This addition joins other Fin.X features, like remote deposit capture, account funding, mortgage rates, auto insurance quotes, account opening, gift card insurance, merchant-funded offers, retail barcode scanning, and more. As with the other options, the financial institutions interested in adding p2p payments just select the option on the mFoundry platform, and the feature will appear in their bank’s mobile (smartphone or tablet) app.
Because Dwolla also offers consumer-facing products on mobile and web, some may misunderstand the startup’s larger vision. It’s not only a consumer or merchant-focused product, but is also working to upgrade the financial institutions themselves from within. For example, in June, the company switched on its first FiSync integration, which allows banks to offer a real-time alternative to ACH, or Automated Clearing House, payments. ACH normally take 2-3 days – but Dwolla’s FiSync lets money move in real-time. The details as to how FiSync does this are complicated, but the short of it is that Dwolla built an alternative infrastructure for moving and settling payments that bypasses ACH altogether. The mFoundry partnership simply expands Dwolla’s ability to offer its FiSync product to more banks, instead of having to work with individual institutions one-on-one.
For banks, the mechanics of the deal mean they can now offer real-time payments affordably (Dwolla will be free for them), and the solution doesn’t require complicated I.T. integrations with their own core banking system. That means the banks get a new way to generate revenue from their mobile customers. For Dwolla, the partnership is notable because it allows FiSync to scale. And because Dwolla’s per transaction fees are so low, scale is important for the startup to achieve profitability.