Comment by thinkcomp | Hacker News Reader

Comment by thinkcomp | Hacker News Reader

The question here is really "for how long?"

Ben isn't running a charity. If he thinks this strategy will help increase the user base, he could be right. The only problem is that if that strategy works, he'll be losing money on almost every transaction. (ACH transfers are cheap, but they're not free.) Dwolla also has pretty limited fraud detection at this point, and no bonds in most states to serve as nominal protection (see http://www.facecash.com/legal/brown.html). So at some point the price will need to rise again.

If the strategy does not work, then this will just hasten the company's demise. There's a remote chance it could help catalyze an acquisition, but that's really remote.

I then thought for a minute that perhaps this was a step toward operating legally in states like Pennsylvania (see http://www.thinkcomputer.com/corporate/whitepapers/heldhosta...), which waives its money transmission regulations only if you do not charge a fee (a la Venmo), but since you'd have to pay a fee at $10.01, that doesn't make sense.

So honestly I'm not sure I get what's going on here.

How long can they offer free micro- and mini-payments? (or should that be midi-payments?)

Well the clue appears to be:

"Dwolla is not a feature, it’s a network… And on Dec 15th… Nothing will be more obvious." (from http://blog.dwolla.com/on-december-15th-dwolla-will-change-a...).

So "it's a network" is your clue to working out how they're being 'acquired' and by whom. I'm going to go with integration in to Facebook because I have absolutely no clue ...

Also, ACH transfer fees are presumably set by the bank at the terminal ends of the transactions and so are likely, IMO, to be varied if the bank thinks that they're being exploited to avoid other types of payment fees.

ACH fees are set by Dwolla's banks that connect them to the fed network. ACH transfers tend to be free for the individual who is getting or sending money, unless you have a bank that charges you per transaction. ( think bill pay, or direct deposit).

While I don't know what rates Dwolla is getting, I'm going to guess that they're under 10c per transaction, and they may be as low as 1-2 cents per. I certainly hope they are for their sake.

What may save them a bunch, in cost and fraud, is if they can do the clearing between their accounts internally, and not hit the ACH network for most transactions.

It's a tech/UX/product demo. Consumers outside of startup Valley aren't going to understand the concept or remember the silly name. If Dwolla succeeds, it will be getting bought and helping deploy the next iteration of online bill pay, which is exactly what dwolla is.

Ben isn't running a charity.

Exactly. If you have a business model where Dwolla being free is integral to your success, then you're in a very bad place. Always assume you'll have to pay your suppliers/service providers, and keep a healthy margin on top of that to protect yourself from price fluctuations.

For a more concrete example, look at Chargify. For a while they were free to anyone under a certain size. Then, they changed their prices and started charging $39/mo (originally it was $99) for the lowest tier. A lot of hackers got burned by that move.

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