Iowa state government will begin to use Dwolla - a Des Moines company's cash-based online payment system, Gov. Terry Branstad announced Tuesday.

The first use will be through the Iowa Department of Revenue, which will allow businesses, which pay more than $100 million in cigarette stamp taxes, the option of paying via Dwolla. Dwolla is cheaper and safer than mailing and processing a paper check, state officials said, and the speed and efficiency of the system also allows participating businesses to receive their tax stamps sooner. 


Branstad and Lt. Gov Kim Reynolds said the state eventually could use Dwolla for collecting property taxes and issuing state refunds, to accepting vehicle registration renewals or for paying government contractors.

"The number of state and federal payments are in the billions with transactions totaling in the trillions, meaning even a fraction of savings could have a profound effect on the economy," said Ben Milne, founder and CEO of Dwolla Inc.