Ben Milne, CEO of Dwolla, said a transaction fee of 25 cents will be enough to make his online company profitable, and attractive to a national market. Photo by Duane Tinkey
Ben Milne, CEO of Dwolla, said a transaction fee of 25 cents will be enough to make his online company profitable, and attractive to a national market. Photo by Duane Tinkey

When Ben Milne was selling speaker components online, it really bugged him that credit card processors' "swipe" fees were bleeding his small company's bottom line. Each time a customer paid online with a credit or debit card, his business would incur a fee that was more than 3 percent of the purchase amount.

"I got a little obsessed about how to reduce that line item," he said.

That obsession led to Dwolla Corp., an online peer-to-peer payment business he launched in February.

"We have an easy, low-cost way to save (companies) money, and it doesn't cost much to integrate," said Milne, whose company's name is a hybrid of "dollar" and "web."

Working with Shane Neuerburg, a software development partner, Milne developed a proprietary software system that enables users to transfer funds online without using a debit or credit card. Dwolla charges a flat 25-cent fee for each transaction.

Dwolla has applied for patent protection for its system, which uses the Automated Clearing House (ACH), a vast secure electronic infrastructure used by all U.S. banks to send and receive money. Dwolla's proprietary software and network connect end users with the ACH and Dwolla.

Dwolla's payment system can be accessed three ways: by going directly to the website at; by clicking on a radio button on the payments page of the website of a business that offers Dwolla as a payment option; or by accessing an online payment hub that an organization sets up to receive payments.

Milne and Neuerburg tested the system for more than a year and a half before the product launched, "so our software is probably more mature at this point than for many start-up companies," Milne said. He leases office space at Foundry Coworking on Locust Street downtown and works primarily online with Neuerburg, who resides in Grand Forks, N.D.


A number of Iowa companies are already using the system, among them c.RESULTS LLC. The East Village-based consulting firm has used the system for the past several months to receive retainer payments from clients.

"I work with busy executives, so it's nice for them not to have to worry about scheduling the payments," said Cherise Flynn, c.RESULTS' owner. "And running a lean business, it's just been very helpful to me."

Flynn has also used Dwolla to pay her membership dues with the Iowa Association of Business and Industry, which offers Dwolla as a payment option on its website, not to mention sending money to her mother occasionally. "But the big benefit is for my business," she said.

Earlier this month, Dwolla added a new service, HUB pages, a landing page to which users can link their websites, Facebook pages or Twitter accounts to receive online payments. The service is particularly suited to nonprofit organizations that solicit donations, Milne said. The Des Moines Social Club is currently using the feature to raise $10,000 in matching funds so it can receive a challenge grant from the Community Foundation of Greater Des Moines.

Users must link their bank account to the Dwolla account to receive or send funds. Money transferred through Dwolla is held in federally insured accounts at either MidwestOne Bank or Veridian Credit Union.

Milne, 27, launched his first business, Elemental Designs, while he was a freshman at the University of Northern Iowa. His college career was short-lived, in part because he didn't attend classes that didn't interest him.

"I spent time with my customers instead of with my teachers," he said of his first business, which still operates out of Newton. "When that semester was up, I just never went back. So I don't have a college education; I just sort of solve problems."

Word of mouth

Though Dwolla has attracted some Iowa-based customers, it has a big chicken-and-egg hurdle to resolve: How to get large retailers to sign on to a not-yet-nationwide payment system so that it can become nationwide.

"We're close to resolving that issue," he said. "We have a lot of conversations going on."

Nathan Wright, who has known Milne for about a year, said he's impressed with how Dwolla is growing its business almost entirely by word of mouth.

"And along with what he does with social media, it all works well together," said Wright, owner of Lava Row, a social media consulting firm. "The entrepreneur community here in Des Moines is pretty supportive, and that's helped him out, too." Wright said he has set up a Dwolla account for his firm, but hasn't integrated it into his billing system yet.

"That would probably be a logical way to use it long-term," he said. "I know that some companies are looking at it for payroll as well. If you have a large staff, the savings are pretty immediate right there."

The company, which Milne initially funded with his federal income tax refund, didn't need a lot of cash at first.

When the time came to move the software from a concept to a working product, he told an angel investor he'd probably need $250,000 to get the company going. It wasn't long before a group of Iowa investors came forward with the money.

"That occurrence was pretty serendipitous," Milne said. "I thought, 'Oh, man, this is really easy. What's everybody talking about? Raising money isn't hard.'"


More assistance came earlier this year through a state grant. Working with Mike Colwell at Business Innovation Zone (BIZ), an entrepreneurial assistance program in Des Moines Milne secured a $55,000 grant from the Iowa Demonstration Fund to assist in building the company's communication device for integrating Dwolla with clients' websites.

"If I didn't have a constant dialogue with (Colwell), I would not have known how to do the things I did to get that grant," Milne said. "Really, I think that's a big testament to Des Moines."

Milne said Dwolla's low-cost pricing model is sustainable.

"If you just remove the cost of that other network and you become a processor and a network, you don't need to charge as much," he said. "If you reduce the number of hands that are involved in a process and the fees that are attached to it, you lower the cost of the process.

"The fee structure we have up is, without a doubt, enough to make a profit."