Dollar + Web = Dwolla

For those that might not be familiar with Dwolla, here is a brief run down.

Now, for some time I’ve been using the app for small transfers here and there. I think the service is great, easy to use, and their spots feature makes it really easy to find vendors that are accepting Dwolla. This was once a pain point but now I can easily pull up a map and find a local coffee shop and for my morning cup of joe. With all the ease of transferring money and extremely low transfer fees, it still has a few areas of improvement.


If I’m a vendor taking Dwolla and you being a customer think, “Wow, this is a great service, I’m going to setup an account quick and use it at check out”. Well, I’ve got news for you, come back in 2-3 business days. WTF? The appeal just went away for that user. They’re going to pay with credit card and the chances of them signing up are very very slim. Unless…I charge more for CC transactions to cover my cost and basically force my customers to become Dwolla customers as well. Not that I mind, but I might lose some customers by doing this. For me, this seems a pretty big issue of getting more users on the platform and the ease of signup is an issue Dwolla has yet to resolve. And I’m not sure they can solve it without some helps from the various banks out there. Supposedly its gotten better, but its still not a smooth process.

Proving the business model

This is one where I’m going to pick on Dwolla the company a bit. They’re charging $0.25 per transaction which is freakishly low. It takes a lot of transactions to make $0.25 profitable. Not that they can’t do it, but there have been snippets of information coming out of the company that make me think, will they make it? Sure they have been sitting on a nice fat 1 million dollar round of investments. And I have no doubt that they can get another round with their recent announcement of 1 million dollars in transactions per week. But the business model underneath is what has me a little concerned.

A long time ago, Dwolla mentioned in a tweet that the average transaction was $500. Personally, I thought this seemed ridiculously high. But let’s run some numbers to see how the model looks. 1 million in transactions per week / $500 = 2000 transactions. Take that by $0.25 and you get $500 per week. Houston, we have a problem. Its hard to pay for your servers and put food on the table at that rate for a single person. They’re pushing 15 employees now.

So let’s assume that the average transaction has dropped to $100. That gives us 10,000 transactions or $2500 a week. Better, but can we really run a 15 person company on this revenue?

Now, where I think Dwolla really kicks ass is coffee shops, and mom and pop restaurants. And Des Moines has really caught the craze with this one. If we look at these being the typical Dwolla customers, you now have an average transaction in the $5-10 range for an average breakfast / lunch. At $5, NOW we’re talking a sustainable company. 200,000 transaction gets you into the $50,000 a week in revenue. Now that’s a number Dwolla can live with.


If you haven’t checked out Dwolla, I highly recommend it. Its a great service from a local Des Moines company. I really think that the average transaction has come down and these guys are making some major waves with their product announcements. Even if they don’t become the de facto online payment service, they’re proving that the market is out there for something other than credit cards and others will follow. Its going to be some exciting times for online payments in the next 12-24 months. I hope the best for Dwolla and will continue to promote them wherever I can.


Since writing this original article, Dwolla has announced that they are now doing 1 million in transactions A DAY! If they have lowered their average transaction like I think they have, holy crap, they’re killing it!

Matt Patterson avatar
About Matt Patterson
Husband, Father of 3, Programmer at heart, spends his days running ridiculously large data centers in the midwest.