Dwolla’s new CEO Brady Harris joins me on the podcast. He’s been in the payments industry long enough to see the real opportunity for B2B payment players and how the space has evolved over time.
We talk about ACH, the role it plays in payments ecosystem, and where it might be headed. Use cases are expanding and Harris describes how different firms and industries are using it to advance their payments experiences. We also explore Dwolla and where the new CEO believes the company can continue to find growth.
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The following excerpts were edited for clarity.
Payments experience
I've been in fintech and payments for about 20 years. I started back when people were using those knuckle-buster carbon copies, which you had to slide over to get an imprint of a credit card. I was really fortunate to pick a good industry -- fast growing, technology, and advancements.
I grew through the ranks in various payments companies to ultimately run a fairly large payments ISO with 15,000 merchants coast to coast. I came up through the revenue/sell side part of the business. This matured into a president/CEO role. We had several successful private equity transactions.
I relocated to Atlanta and joined fast-growing Payscape. I was brought in to help professionalize and scale revenue. It had several interesting SaaS products on the periphery of payments that they had developed from the ground up. I joined them as President and we just finished a transaction at the end of last year with Parthenon Capital in Boston. They're now on an M&A sprint doing amazing things.
It was a great opportunity for me to move to another fast-growing company -- Dwolla -- where I've been for a few weeks now.
New stage of growth
Dwolla is an amazing company. It grew something like 60 percent last year. The most exciting part of that growth is that the company hadn't really defined its go to market strategy. So, they are sitting on an amazing technology -- this ACH product delivered through API -- and had organic growth, good trajectory in the business, and an innovative product roadmap. They really wanted an executive with transaction experience who had scaled revenue and go to market teams. For me, it checked all those boxes.
ACH product
In payments, we primarily talk about the Visa and Mastercard rails. You create a merchant account, it's a commodity, you transact funds from point A to point B. You're going to pay a percentage -- interchange -- and likely some transaction fees. All in all, you'll pay something like 3 to 4 percent of every transaction for a 24 to 48 hour deposit time.
The exciting thing about ACH rails is that there's some emerging technology where you can have same day -- and even instantaneous -- fund transfers. It's also a fraction of the cost of interchange of what Visa and Mastercard charge on the same transactions. So, you have a couple things intersecting. You have really fast deposit times. Using API, you have a highly customized programmable payment that can be integrated into software, apps, platforms and dashboards. And it's a fraction of the cost.
Use cases for ACH
Dwolla does a great job in diversifying who we work with. We have a wide swath of industries we target. It's almost entirely B2B transactions. A recent situation was an established tax preparation software company that does about $100 million in ARR. Attorneys and accountants use the software on behalf of their clients. In order to facilitate payment, the software company wanted to integrate a payment solution where a service provider could invoice his customers for services rendered.
Dwolla created a highly customized white label payment solution embedded in the software itself. As a user wants to send or remit payment, he can do that easily within the software.
Evolving payments space
One thing that's interesting about the payments space -- think about the credit card terminals sitting on a counter. That advanced to using pin-based debit. Then mobile and EMV.
The space has moved heavily over the past few years to have a point of sale to transact those payments. An interesting trend is that a lot of industries and verticals are now using POS systems that are specific to them. There has been a mad dash by merchant acquirers or payment facilitators to integrate quickly with the independent software vendors.
Transaction speeds
It's just table stakes now. It's going to have to go faster. We've all become accustomed to immediate information and want instant gratification. We want things now. The idea that you have to wait a couple days for money to show up in your account is going to be seen as increasingly antiquated.
So, you've got push to debit, push to card, fintech disrupters like Venmo that are finding creative ways to send funds faster -- I think everyone is just raising the bar in terms of what you need to do to compete in B2B, B2C, and P2P.
What's next in payments
Look at what financial sponsors are doing with their money to see what the next thing is. It's a canary in a cave way to think about emerging technologies. If you look at VC, you see a lot of fintech and banking technologies. I envision products like Dwolla -- deeply integrated, intuitive user experience, ancillary drag and benefits to other aspects of your life, instantaneous transfer, and it grows organically. These are the key ingredients.
Positioning Dwolla for the future
We're going through a value creation planning process -- it's a deep, intense 90 day SWOT process. Participation is open to the entire company. We've created seven different committees that each represents a critical segment of the business (one of which is our go to market strategy). We're doing a lot of market research and talking to a lot of customers. We're doing intel work on competitors, trying to formulate the shape and vision of the company as we move forward in the future.
We anticipate doing some exciting fundraising in the next 12 months. We will get clarity around product focus and we anticipate growing really quickly. We'll be adding headcount. We'll be diversified in how we go to market, being thoughtful around what sectors and industries we target and how to penetrate those accounts.