BBVA Looks to Dwolla Tech to Modernize Payments

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BBVA Compass is partnering with Dwolla, the Des Moines, Iowa-based alternative payment network to enable real-time payment capabilities throughout its offerings.

One opportunity for the Dwolla integration would be eliminating paper checks from the system, said Jeff Dennes, senior executive vice president of business development and digital transformation at BBVA. A lot of organizations still distribute paper checks for payroll, which has been one of the use cases of Dwolla's network in the past. BBVA plans to start using Dwolla's tech in the first quarter of 2015.

"Banks need to move money…and there's not a rail to move money real-time besides wires, which are expensive," Dennes said. With the ability to move money in real time, "there are multiple business models we'll be able to incorporate around that," he said.

While BBVA will focus the real-time payments towards consumers first, the bank's small-business customers will also benefit from using Dwolla to replace checks for payroll and disbursement, Dennes said.

Users of the integration must be both BBVA customers and sign up for a Dwolla account. End users' costs will remain the same as they are when working directly with Dwolla, which charges no fee for transactions under $10 and a 25 cent fee for transactions exceeding $10.

A BBVA user can send money to a non-Dwolla or non-BBVA user in real-time, but to use those funds they must set up an account. 

Dwolla and BBVA would not disclose the cost details of their arrangement. BBVA is the largest financial institution integration Dwolla has done.

"The conversation around real-time, up until this point, has centered around standards, rules and policy," said Ben Milne, CEO of Dwolla. "There's a place for those conversations, but real-time needs to be thought of as a platform for innovation, to allow developers to stream payments to and from their applications, utility companies to charge for energy by the minute, marketplaces to make disbursements instantly, or financial institutions to build new B2B products."

The integration comes at a time when the industry is abuzz with talk of a faster payments network. The Federal Reserve has been pushing the industry to develop a faster U.S. payments system, pulling back the curtain on its idea of building a new infrastructure earlier this month. At the same time, The Clearing House, a payments company and trade group representing the nation's largest commercial banks announced it was building a real-time payments system. And because of the near real-time, low cost Bitcoin protocol, many startups have entered the space, innovating on the automated clearinghouse (ACH) rails.

"What we all know is the U.S. is going to get real-time payments…but it's years away," Dennes said. "The conversations have been going on forever but they're just conversations."

But as consumer expectations shift towards secure real-time payments, BBVA thinks it partnership with Dwolla will give it a leg up on other bank competition. Dennes thinks consumers might move their accounts to BBVA for real-time payments.

"We're looking at a lot of these different startups and the business models and how we can leverage that," said Dennes. BBVA is not currently eyeing another startup in the real-time payments area, but Dennes gave the bank's acquisition of Simple in February as an example of how the bank is willing to innovate outside of the norm to appeal to consumers. 

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