Why Dwolla’s next pivot will include new leadership

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When Dwolla launched a decade ago, the company pitched banks on new technology enabling P2P transfers between consumers via ACH on social media along the lines of what Venmo eventually became.

But banks were slow to adopt Dwolla’s concept, and the Des Moines, Iowa-based company eventually pivoted to a B2B model, using APIs to deliver white-label ACH funds-transfer services to other companies, including providing payment solutions for online marketplaces.

Now Dwolla—which wowed investors early on with a novel approach to payments that eschewed cards—seems to have lost momentum, and its founder and CEO Ben Milne, 36, is stepping down as Dwolla prepares for a new market strategy.The move suggests Milne, who launched what became one of the first fintechs in his 20s, is looking for an outside vision on growing the company further.

A number of employees have been let go from the company, Milne explained in a lengthy blog post, adding that he’ll help Dwolla search for a new CEO while he remains on the company’s board of directors. Dwolla has fewer than 100 employees.

Surprisingly, Milne revealed that Dwolla—which previously has kept details about its numbers close to the vest—has revenues of $10 million and supports more than $10 billion in gross payment volume and “quietly” recapitalized the company four years ago.

After raising more than $22 million in funds and a recapitalization four years ago, Dwolla's management is under pressure to produce fast growth, particularly given the high-profile investment in rival fintechs.

In the shadow of Visa’s recent $5.3 billion acquisition of Plaid—a fintech whose API-based technology quickly hooks Venmo users to banks—Dwolla faces competition from a firm that offers the same services Dwolla promised early with its P2P concept and API-powered data-sharing services.

“Both Dwolla and Plaid focused on creating solutions for developers using mobile and internet banking credentials to verify accounts before sending ACH payments, but Dwolla didn’t get there,” said Richard Crone, a payments consultant.

Despite Dwolla’s constant business-strategy shifts — included being one of the first to enable real-time payments, through a deal with BBVA — the company is still closely connected to Waterloo, Iowa-based Veridian Credit Union, the financial agent that holds all of its funds.

Executives at Dwolla and Veridian were not available for comment, but Dwolla has a long list of clients using its services, including Routable, which uses Dwolla for its service streamlining B2B payments; GetMyBoat, an online marketplace for boat rentals; the online lender LoanWell; and GOAT, which sells collectible sneakers.

Though Milne didn’t provide any hints as to Dwolla’s next go-to-market strategy, in an earlier blog post this year he alluded to one significant change. Dwolla has always eschewed payment cards in favor of ACH, wire and account-to-account transfers. But Dwolla will soon enable direct debit push payments, Milne said.

Under a new CEO, Dwolla may emphasize new or different services, but the company still seems to be searching for a breakthrough product, Crone suggested.

“Dwolla has continuously pivoted from one year to the next, and you have to either credit or blame the CEO for that,” he said.

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Fintech Digital payments Dwolla Visa Plaid Technologies