Most consumers swipe their credit cards without a second thought, not realizing they're costing a business money in doing so. Business owners have to pay processing fees for every credit card transaction that comes through. These interchange or swipe fees are usually a percentage of the total transaction, and they quickly eat away at the business's profit margins.
A new company called Dwolla is attempting to redesign the way businesses pay these fees, charging significantly less per transaction than other processors on the market. Rather than paying around 3% per transaction, business owners can pay a low $0.25. If the transaction is for less than $10, there is no fee at all. This can lead to thousands of dollars in savings for some companies.
Dwolla has a system that eliminates most of the overhead associated with credit card processing, allowing them to charge a low amount for a much-needed service.
"The fees that come into a credit card system really pay for the infrastructure to support it--all the people that are doing the sales, all the hardware, all the old systems, the fraud protection inside of it. When you just remove all that stuff, when you don’t have to mail anything anymore, you can actually remove a ton of fees just by building a new system," said Ben Milne, the mastermind behind Dwolla, in an interview with WBUR radio.
You don't have to have a business to use Dwolla. You can send money to your friends this way or raise money for your non-profit organization, all while paying low fees to Dwolla.
It's an idea that may revolutionize the way money moves in the future.