Wednesday, May 16, 2012

Dwolla, please resolve the Fee Dilemma for us

A letter I wrote recently to Dwolla. For background, Dwolla is an up-and-coming payment network that competes with credit cards and Google Wallet. When paying someone by smartphone app (and probably via the web interface), the payer has to resolve the Fee Dilemma™: does the 25-cent fee come out of the payer's balance or from the amount being transferred (a-la PayPal)? I argue that this choice is harmful.

Hello. I'd like to suggest for Dwolla to make a decision about whether the sender or the receiver eats the 25-cent fee, and to remove that decision from the user.
Right now, as an IT consultant, I am pitching Dwolla to a local retailer. Additionally, starting next month, my fiance will accept Dwolla as a vendor at a farmer's market.
In both cases, the businesses have to figure out what to do about the 25-cent fee. Should they have a stated "policy" about it? What should they say when a customer asks? And of course once they commit to one way, it might make someone unhappy if this is ever changed. And what if a business next to them has the opposite policy? Credit cards leave you no dilemmas during a transaction. I think the Fee Dilemma is a hurdle for adopting Dwolla.
I think no matter how YOU would resolve the dilemma, merchants would be happy about it. Whether the customer or the merchant eat the fee, it would be a consistent experience and no one has to ***think*** about it at every transaction.
My personal preference would be for merchants to eat the fee. It's consistent with credit cards' fee structures. It also encourages more regular people to get a Dwolla account if it's "free" in every sense. I can't imagine a business having a policy that the customer should eat the fee. So what's the use case for that? If it's for person-to-person transactions (such as paying back a debt without having the lender lose value), then how about limiting the option to person-to-person transactions? Dwolla already knows whether the recipient is a person or a merchant.
Thank you for reading.