Iowa isn't your typical start-up city and Ben Milne isn't your typical start-up chief executive. A native Iowan, Milne didn't attend Stanford; he went to the University of Northern Iowa before dropping out to start Elemental Designs, a Web-based audio speaker retailer.
Then he got annoyed with how much money he lost in credit card interchange fees, the cut that credit card companies take from every transaction. That gave birth to Dwolla, the company that Milne, 29 years old, runs from Des Moines. The company has 30 employees and has raised $6.31 million from venture capital investors including Union Square Ventures and Thrive Capital. The company began with a consumer application to more easily make payments online.
Its current project is more ambitious. Milne wants to supplant the age old delivery mechanism banks use to transfer money to one another, the Automated Clearing House (ACH). He says the system, which moved $33.91 trillion last year, is outdated. It can take as long as 24 hours to a week for a merchant to get paid when a customer makes a purchase with their credit card. Dwolla's fix is a service it calls FiSync, which it says can process a transaction in as little as 15 seconds.
We spoke with Milne about his big swing in trying to tap the banking market, why his ideal day involves riding around on a four-wheeler on a farm, and why financial institutions would want to hire a bunch of 20-somethings to handle their money.
Joseph Walker: What is Dwolla?
Ben Milne: Dwolla is a payment network that allows anyone with an Internet connection to bypass interchange fees. We let you access the money in your bank account and exchange it for anything as long as you have an Internet connection. It's a next generation Visa but without the card; we use APIs instead of plastic.
JW: Why are your changing your focus from the consumer market to financial institution customers?
BM: We're really interested in the $33.9 trillion bank-to-bank market. It's massive. The tech stack for financial institutions hasn't really been updated in 30 or 40 years.
With financial institutions, the system they're dealing with right now is really slow. A bank can't even move money between itself and another bank on weekends and it can't do it on holidays. The fact that banks, which are databases, can't talk to another bank's database without a few days' delay is pretty silly. Banks want to get paid faster like everybody else. Our system doesn't take breaks on holidays and it's open on the weekends.
JW: What are the challenges in breaking into the market?
BM: In the world of financial transactions, it's very difficult to leapfrog to the biggest institutions and start moving trillions of dollars. We also accept that we're a bunch of 20-year-olds and we do business with a lot of seasoned folks in the finance industry. None of us came from this industry and we have to work 10 times harder than the guy who's been in the business for 30 years. But we get to look at the marketplace with an outsider's view and it's enabled us to concentrate on inefficiencies and creating value rather than just the next sales cycle.
There is no shortage of challenges. When it comes to being taken seriously, there's a social challenge that can be overcome in time by being consistent and doing good work. There are regulatory and compliance challenges, but the beauty of those is that they come with a set of rules and as long as you understand those rules, you'll be OK.
JW: You've been a big evangelist for Des Moines as a place to build a company. What's it like there and do you ever get bored?
BM: Hell no. Man, I'm from Iowa. If I had a day off to do anything I wanted, the best thing I could do is a get on a four-wheeler and drive around on a farm. I'm from the Midwest and I accept that. I spend so much time on the road that I know what's out there. I like living somewhere where, when I go to sleep, I can't hear anyone or anything.
I just made myself sound like a hick. But there's a certain peace in Iowa in just hearing the wind and being able to have a bonfire out in the middle of nowhere. You can be bored wherever you're at if you ignore all the beautiful things around you.
JW: What's your typical day like as CEO of Dwolla?
BM: If I'm awake, I'm working. I like to have a good quality of life, but I work even if I'm on a four wheeler – I'll stop to take a call. Or I'm probably thinking about what the architecture should be for the next mobile app. I wake up every day and I start working and I don't stop until I go to bed. I dropped out of college and built my first company and this has always been my way of life.
Write to Joseph Walker at email@example.com