Mr. Taub and Mr. Schonfeld

The Credit Card Killers

With an ever-crowded financial tech market and companies like PayPal and Google Wallet elbowing for industry dominance, the race to kill the credit card is heating up. But among the standouts is Iowa-based mobile payment startup Dwolla, thanks to an innovative pricing structure and a growing New York presence helmed by Michael Schonfeld and Alex Taub. Dwolla has raised money from two New York venture capital firms, Union Square Ventures and Thrive Capital. (Josh Kushner, a Thrive principal, is also part-owner of Observer Media Group.)

Much like PayPal, Dwolla seeks to disrupt the traditional money-wiring business and enable users to send payments with ease. Users set up a Dwolla profile, link it directly to their bank account, and can then instantly send money to friends and businesses through an iPhone or Android app.

The company also processes bank-to-bank transactions, eradicating the need for slow and costly credit card processing. “We’re building a human network based on how we think the future of payments will work,” CEO Ben Milne told Business Insider. “The current model needs to be blown up.”

PayPal, Dwolla’s main competitor, is far more established and is a trusted brand name in online payments, but its fee structure makes it expensive to use. Unlike PayPal, Dwolla doesn’t take a percentage of each transaction, instead charging a 25 cent fee for any payment over $10 (under $10 is free), making it much cheaper for businesses and consumers.

“PayPal is a pioneer, but it can only innovate so much on the backs of these 40- or 50-year-old networks that they’re using,” Mr. Milne told The Observer. “Dwolla is a new conduit to move money in a better way that anyone can use.”

Next: Mike Karnjanaprakorn, Skillshare: The Principal of New York

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