UPDATED 13:34 EDT / DECEMBER 17 2010

PayPal Stays Ahead of the Curve as Dwolla Threatens Its Market

New player Dwolla is knocking on PayPal’s door,  striking the world’s leading online payment company where it is weakest—transaction fees. Dwolla will only charge 25 cents per transaction, whereas PayPal deducts a certain percentage on credit card payments and bank transfers depending on the amount involved. The main principle behind Dwolla is to promote swift and cost-efficient cash flow for different businesses and consumers.

In a report publicized by CNET News, Dwolla founder Ben Milne explains how the whole thing works for the new online payment paradigm: “It’s virtual, relying on Web-connected point-of-sale systems on one side and consumers with smartphones on the other.

“A consumer selects the store he or she wants to pay and enters the amount on the smartphone app; the register clerk can see a payment come in and close the transaction. In the future, Dwolla’s mobile app, which is currently very bare-bones, will get location awareness so it will know what store you’re in when you go to use the system to send a payment.”

While Dwolla is going after the PayPal market, the latter is doing its best to stay ahead of the curve and enacted several updates and enhancement tools recently. A solid proof that PayPal is still dominating and has firmly grounded its roots in the industry is the recently concluded “PayPal Innovate X Conference”, where discussions revolve around the future of money.

The same conference also paved the way for neophytes to harness good practices and build partnership with the industry’s pioneer. The growing trend in micropayments caught the interest of many. In fact, several businesses are looking to circumvent the larger platforms. Kachingle, for example, adopts the micropayment system and will use PayPal to lure consumers to Kachingle subscription.

A recent report also noted that PayPal mobile payment is really doing so well right now, they hit a record-breaking 300 percent increase from last year’s remittances. In addition to this feat, PayPal is tapping a new feature to support its iPhone app and enable it to make donations to various charities.

It is interesting to note that mobile has dictated the pace of the growth and development of the industry.  Now, Fortumo In-App payments are available. This will allow online payments and users to dismiss the advertisement without having to leave the application by making a small payment.


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