Dwolla claims they don't need licenses, as they use The Members Group to middle man the ACH payments:
Well it was legal, we just couldn't operate outside of Iowa. For the first two years we built out the platform. We did a sh*tload of testing on a small scale because legally we couldn't launch Dwolla nationwide. We spent two years inside of Iowa fine-tuning Dwolla with the financial institutions, building out some of the initial models, and trying to figure out how to legally do what we do.
How'd you find a legal loophole?
Moving money is an exceptionally regulated business. We're in Iowa, which is sort of conservative — I don't know if that helped us or hurt us, but in the long term I think it helped us. We figured to do this legally, we had two options: we could take in a tremendous amount of money and go out and get licenses, which is how most people do it. But we didn't have access to that kind of capital here.
The other option was to bring in really strategic investors, which is what we did. One of our investors is a financial institution; one is a financial services company.
Our investors do credit and debit processing for banks. So when you get a credit card from your bank, it's being issued by companies like them. Our investors are also distributing our product to financial institutions. So we've been building a payment network, and we can do it legally because of who our investors are.
