Dwolla's Big Announcment Today- Instant Credit. No More ACH Delay

[Yankee (BitInstant)]

Hey guys,

First, read this http://blog.dwolla.com/its-instant/
Then this http://www.siliconprairienews.com/2011/12/dwolla-introduces-instant-gives-users-instant-access-to-line-of-credit

Basically, Dwolla's not feature is it wille extend up to $500 credit to any customer who opts-in to the $3 a month service. If the balance is not paid, its a $5 a month late fee.

With Dwolla's history of being incompetent and malicious I have a few questions that I need Dwolla to answer. In the past, if a customer tries defrauding Dwolla (using a few different methods) then Dwolla has tried taking the funds from my account. Of course, I record every phone call with them and have caught them in multiple lies so I dont let them take the funds. This is not my only problem with them.

TradeHill and MtGox also have many issues with Dwolla.

Honestly, the reason we all use Dwolla is because its easy and cheap to do ACH. With this new system of 'instant credit' I'm afraid Dwolla can use this to scam us merchants.

Thoughts?

-C

[Drifter]

$3 a month are they serious? Worse than just owning a credit card. I could have the worst credit on the block and still get a $500 line of credit for less than that a year.

[FreeMoney]

$3 a month are they serious? Worse than just owning a credit card. I could have the worst credit on the block and still get a $500 line of credit for less than that a year.

But you can't buy bitcoins with a CC today.

[moocow1452]

$3 a month isn't that bad as far as overdraft insurance goes.

[Yankee (BitInstant)]

$3 a month isn't that bad as far as overdraft insurance goes.

From a customers point of view, this is awesome.
From a merchants point of view, it gives Dwolla license to fuck with us more.

[moocow1452]

If you're already in your ecosystem, then they already have authority to redact purchases as they see fit. How does that change if it's IOU's floating around instead of virtual cash?

[sadpandatech]

If you're already in your ecosystem, then they already have authority to redact purchases as they see fit. How does that change if it's IOU's floating around instead of virtual cash?

  umm, because it increases the likeliness that they will redact more purchases....

[Yankee (BitInstant)]

If you're already in your ecosystem, then they already have authority to redact purchases as they see fit. How does that change if it's IOU's floating around instead of virtual cash?

  umm, because it increases the likeliness that they will redact more purchases....

Thats exactly my point. Not only will it increase the likeliness but this new system gives them license to do it!

[moocow1452]

So be it, but you're still getting more purchases per month if this takes off.  MtGox still uses it after Paypal fell off the map so they have to have a decent success rate, and even if it is within their profit margin to actively troll the Bitcoin Economy, which is stupid, that is gonna come back to bit them in the ass when someone starts something better and more protected on the merchant end.

[Yankee (BitInstant)]

So be it, but you're still getting more purchases per month if this takes off.  MtGox still uses it after Paypal fell off the map so they have to have a decent success rate, and even if it is within their profit margin to actively troll the Bitcoin Economy, which is stupid, that is gonna come back to bit them in the ass when someone starts something better and more protected on the merchant end.

Of course, your 100% correct.

As per Bitinstant, we will be fine. We have a system in place that greatly reduced fraud and chargeback and we only get 1-2 a month.
All the exchanges that currently are supported and will be supported (mtgox, tradehill, virwox, cryptxchange. Who am I mising?) don't need to worry at all because even IF something happens, its between Bitinstant, Dwolla, and the customer. The exchanges will not be effected by it.
I'm just worried about smaller merchants that accept Dwolla

[gnar1ta$]

Well I wish it was good news all around. I just use Dwolla to get money into the exchanges cheaply, and the wait sucks. So good news for me.  Wonder if this will affect Cryptoexchange's pricing?

[Jered Kenna (TradeHill)]

Any purchase or transaction involving virtual currency or a virtual product is not eligible for a dispute or arbitration. This includes but is not limited to credits, downloads, PDFs, or mp3s.

Basically their TOS now states if your transaction involves Bitcoin and you want to do a chargeback it's an automatic win...

Combine that with a $500 line of credit and things are going to get interesting.
I'm well aware of what Charlie does to lower his Dwolla risk and I'm not concerned for Bitinstant but I fear for others that accept Dwolla.

Regardless this is going to be interesting.

Jered

[evoorhees]

Wonder if this will affect Cryptoexchange's pricing?

Crypto X Change's $15 fee is only for the direct bank transfers (replacing a wire/eft fee). Funds via Dwolla/Bitinstant would not have any fee from Crypto's side.

[Ranvier]

Any purchase or transaction involving virtual currency or a virtual product is not eligible for a dispute or arbitration. This includes but is not limited to credits, downloads, PDFs, or mp3s.

Wait... doesn't that mean that you CAN'T issue a chargeback, as Dwolla will not hear the dispute? Or am I reading it wrong?

[Jered Kenna (TradeHill)]

Any purchase or transaction involving virtual currency or a virtual product is not eligible for a dispute or arbitration. This includes but is not limited to credits, downloads, PDFs, or mp3s.

Wait... doesn't that mean that you CAN'T issue a chargeback, as Dwolla will not hear the dispute? Or am I reading it wrong?

You've got it reversed the way I understand it. Essentially if you do a chargeback it won't be questioned. Or more accurately if you pull the funds back to your bank Dwolla will yank them from the merchant without asking if they delivered the goods or service. I'm wondering how well this would go over if iTunes started accepting Dwolla.

This was added After Dwolla removed funds from TradeHill's account and refused to acknowledge it. It wasn't in their original TOS.

Jered

[Ranvier]

http://help.dwolla.com/customer/portal/articles/87923-file-a-dispute

At least you cannot file a dispute about bitcoins:

Disputes can not involve the purchase of virtual currency.

However, what would happen if someone doesn't transfer their bank funds remains to be seen.

[MelMan2002]

$3 a month are they serious? Worse than just owning a credit card. I could have the worst credit on the block and still get a $500 line of credit for less than that a year.

But you can't buy bitcoins with a CC today.

Sure you can:
http://www.memorydealers.com/bieq.html

[Stephen Gornick]

Combine that with a $500 line of credit and things are going to get interesting.

Well they hit their quota for the first batch of applicants within the first half hour after the press embargo expired.  Free (er, ... easily borrowed) money always has a greater demand than supply.  

Doing the math, $3 per-month plus $5 per-month (late payment) on $500 owed is 19.2% fees on an annual basis (the first month, and then the rate drops down to under 17% after the amount owed rises but the monthly fee doesn't).  That is actually less expensive than many credit card agreements charge for interest.  And you could even drop the $3 during the first month so that charge would not occur each month.

"Those are the only two fees," Milne said in the interview, "no percentage rates, no other penalties, no fine print."

 - http://www.siliconprairienews.com/2011/12/dwolla-unveils-instant-immediate-access-up-to-500-for-flat-monthly-fee

So I can keep the debt and owe it indefinitely?  I'm guessing there is some "fine print" that will come.

TMG Financial Services will research each Instant user's credit history. "Just like if you were to apply for any type of a loan," Russell said, "it is based on your credit history and other risks factors."

"I don't know if this is the best analogy," said Jeff Russell, the president and CEO of TMG Financial Services and a Dwolla board member, "but it's a little bit like an American Express in that sense of, you know, your whole balance is due at the end of every month and you have to pay the whole balance off."

That analogy would probably be good, except that AmEx probably scrutinizes a bit closer before granting credit.  And AmEx has a lot of "fine print" so you know exactly what happens if you don't pay in full.

Hopefully it is not Dwolla that is exposed to the risk of customer defaults on this.

[Jered Kenna (TradeHill)]

Any purchase or transaction involving virtual currency or a virtual product is not eligible for a dispute or arbitration. This includes but is not limited to credits, downloads, PDFs, or mp3s.

Wait... doesn't that mean that you CAN'T issue a chargeback, as Dwolla will not hear the dispute? Or am I reading it wrong?

Well I would imagine it works both ways.

If Andy sells BTC for Dwolla and Pablo complains he never got his Bitcoins they probably won't yank it back and the buyer loses.
If Pablo buys BTC with Dwolla from Andy then pulls the ACH or something similar Dwolla won't care because it's BTC and the seller loses.

This is the way I see it working. I could be wrong. The only thing I know for sure is Dwolla has proven they won't eat the ACH loss at least if it's Bitcoin related. I don't want to speculate on other things.


This is the first time I've wished for more fine print on financial paperwork...

Jered

[FreeMoney]

$3 a month are they serious? Worse than just owning a credit card. I could have the worst credit on the block and still get a $500 line of credit for less than that a year.

But you can't buy bitcoins with a CC today.

Sure you can:
http://www.memorydealers.com/bieq.html

Okay, so you can pay for them today, but you won't get them today.