On this episode, Josh talks with Brady Harris, CEO of Dwolla a FinTech company. They talk about payment systems and what types of modalities may be best for certain types of business.

Brady Harris is the Chief Executive Officer of Dwolla. With over 20 years of experience in the payments industry, he’s making programmable payments the standard for any industry.

Prior to Dwolla, Harris was the President of Payscape, a nationwide FinTech/SaaS provider that offers dynamic payment solutions. In his 18 year history of leadership in FinTech, Payments, and SaaS industries, including multiple successful private equity transactions, Harris excels at accelerating growth and successfully scaling businesses. In 2017 he was recognized as the 3rd highest rated CEO nationwide by Glassdoor.

In today’s episode you will learn about:

  • How Brady joined Dwolla and led a remote workforce
  • How Dwolla’s payment flows gave it an early warning of the crisis to come
  • How the crisis is changing expectations for consumer payments
  • Advice Brady has on leading a company following the outbreak


Narrator:             Welcome to “Cracking the Cash Flow Code”, where you’ll learn what it takes to create enough cash to fill the four buckets of profit. You’ll learn what it takes to have enough cash for a great lifestyle, have enough cash for when an emergency strikes, fully fund a growth program and fund your retirement program. When you do this, you’ll have a sale ready company that will allow you to keep or sell your business. This allows you to do what you want with your business, when you want in the way you want.

In Cracking the Cash Flow code, we focus on the four areas of business that let you take your successful business and make it economically and personally sustainable. Your host, Josh Patrick, is going to help us through finding great thought leaders as well as providing insights he’s learned through his 40 years of owning, running, planning, and thinking about what it takes to make a successful business sustainable and allow you to be free of cash flow worries.

Josh:                      Hey, how are you today?  This is Josh Patrick.  You’re at Cracking the Cash Flow Code. Today, my guest is Brady Harris. Brady is the CEO of Dwolla. It’s a payment system. For many of us, you’re probably seeing you’re saying, what the heck is a payment system? We’re going to start off there and then we’ll get into how his payment system might be something you want to be considering your business. Let’s bring him on. Hey, Brady, how are you today?

Brady:                   I’m good, Josh. Thank you for having me, great to be here with you.

Josh:                      My pleasure. Let’s start off with the obvious question. What is a payment system?

Brady:                   Payment is an interesting industry. I’ve been in it about 20 years. Back in the day it started you might remember those knuckle busters in using a credit card where you would run that card over a carbon copy piece of paper.

Josh:                      I am old enough to remember that.

Brady:                   Well, funny story. That’s what I was first selling back in Portland, Oregon in the early 2000s in what we at the time called the Payment Industry. As you know, that quickly evolved to credit card terminals to point of sale systems that evolved to primarily online gateways and the payments industry has really evolved into all things FinTech (Financial technology). At its core, a payments company is going to be one that can facilitate electronic payments either in a P2P, peer to peer, B2C, or a B2B environment while it focuses its technology in facilitating transactions or funds flow, in a B2B environment primarily.

Josh:                      If I’m a blue collar business, a construction company. Why would I want to know about payment systems?

Brady:                   We use the term modality. We can say rails, if you think about train or a subway car. As a business, you want to enable or support as many payment modalities as possible. Back in the day, a lot of times that was done with cash that would be a modality. Paying with a paper check would be a modality.

Accepting credit cards would be a modality. While the payment rails or modalities a business would want to accept is very unique to industries or even businesses within certain verticals. Generally speaking, you want to enable as many forms of payment as possible. There’s been a lot of research done that whether it’s enabling credit card payments or electronic invoices, paper checks.

The more that a business can provide as payment options generally, that increases your funds flow for the ability to drive revenue. Payments as a whole is just a way to make sure that you have cash flow coming into the business.

Josh:                      What were the difference between a B2B in which is business to business payment system versus a C2B which be a consumer to a business payment system?

Brady:                   That’s a great question. If you think of a B2B transaction that might be you reference maybe a construction company or an HVACs maybe a landscaper. A landscaper would have vendors that, that business might do business with on a regular basis. Perhaps they buy equipment, or they buy fertilizer from another business.

So a B2B transaction would be where one business needs to send or receive funds with another business. Obviously, in a B2C environment, business to consumer, we’re all familiar with that. That could be a situation where I use DoorDash, or Uber Eats. I order a meal actually just did that last night with my family. Uber Eats facilitated a payment through their app where in a B2C environment. I can buy a pizza or a meal. That app or those funds flow will transact through their technology, essentially debiting my bank account or my credit card, and putting those funds into that of the businesses.

Josh:                      If I’m a construction company. Let’s say I’m a plumber, and I go to your house and I fix your plumbing, what kind of payment systems would that business want to have available?

Brady:                   Well, a couple things that one would consider in the payment space, primarily my 20 years has been in companies and environments where we focus on the Visa and MasterCard rails. So if I go do plumbing work, and I’m a plumber, and I charge my customer $200 for the services rendered, I might have some kind of either credit card terminal or a gateway where I can capture the credit card information of my customer, where that processor will debit the funds from the card issuing bank and deposit that $200 into my business bank account as the plumber for as the plumbing company.

Again, you’ll want to consider how fast you need your funds. Visa and MasterCard generally take 24 to 48 hours for those funds to be deposited. ACH is a much cheaper way, typically pennies on the dollar, whereas a credit card transaction is going to be two, two and a half to 3% of the transaction total. So you’ll want to consider how fast do I need my funds? How much am I willing to pay for that service? Then make sure that that modality is appropriate to the customer.

An ACH transaction might require that one captures a bank account number, a routing number. That may not be the best modality maybe for a plumber to work with a consumer in their home, where’s that consumers willing to pull out their American Express or their Visa card, and that’s much easier. It’s really dependent on that industry type and the nature of the transaction itself.

Josh:                      So if I’m writing physical checks as somebody in the business, I could use your system and not write physical checks and just go through the ACH system instead, which is your electronic banking system that people use for payments.

Brady:                   That’s right. I’ll give you some vanity metrics. So in Q1 of 2020, we added through our platform about $5 billion in gross payment volume, meaning that our clients and the funds for the transactions flowing through our clients utilizing our technology. We added about $5 billion that was net new to our platform and that represented about a million new net users or close to a million new net users. What will happen is that plumbing company will come to Dwolla.

They might have a website, or maybe they’ve developed an app. They say, “We don’t want to take credit cards. We don’t want to give up 3% of every transaction. Maybe credit cards take too long. We need those funds quicker that we don’t want to take paper checks, because that’s antiquated and those checks may bounce and it takes three to four days for it to clear the bank account.”

They would come to somebody like a Dwolla, where very quickly, we could work with either their website or their app and embed our technology using some really simple API, where they can facilitate those funds flow in a really easy fashion. We have some technologies that those funds can be deposited same day into that business’s bank account.

There’s a new technology, push the debit or RTP (Real Time Payments) that’s actually on our project or our product roadmap, where very soon we’re going to be able to push funds almost instantaneously. Those are some really exciting, more payment specific technologies that just enable faster payments at pennies on the dollar especially versus credit cards.

We have using your example of a plumbing company. We have close to 400 businesses today transacting on our technology and even more downstream from that. We have about 50 to 60 businesses a day that will register for our product that wants to play in our sandbox, get familiar with our technology, and that we hope ultimately will transact using our platform. So we have quite a bit of what we say organic demand or interest in our product. We think that it’s really exciting. We just see that gross payment volume and the number of new users coming to Dwolla grow every single day.

Josh:                      It sounds to me like what you’re doing is pretty complicated. Meaning that I’m going to need a programmer to set this thing up to take payments on my website or my mobile app or whatever I’m using, am I correct in that?

Brady:                   That’s a really smart question. Transparently, Dwolla the way that the product was built to be what we had called a programmable payment solution. We have some pretty sophisticated clients that come to us. For example, the Bill and Melinda Gates Foundation is one that we’ve partnered with and worked on some really complex solutions for payments needs that they have.

We have financial institutions come to us. So our product is very technical. It can do pretty much everything. In my humble opinion, from an ACH standpoint, we have more capabilities than I think any other ACH product in the world. We can solve very technical, very complex solutions. One thing that we’ve been highly focused on is how do we take a higher level technical or complex product, but configure it in a way that the business does not have to have significant resources either a developer or programmers in order to embed or integrate with our product.

We have actually introduced and we’re introducing now what we call dropping components or more consolidated API’s that make it really easy to send and receive funds. From there, we what we think is our product differentiator, especially when you think of Stripe and Squares of the world is that we can scale with our customer.

As that plumbing company needs additional functionality or their business grows, or they might want to unlock certain reporting capabilities. We have all of the technology that we can scale and grow with that customer to really meet the needs of the business all the way from a starting point of I just need to send and receive funds to really complex multibillion dollar solutions. That’s what we call the flexibility or scalability of the Dwolla product.

Josh:                      So if I have a company with five people, would it make sense for me to add a payment system like yours to how I get paid?

Brady:                   That’s highly specific to the business. In many instances, yes, there are very few situations where a company regardless of industry would not benefit from an ACH solution. I think that it’s going to start to increasingly become a bigger percentage of total electronic transactions.

Visa and MasterCard are obviously huge rails, but the ACH technologies, the payments are getting faster, they’re much cheaper than Visa and MasterCard. They have a lot of flexibility, or programmability if I can use that word and make that up. We see businesses with five employees. We see businesses with 5000 employees. That’s kind of the beauty of ACH and the technology that we’ve built in our platform.

Josh:                      One of my companies is a consulting company where I get monthly payments from clients. With most of my send them a paper bill, when they send me a paper check back, would it be possible for me to set up my little company with my three or four clients to pay me monthly, and have the recurring payments automatically happen or does every payment have to be set?

Brady:                   If I was to encounter a business like that, that’s having to receive paper checks, some of our dashboards for example, one would be able to get into our dashboard, enter in the bank information for the customer, or the customer can do it themselves. Then within days, send and receive funds to include on a recurring basis, where you’re not having to do that manually every month. That’s a great case study or textbook example of where one might benefit from this kind of technology.

Josh:                      So a law firm that’s on a retainer was one of the uses or a CPA firm would want to use technology like this.

Brady:                   Definitely. It’s funny, you mentioned CPA. We have a pretty large client that has thousands and thousands of customers where they are doing accounting, bookkeeping, and tax preparation. They’ve built a software. It’s a SaaS model. We’ve created a custom payment solution using ACH where they can either in a onetime fashion or on a recurring basis bill customer. It’s light years faster, light speed faster than paper checks. Again, it’s a fraction of what a credit card would typically charge.

Josh:                      Speaking of refraction and charges, what do you guys charge for your ACH work?

Brady:                   We have a lot of options. We consider ourselves really competitive in the ACH space.  The price is going to correlate with the amount of functionality that one wants to unlock with our platform. If you’re just looking to send and receive funds that those can be done for pennies, we have what we call subscription models.

That’s more of a SaaS pricing model where it’s a fixed monthly amounts a recurring basis. That will give you an allotment of X amount of transactions that might be 10,000 transactions a month that are fixed. What our pricing packages do is we’ll talk to a customer, and we’ll try to find out how many transactions do they anticipate? What is the volume amount?

Then we’ll direct them to the most appropriate pricing tier where it’s most cost advantageous. The vast majority of our customers come to us because there’s some kind of cost savings versus accepting Visa and MasterCard or using a Stripe or Square one of the larger payment providers.

Josh:                      Well, 3% is a lot of money to save.

Brady:                   It is, yeah. That’s a huge value add that we bring along with that customization of those payment solutions. That’s definitely one thing that we focus on as we bring on new clients.

Josh:                      Are you guys thinking about having B2C solutions? Venmo was C2C or it seems like it’s consumer to consumer.

Brady:                   P2P. Yep.

Josh:                      Does anybody doing B2C with ACH solutions?

Brady:                   We do? Yeah, we do B2C. We have B2B solutions. We’re really agnostic in that sense that if you need to send and receive funds, again, using our technology, we can work with your platform. We can work with your systems. We can find out what would be the best solution. We’ve got great support staff to kind of guide customers in the appropriate direction.

Josh:                      So once I sign up with you guys, as a consumer, can I use your technology to several vendors without having to re input my information in every time?

Brady:                   Yep, definitely. So a client, when we say consumer, our clients would primarily be a business that is created, again, technology, a software and application, that technology would have end users. You might use an app of a business or software or a website of a business that utilizes the Dwolla technology.

So if you think of it in terms of a chain, we have several customers starting with our client who has integrated with our technology, but then the customers of that client, utilize the Dwolla technology as they send or receive funds through our clients technology. We actually have in that chain, quite a bit number of users. I mentioned that 1 million new net users, either directly or indirectly, you will be interacting with our technology.

Josh:                      I’m going to change subjects on us. This is probably going to be a strange subject, but there’s a thing called a network effect. It appears to me that your company is definitely a network effect company, meaning that the more users you have or the more people in your network, the more valuable and useful your company becomes.

Brady:                   That’s a fair assessment. One thing that we have focused on and we intend to focus on moving in the future is what we call partnerships. That network effect or the hub and spoke, the spider web, all equal analogies is that through our technology being embedded with a client. We then have access to millions and millions of new net users.

Oftentimes, those new net users might be businesses themselves. There’s a lot of ways that we can leverage our technology downstream to a lot of customers using some of the partnership programs that we have. That’s a great thought that you pointed out there.

Josh:                      Is there going to be some technology coming down the road that makes it easy for the consumer to put their checking account information into apps like yours?

Brady:                   Yeah, that technology exists today. I always use this example. There’s an app that allows you to, it’s essentially a brokerage account, where you can sell and buy stocks on the stock market using an app on your phone. Well, as part of the on boarding process with that app, one would enter in their checking account number, or their savings account number and the routing number, the financial institution that they use. That’s a self driven on boarding process.

You do some micro deposits to verify those transactions can be sent and received. If you have that account right. That would be an example of technology that we do. We can confirm those bank accounts. We can confirm the identities of the users. That’s all at the core of our product where we would be the technology in that investing app itself that’s sending and receiving those funds.

Josh:                      It seems to me a technology like yours would be easily a replacement for debit cards.

Brady:                   Definitely. Our teams that really consult new customers on the best modality and how to take advantage of the Dwolla platform or network will ask some of these exploratory questions. How do you accept electronic payments today? Do you accept electronic payments? What is that businesses type of client or customer they engage with? How quickly do you need funds?

Asking some of those exploratory questions. Again, our goal is to provide a solution that’s cost advantageous solution for the business, allows them to get money faster for less money to just open a modality that most likely doesn’t exist today. We take a lot of pride in the fact that we enable entrepreneurs and creators to really grow their businesses.

Josh:                      I have time for one more question. I want to go into the wonderful world of refunds because if you’re going to be in the underline world, you have to have some way of refunding or guaranteeing products for people. So with credit cards, they know how to do refunds. How do you guys handle refunds, just go into the bank account and pull money back out?

Brady:                   That’s very client specific. We have applications that allow for the tipping of the service industry where you may be in a retail environment or some kind of service space. That would be a different refund capability that they need versus one that is in a B2C environment.

So when we say send and receive funds, the client, the customer, or the business that is integrated with our product can drive those transactions either sending or receiving funds to include refunds or debits. We provide the technology. The driver is going to be the customer that is integrated with our technology, but the funds flow in either direction is a capability of our product.

Josh:                      Cool. So Brady, unfortunately, we are out of time. I’m assuming I have your website address here. I think I have it right besides that which is https://www.dwolla.com. How can people find you?

Brady:                   That’s a great place to start. Business Insider actually just released their top 10 FinTech companies in 2020. We were on that list, but Venmo and PayPal. There’s quite a bit of publicity as it relates to Dwolla. We’ve been in the ACH space for quite some time, but we would love it if people visit us on our website, a quick Google search will direct them towards us. We’d love to speak to anybody who’s interested.

Josh:                      Sounds great. I have an offer for you also. I have written an eBook, what I call The Sale Ready Company. In fact, that’s the title of my new book coming out sometime this fall. It’s finally written and we’re doing a final editing on it. With the Sale Ready Company talks about the eight steps you need to be taking to have a sale ready company.

Now, sale ready does not mean you’re going to sell your company. All it means is that your company is in the position as somebody else would want to buy it. To get the eBook is really easy just go to www.sustainablebusiness.co/saleready. That’s sustainablebusiness.co not.com/saleready. This is Josh Patrick. We’re with Brady Harris. You’re at Cracking the Cash Flow Code. Thanks a lot for stopping by. I hope to see you back here really soon.

Narrator:             You’ve been listening to the “Cracking the Cash Flow Code” where we ask the question, “What would it take for your business to still be around a hundred years from now?”

If you’ve liked what you’ve heard and want more information, please contact Josh Patrick at 802-846-1264 extension 102. Or visit us on our website at www.sustainablebusiness.co. Or you can send Josh an email at jpatrick@stage2solution.com. Thanks for listening and we hope to see you at Cracking the Cash Flow Code in the near future.

Topics: payment modalities, dwolla, payment flaws, brady harris, payment system, consumer payments, sustainable business podcast, Sustainable Business

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