Legal Seminar, Denver, CO

071018 Discussion Draft

some may become popular, their prospects of dislodging other payment methods for consumer purchases seem rather low based on their inability to incentivize change from embedded consumer preferences favoring payment cards. Consumer protections are limited, though these systems likely present only modest risks for crime and/or money laundering due to their interconnection with existing bank networks. a. Dwolla. o Dwolla was developed independently. It is based on Des Moines, Iowa. o The advertised fees are modest -- 0.5% of transaction value with a $.05 minimum and $5.00 maximum. https://www.dwolla.com/pricing?b=header However, custom rates are available for larger enterprises. o These rates are better than those applicable to a debit card or a credit card. o But if any fee is imposed on the one making the payment, then what incentivizes consumer usage? Customer fees on payment cards? o A ratings website views Dwolla favorably. https://www.cardpaymentoptions.com/money-transfer/dwolla/ (“I created this site because I was tired of seeing small business owner getting ripped-off by high fees and tricked into shady contracts.”) o No reward points, etc. here. Plus there is no credit offered – you are debiting your bank account. And what about mistakes? o In this environment, it is difficult to see how this platform can expand to significantly displace consumer payment options.

b. Zelle.

o Zelle is a product of a consortium of banks. o It does not charge a fee, but there are transaction limits for each account. https://www.zellepay.com/support o It is perhaps convenient for friend-to-friend payments, but it does not appear to be designed to displace merchant accounts. o Zelle looks like another customer service designed to attract Millenials (and others) who like the idea of mobile payments. It may also deliver cost savings to banks when compared to alternative means of making transfers, such as checks or cash withdrawals. o You do not get consumer protections; once the money is gone, it leaves your account and is deposited in the account of the recipient. Good luck getting it back if you don’t know and trust the receipient. See https://www.experian.com/blogs/ask-experian/heres-what-you- need-to-know-about-zelle-the-mobile-payment-app-that-rivals-venmo/ o But since this involves a banking relationship, someone has done at least the minimal due diligence required for KYC compliance. o Venmo is a Paypal product. Although it ultimately uses ACH (either through a link to the account or a debit card), it stores funds in a digital wallet, from which users must transfer them to a bank account (if that is what they desire). See id.

c. Venmo.

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