Building new infrastructure for digital payments may not sound sexy, but it’s an area that’s ripe for innovation. The legacy payments networks in existence today are bogged down with outdated technology, slowing progress. Des Moines-based Dwolla decided that the way to innovate in payments was to essentially blow up the outdated infrastructure entirely and start over by building out a new network from scratch. Today, that work has scored the company $16.5 million in new funding, in a Series C led by Andreessen Horowitz. The company’s previous investors, Village Ventures, Thrive Capital, and Union Square Ventures also participated in the round.

Dwolla is sometimes confused as an alternative to PayPal – and though it may compete with PayPal more directly on some initiatives, like MassPay which undercuts PayPal’s fees on a service business’ use in lieu of writing checks – that’s only a result of the new payments infrastructure the company has built, not the entire vision in and of itself.

Last year, for instance, Dwolla launched a number of new products that are helping propel the business to the next level, including not only its own mass payments service, but also FiSync, a real-time alternative to ACH payments, plus a partnership with the state of Iowa to process an initial $130 million in taxes, and a partnership with mobile banking and payments service provider mFoundry, which put the service in front of that company’s more than 800 bank and credit union partners interested in offering real-time, peer-to-peer payments to their own customers.

Today, Dwolla’s annual transaction processing run rate has topped a billion dollars; the company has grown at 15 percent month-over-month to reach a quarter-million account holders up from 80,000 in early 2012, and it has brought on more than 100 large customers, including both enterprise and government.

But getting to this point was not easy.

Explains CEO Ben Milne, the company found that some things it tried worked better than others. For example, trying to disrupt payments with a consumer-facing product has been tough.

“We found that retail is a really hard place to convert users in terms of getting them to pay with another payment form,” Milne admits. Along these lines, the company had launched various efforts both online and offline to encourage consumers to pay using Dwolla instead of traditional means like cash, checks or credit cards. While Dwolla’s efforts here continue today, they haven’t been the areas of growth which led to this new investment.

“A lot of the volume we’ve seen is in one-to-many relationships, and basically those are more check replacements than credit card or debit card payments,” says Milne. On this front, the company doesn’t have new relationships or partnerships to announce today, but hints that there are several in the works as the additional funding has been earmarked in particular to grow out the startup’s business development and relationship teams to service larger customers.

“These deals take a long time, and they require a lot of attention…they don’t work at the speed of small startup companies. They’re big, established companies,” Milne explains. “This round is about not screwing up the opportunity that we have. It doesn’t really matter if we were first to market with a lot of this new technology – it matters that we have the opportunity to be the first to market and the first to scale.”

The startup is now working with payroll companies and governments, among others — the latter initially in its home state, where Iowa Governor Terry Branstad announced in early 2013 that government officials would explore ways to use the service to collect property taxes, issue refunds, pay contractors, and renew vehicle registrations. But while Dwolla’s system works well for these large customers, it also works for smaller ones, too, including manufacturers who need to pay vendors, an ad agency paying consultants, or a micro-consulting platform paying thousands of people, for example.

“A16z makes bets on companies that change the underlying fabric of their markets and, like Facebook, Twitter, and GitHub, we think Dwolla is going to do it in the banking world,” said Scott Weiss, Partner at Andreessen Horowitz and new Dwolla board member, in a statement about the investment. “The fact that Dwolla’s network can simultaneously meet the needs of a complex enterprise or government, while allowing a parent to pay the babysitter with her phone, reflects just how simple and strikingly different this solution is in the marketplace.”

In addition to growing the engineering team, as well as those needed to support its larger customers, Dwolla is also expanding to its fifth office location, San Francisco, where it has already been interviewing and hiring ahead of the opening in June. (The company already has staff in Des Moines, New York, Omaha, and Kansas City.) In the Bay Area, the team will be led by Dwolla’s Chief Operating Officer, Charise Flynn, and will be mainly focused on product and business development and marketing.

Milne says that there is still much that needs to be done before Dwolla could really compete with a legacy payments provider. For instance, while its network supports payments now, a legacy provider like Visa supports two other types of transactions, as well: authorizations, which guarantee funds are there; and captures, which take the funds following an authorization. Over time, Dwolla will build up support for these types of transactions, which are still in demand in the market. The company will also update its mobile apps and do more to educate the marketplace, too.

But that “marketplace” may not mean consumers.

“The reality is that our fundamental business is allowing anybody with an Internet connection get access to their money and exchange it with anybody else they want to receive it,” Milne says. “A lot of that adoption is going to come instead from third-party platforms and products,” he adds. “I don’t see people going to Dwolla.com more and more – I see them doing that less and less, while our software is just facilitating the payments.”

Article courtesy of TechCrunch

Because sometimes it’s the companies you don’t hear about constantly. FastSpring, founded in 2005 as an all-in-one e-commerce solution for companies selling desktop software and downloadable games before heading into the Software-as-a-Service space in 2011, has received a significant but undisclosed new equity investment from L.A.-based Pylon Capital. This is the first outside funding the previously bootstrapped company has taken in.

The funding comes with some shifting roles for one of FastSpring’s co-founders. While all four will remain with the company, CEO Dan Engel is now becoming Senior Vice President of Marketing and will serve on the company’s Board of Directors. Ken White, Ryan Dewell, and Jason Foodman will continue with their prior roles. Pylon Capital Managing Partners Chris Lueck and Tom Tzakis will now join FastSpring’s management team.

The company, which competes directly with DigitalRiver, offers more than payments, but instead is a way for businesses to outsource their e-commerce infrastructure, including product merchandising, digital fulfillment, global tax compliance, online payments that support multiple currencies, localized order pages, PCI compliance, refund management, reporting, and more.

Its newer service SaaSy (our coverage), also brings support for subscription-based payments, as are more common with online businesses. Since the launch of that option, FastSpring has grown its business from 1,000 clients worldwide to now 2,200, five hundred of which are using SaaSy. While the company can’t disclose the names of many of its customers, those it can mention are familiar: Smith Micro, Adobe, Flexibits (makers of Fantastical), Toshiba, Random House, and Intego (Anti-virus).

The company has been steadily growing its revenue over the years, climbing from less than a million in 2007, to $35 million in 2010, then $66 million in 2011, $95 million in 2012, and in the trailing twelve months, it’s over $100 million. It was also ranked #53 in Inc. Magazine’s Inc 500 list of fastest-growing companies in the U.S. in 2011. And Deloitte & Touche ranked it the #1 fastest-growing company in the Greater L.A. area and #13 in North America in its 2011 Technology Fast 500 awards.

Which perhaps begs the question: why the new investment?

Explains co-founder Dan Engel, “as a group of serial entrepreneurs, we have a lot of experience in getting from A to B — ‘B’ being getting to where we are as a company in terms of revenue, profit, headcount, and what we’ve scaled to, to date,” he says. “But we felt like we wanted some outside expertise from folks who had experience going from B to C, which is turning the business into something worth many hundreds of millions of dollars.”

Pylon’s L.P.’s have experience in all the areas where FastSpring now needs to grow, Engel says, which includes things like scaling sales and support both in the U.S. and internationally, for example. FastSpring has limited experience in Asia, which it sees as a big opportunity, and it also has a large percentage of its customer base in Europe (around 30% vs. the ~45% in the U.S.), but not much experience on the ground in that region – something which it plans to change, following the funding, in fact.

The company also wants to expand its e-commerce offerings outside of software, expand deeper into the gaming vertical, and break into micro-transactions (those under $10.00).

And FastSpring is working to develop its own private label app store solution for companies that want to have their own embedded store which works within their existing software. “There’s a lot of demand right now, and there really isn’t much in the way of solutions that we’re seeing,” Engel says of the app store offering. “And what’s neat about our app store is that it has all the capabilities of our web store – which is pretty vast,” he adds.

The Santa Barbara-based company, now a team of 24, will use the new funding to scale and hire, with plans to add around 10 more this year across all positions.

Article courtesy of TechCrunch

Another day, another Bitcoin-related investment, and further affirmation that VCs are hungry to invest in the ecosystem surrounding the decentralized digital currency. Today, OpenCoin, better known as the developer of open source payment protocol, Ripple, announced that it has raised an undisclosed angel round from Andreessen Horowitz, FF Angel, Lightspeed Venture Parnters, Vast Ventures and Bitcoin Opporunity Fund, SecondMarket founder Barry Silbert’s investment vehicle for Bitcoin-related startups and companies.

OpenCoin will use its new capital to expand the open-source code behind Ripple, which, for those unfamiliar, is a virtual currency and payment system that aims to make it easy and affordable for anyone to trade any amount in any currency. Headed by financial services veterans like CEO Chris Larsen, who is also the founder of P2P lending giant Prosper, OpenCoin is on a mission to create a new kind of global currency.

Some would say that makes OpenCoin the equivalent of a “Bitcoin copycat”, due to its being a distributed, open source payments network with its own native virtual currency called “Ripples” (like bitcoins). But OpenCoin, for its part, is eager to avoid that moniker — and to avoid being mislabeled as the “next Bitcoin.”

In spite of (or because of) its growing popularity — and its becoming a billion-dollar market for the first time — Bitcoin has been subject to increasing volatility and security issues. Bitcoin transactions also have a tendency to take a long time to confirm.

OpenCoin wants to solve these problems by creating a unified ledger, which keeps track of every account, transaction and balance, which the system automatically pings to confirm the legitimacy of transaction, allowing them to clear in under a minute, the company says. By doing so, it hopes that it’s also created a system that can eliminate interchange fees and enable people to trade across borders with minimal cost and chargebacks, while solving some of Bitcoin’s security issues.

The company claims that Ripple can accommodate any currency, including dollars, yen, euros, and even bitcoins, making it one of the first distributed currency exchanges. Until now, a few Ripples have been in circulation, but today, the company will start releasing a huge chunk of its currency, distributing 50 billion Ripples to users over time, with plans to put 100 billion coins into circulation, according to BusinessWeek.

The news follows OpenCoin’s acqui-hire of SimpleHoney, a startup making a “wish list shopping app,” to help it popularize virtual currencies and make Bitcoin easier for Average Joes to use and convert, for example. The move comes as OpenCoin looks to expand the ecosystem of tools around its exchange service, which now allows users to send and receive payments, monitor balances, convert ripples into other currencies, and so on.

While many believe that the odds are stacked against Bitcoin and that it may just be a passing fad, perspectives that could very well be applied to OpenCoin and Ripple, there’s plenty working in its favor. The fact that Ripple was developed by hackers like Jed McCaleb, who were instrumental in the early development of Bitcoin (McCaleb is the founder of one of the largest Bitcoin exchanges, Mt. Gox), gives it plenty of early cred in the virtual currency world.

OpenCoin believes that it is facilitating the evolution of Bitcoin, and by creating a multi-currency, security-focused exchange, it can have a better shot at selling the concept of a distributed, global virtual currency to the mainstream.

For more, find Ripple here.

Article courtesy of TechCrunch

If there is any downside to Stripe, the payments startup that makes it simple to accept payments online without having to first set up a merchant account, it’s that the service is aimed at developers and other technical users. Newly launched payment system MoonClerk wants to change that, by making it easy for non-programmers to quickly accept and mange both recurring and one-time payments on their own websites.

MoonClerk is a DIY alternative to working with Stripe through platforms supporting  Stripe Connect, such as ShopLocket, Shopify, Wufoo, and others. Today, non-developers and other small businesses can set up their web presence using one of those services – for example, establishing their e-commerce store on Shopify – and then begin taking Stripe payments through the provided integrations.

But many small businesses and other organizations already have their own websites up-and-running, and would rather just have an option to enable Stripe payments on their established sites. With MoonClerk, that’s now possible. After stepping through an online form builder, configuring options, the style and colors, MoonClerk then returns a link and embed code which can be used on any website.

Founded in May by Dodd Caldwell (CEO) and Ryan Wood (CTO), the two-person team participated in their local startup accelerator, The Iron Yard, over the summer, then launched into private beta this November. Earlier this year, the company started opening up more broadly, and now that the kinks have been worked out, MoonClerk is available to anyone.

Caldwell says he was inspired to create the service because it was something he wanted to use himself. Before MoonClerk, he was building software for non-profits at a company he created called Bellstrike, and was in search of an easier and more cost-effective way to accept recurring payments.

“We looked around for what other options were out there in terms of small businesses and non-profits being able to accept recurring payments, but we didn’t think they were really great checkout experiences, or they would require people to go get merchant accounts,” explains Caldwell. “We really liked being able to have the immediate sign-up process, which Stripe Connect allowed us to do, where nobody would have to get a merchant account, or a gateway, an SSL certificate, or anything like that,” he adds.

He also wanted to be able to style the checkout experience and embed it on the site so it would look more like part of the website itself. Caldwell was already struggling with low conversion rates because of his use of PayPal, and says it was a “no-brainer” to start working on MoonClerk instead.

As a non-technical person himself, he recruited Wood, who had previously done contract work on Bellstrike, to help him build the company. Today, the system does more than just bring Stripe to non-programmers – it also adds a lot of value on top in the form of additional features.

MoonClerk supports one-time payments, as well as monthly, quarterly and annual recurring payments. To get started, you’re walked through an online form builder where you can style the checkout experience using themes, or for web designers, custom CSS is also available. You can also design your form using a number of options related to your checkout process, like whether you need to add on a standard percentage in addition to the total, or charge a shipping fee, or whether the customer can choose what time of the month the recurring payment should be deducted, and more.

After creating the form and providing your own credit card for the MoonClerk monthly fee, you fill in your banking information with Stripe Connect to complete the process. You then have the embed code for the site as well as link that you can share elsewhere, like on Facebook and Twitter.

MoonClerk also supports email notifications to send receipts to customers, and next week, support for coupons and discounts codes will be added, too. Dodwell says they have a long product roadmap ahead of them, building in all those little things that people need for their own sites. For instance, another upcoming feature will allow customers to select an optional add-on at checkout (e.g. would you like to also add X for $5 per month?)

Based in Greenville, S.C., MoonClerk is entirely bootstrapped, funded through Caldwell’s previous investments in real estate. He doesn’t plan to raise funding. Through word-of-month, the company has found a few dozen or so early customers, some of whom are already processing $10,000 per month using the service.

Pricing for the service is based on payment volume, and starts at $9 per month for up to $1,000 in payments then go up from there. Interested users can sign up here.

Article courtesy of TechCrunch

Braintree, a payments gateway that’s backed by Accel Partners and NEA, sounds like it has effectively doubled the volume of mobile transactions it sees per year to $2 billion. It now touts 40 million credit card accounts in its vault.

How does that compare to competitors? eBay, which operates Paypal, said it had 123 million registered accounts in its last earnings filing and that it expects to generate about $20 billion of mobile commerce and payments volume. So while Braintree is still smaller, it’s one of the few notable upstart companies in the space. Y Combinator’s Stripe is the other one with its formidable concentration of technical talent.

Braintree made waves last year when it acquired Venmo, a New York-based mobile payments startup that made it easy and frictionless to transfer cash back and forth via texts and e-mail.

The company kept Venmo’s brand name when it launched a series of products including Venmo Touch, which makes it easy for consumer to store their payments information across a network of Braintree-supported apps like HotelTonight, Airbnb and Uber. The idea is to reduce friction in entering credit card information, so that customers won’t abandon potential purchases.

Instead of having to re-enter your credit card information whenever you sign up for a new mobile service that’s Braintree-supported, Venmo Touch will automatically remember your payments data with one-click. Venmo Touch has been in beta, but now it’s fully launched and available for all Braintree merchants.

On top of that, they’re releasing a new iOS SDK, which will make it easier for developers to create a native checkout flow with stock UI images and suggestions for text. It has a payment form, that already contains plenty of credit card entry user interface elements, and other features that help catch typos. They’ll bring both Venmo Touch and an improved SDK to Android in the near future.

Braintree has raised $69 million in venture capital to date from New Enterprise Associates, Accel Partners, RRE Ventures and Greycroft Partners.

Article courtesy of TechCrunch

Mozilla is working with payment vendors and the W3C standards body to create a common API to make online payments, both on desktop and mobile, easier and more secure. To get this process going, Mozilla has implemented a new and experimental JavaScript API into its new Firefox OS for smartphones that will eventually allow web apps to accept payments. Mozilla argues that having a common API for handling payments that can be integrated with multiple payment vendors will open up new business models for developers and publishers.

This new API, navigator.mozPay(), Mozilla says, was inspired by Google’s Wallet for Digital Goods API and will ship in Firefox OS first and then be added to Firefox for Android and desktop Firefox later. While it’s currently a very experimental API (and still incomplete), Mozilla expects that it will be usable enough to “process live payments on the first Firefox OS phones and evolve quickly from real-world usage.”

The question to ask here, of course, is why bother, given that online payments don’t seem to be a major issue for users and developers, thanks to services like PayPal and Stripe. Mozilla, however, argues that users should have more choice when it comes to how they want to pay for goods online (be they virtual or physical). Users, the organization also notes, still have to type in their credit card numbers, which “is like giving someone the keys to your expensive car, letting them drive it around the block in a potentially dangerous neighborhood (the web) and saying please don’t get carjacked!”

With navigator.mozPay(), developers will be able to grant permission to each payment provider they want to work with and use a very straightforward process for handling these payments that’s more about exchanging tokens than exchanging credit card information.

You can find more details about how to implement and test the current version of this API here.

Article courtesy of TechCrunch

Facebook today provided updates regarding its transition from Credits to local currency pricing. The company offered new documentation for game developers and announced that migration will occur in Q3 this year.

Facebook decided to phase out Credits in favor of a user’s local currency — dollars, pounds or yen, for example — in June 2012. This allows the social network simplify the purchase experience and give developers more flexibility. Developers will be able to set more granular and consistent prices for non-U.S. users and price the same item differently on a market-by-market basis, as opposed to pricing their virtual goods in $0.10 USD increments as was required when Credits became mandatory in July 2011. This also eliminates any confusion that resulted from users trying to think about conversion rates for dollars, Credits and in-game currency.

Facebook says it will convert any Credit balances into the equivalent amount of value in users’ local currency, which they can spend on in-app items in the same way they do today. People can still redeem gift cards and store unused balances in their account.

Although there is no exact date for when local currency payments will launch, Facebook says it is aiming for Q3, and developers will have at least 90 days to implement the updated payments infrastructure. The company says more information will be available in coming weeks. It also noted that Plarium, a Tel Aviv-based games developer, has already seen positive results from early testing with local currency payment in its game Pirates: Tides of Fortune.

The social network first introduced what it called “Pay with Facebook” in May 2009. That eventually got combined with the Credits program associated with virtual gifts that users could buy and post to each other’s profiles. In July 2011, Facebook made Credits mandatory for social games.

Only 27 million users — a little over 2 percent of total monthly active users — paid for virtual goods on the platform in 2012. Facebook generated about $251 million in games-related payments revenue in the fourth quarter of 2012. That’s nearly 16 percent of total revenue for the quarter, a percentage that has been declining as game developers invest less in Facebook canvas experiences and as the social network focuses more on its ads business.

More details about the new payments are available from Facebook’s developer site here.

Article courtesy of Inside Facebook

In October 20011, PayPal debuted X.commerce, a fabric that weaved together PayPal, eBay and other commerce related APIs in the eBay family. But developers have been demanding more features and simplicity from PayPal’s framework for adding payments technology, and today, the company is separating its developer platform from X.commerce, and relaunching an independent destination on PayPal, here, that includes a number of new APIs, more simple features and more.

PayPal will still be integrated in X.commerce, but the company decided that they needed to have a standlone developer platform for just payments APIs. And the company has been fairly honest about the fact that developer tools have not been up to the mark. “Our tools haven’t kept up with the bleeding edge of innovation that the industry expects of us,” the company writes in a blog post. But with PayPal CEO David Marcus restructuring the company to operate more like a startup, this is changing. And PayPal realizes that they need to satisfy and provide easy to use APIs for developers in order for their payments product to actually reach consumers.

First, PayPal is expanding its mobile library so that developers can integrate a more frictionless payments experience at checkout within an app. PayPal is allowing for customers to never leave the developer’s app experience to pay. Now developers can also integrate card.io (which PayPal acquired last year) to allow customer to scan a credit card for a payment.

Another area of change is in actually being able to integrate a PayPal button into an app. Via the new JavaScript PayPal buttons, developers can add PayPal by copying and pasting five lines of code into their website, shopping cart or a QR code.

As PayPal’s CTO James Barrese explains, the primary goal of this update was to make it easy to integrate PayPal into a site or app in seconds. The focus is on creating a “simplified experience for developers to take advantage of the power of PayPal without having to do as much work.”

Additionally, developers will also have access to new APIs built on REST, OAuth, and JSON. The company is also now tokenizing credit cards for developers so that the company handles PCI compliance for them. The new PayPal developer platform offers a single location for the company’s sandbox, tools, documentation, and resources.

PayPal is catching on to the idea that creating a simple, easy to use product for developers will help them compete against some of the new startups in the payments space like Square and Stripe. But what PayPal does have going for them is its 123 million account holders, which represents massive reach. If PayPal can start selling developers that its offering is as easy to use as some of its competitors (i.e. Stripe), then this could be a big win for the payments giant.

Article courtesy of TechCrunch

Stripe, the payments startup, has today opened a closed Beta of its platform in the UK. For now it will be limited to an undisclosed number of partners, but will be gradually “trickled out” to the current waiting list of developers and start-ups which apparently run into “thousands.”

According to cofounder Patrick Collison, speaking on stage at London Web Summit, Stripe’s UK launch will provide the same “batteries-included” stack that they offer in the US: full API for web and mobile payments, recurring billing support, stored payment credentials, instant activation, and easy PCI compliance.

Stripe’s UK beta will enable GBP and USD payments on Visa and MasterCard cards. Euros are “coming soon”.

Strip is disrupting traditional payment processing companies like PayPal and Visa, by not having any setup fees, no monthly fees, no minimum charges, no validation fees, no card storage fees, and no charges for failed payments. Stripe has an office in London and is actively hiring.

Thairu (his full name) the engineer who built much of the UK infrastructure said in a statement: “Support for countries outside the US has been our most requested feature since we launched. We’re excited to be in the UK – there’s a new flag flying in our SF office!” Stripe launched in Canada in September 2012.

Stripe launched in late 2011, and powers online payments for thousands of companies, including Foursquare, Reddit, Shopify and Squarespace.

Co-founded by brothers Patrick and John Collison, the firm received around $40 million USD in investment from Sequoia Capital, Andreessen Horowitz, SV Angel, and PayPal founders Peter Thiel, and Elon Musk.

Article courtesy of TechCrunch

Bitcoin is the “underground” digital money system that’s fueling growth and disruption in the online payment space. Coinbase is a “bitcoin wallet and platform” that lets merchants and consumers make transactions easily using bitcoin.

The company scored a huge partnership today, as social discovery and discussion site Reddit has just launched an integration that allows its users to pay for “Reddit Gold” using bitcoin with Coinbase’s system. By buying Reddit Gold, you can add features to your account like comment highlighting and shutting off ads. Additionally, Reddit will now start collecting credit card payments in the US and Canada thanks to Stripe, to go along with its PayPal and Google Wallet options.

When it comes to why the move was made, Reddit’s Brian Simpson said “We’ve gotten some requests for additional payment methods so hopefully this brings us closer to reaching everyone who wants to buy gold.”

I spoke with Brian Armstrong, Coinbase’s CEO, and this is what he shared about the launch:

We’re pairing with Reddit to allow them to start accepting bitcoin payments for Reddit Gold. This is a large step forward for Bitcoin and for Coinbase, as Reddit is a top 100 site in the U.S. and top 200 site internationally.

Reddit CEO Yishan Wong stopped by our offices about a month back because he wanted to learn more about how bitcoin worked and how they could start accepting it as a payment method. We had a number of other merchants start using our merchant tools recently, including 4Chan (they have a “pass” which is similar to Reddit Gold), web hosting companies, productivity app, and plenty of sites accepting donations. So this gave him the confidence that we were ready to handle traffic for a site the size of Reddit.

While Reddit isn’t exactly a “mainstream” site yet, it is definitely the most widely used site to start accepting bitcoin that I can think of. The company sees this as just the tip of the iceberg, as people start using bitcoin on Reddit, they’ll want to take their wallets to other merchants. That build of demand will hopefully break bitcoin into the mainstream.

The plusses to bitcoin are many, allowing secure global digital transactions that don’t transmit any personal information whatsoever, as I discovered while covering another player in the space, BitPay.

The transaction fees for bitcoin purchases are also extremely low compared to other services, so it has that going for it as well. Coinbase makes bitcoin integration simple by transferring accepted payments into bank accounts and doing all of the currency conversion for them. The company says it has 30,000 users and is processing 40,000 bitcoin payments a month.

Will Reddit push bitcoin into the mainstream? We will see, but as usual, the Redditors have gotten what they’ve wanted.

[Image Credit: The hilarious web comic Toothpaste For Dinner]

Article courtesy of TechCrunch