In a letter to Tom Wheeler, chairman of the Federal Communications Commission, and Richard Corday, director of the Consumer Financial Protection Bureau, Ben Milne, CEO of Des Moines, Iowa based payments innovator Dwolla asserts that a proposed FCC rule that would allow Internet bandwidth providers and mobile carriers to charge different companies varying fees for carrying their content represents a substantial threat to financial services innovation.

Wrote Milne: “In response to the decision Verizon v. FCC, the FCC proposed a rule that we believe will harm both innovation and competition in the payments ecosystem. The rule tentatively concludes that both fixed and mobile providers of broadband Internet access, primarily phone and cable companies, should technically be able to discriminate amongst applications and to charge companies varying fees for varying levels of quality of service. This is a radical departure from how Internet access currently operates and is a grave threat to an open Internet and to every industry that relies on the Internet for commerce and innovation.”

Milne used Dwolla as a case in point. Leveraging off Internet channels, Milne said, Dwolla has been able to offer a service that “enables anyone or anything to send and receive payments for only 25 cents or free for transactions $10 or less.”

Milne added, “The Internet is a conduit for payment innovation within the existing banking system. In addition to leveraging the Automated Clearing House, which can take several days to process and transmit payments, Dwolla has used the Internet to create a banking application programming interface for financial institutions called FiSync. When integrated in partnering banks and credit unions, Dwolla offers our customers realtime payments straight from their banks or credit union accounts.”

He also wrote, “Using the Internet, we've also been able to reimagine security, transparency and privacy for consumers.”

But, stated Milne, an end to what has been called Net Neutrality – where all Internet traffic is created equally – threatens innovation.

“The FCC's proposal would harm innovation, as emerging payments processors will be unable to compete purely on the merits of their innovations,” the Dwolla founder wrote.

Milne also argued that ending Net Neutrality would have an unintended consequence regarding fraud. “Handcuffing the latency and bandwidth of data will only limit the ability of payment networks to combat consumer fraud,” he wrote.

That's because fast Internet exchange of information, regarding criminals and transactions, may be key to winning the fight against cyber fraud.

Consumers, argued Milne, would be obvious losers if Net Neutrality ended. “Even if all payment processors could afford to pay for 'fast lane' quality of service, these payments would force the industry to add new fees on all transactions to cover the costs of paying for access to the fast lane,” he wrote. “Such fees would make it very difficult to drive costs down in the payments industry and will ultimately pass a greater burden along to the consumer.”

Milne's concluding argument: “The proposal will negatively impact the market for payments processing by quelling innovation among small businesses in all sectors. Indeed, as we drive down the cost for payments, we can serve more and more smaller businesses offering low margin and low cost goods (both virtual and real) that have not yet had affordable payments options.”

Funds in a Dwolla account are held in a pooled account at the $2.5 billion Veridian Credit Union in Waterloo, Iowa.

Instant Insights /

Dwolla Speaks Out on Net Neutrality

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