Dwolla CEO: Open banking, embedded finance to transform the user experience
- "We’re seeing this concept of disappearing payments. Uber sort of made that famous where we don’t dance with the credit card anymore in and out of the car. We just get in the car and get out of the car. It’s that kind of experiences that we continue to have more and more of."
- "There’s a couple of concepts maybe we could define together. One is open banking. I’ve mentioned that a couple of times. Another concept is embedded finance. I think when we combine those two things, it allows us to create these really amazing experiences for users and businesses."
- "The emerging markets are sort of building on the shoulders a giant and they’re going straight to the phone-based payments, digital payments, fast payments right from scratch, right from the beginning of their electronification of payments. I think we’re just going to see more and more of that convergence where cash disappears."
What will the customer experience in payments look like in five to seven years? In this VISION by Protiviti interview, Nathan Hilt, Protiviti Managing Director, interviews Dwolla CEO Dave Glaser about the future of payments and how emerging technologies and the new infrastructure that emerges, ultimately, will transform the overall user experience in payments.
In this interview:
1:33 – Dwolla's mission
6:05 – Challenges and opportunities in payments
9:37 – Technology infrastructure and customer experience
15:56 – Privacy, fraud and crime
19:00 – The industry 10 years from now
Dwolla CEO: Open banking, embedded finance to transform the user experience
Joe Kornik: Welcome to the VISION by Protiviti interview. I’m Joe Kornik, Editor-in-Chief of VISION by Protiviti, a global content resource examining big themes that will impact the C-Suite and executive boardrooms worldwide. Today, we’re exploring the future of money, and I’m happy to welcome in Dave Glaser. Dave is CEO of Dwolla, a payment service provider that offers a modern API for businesses to seamlessly connect to the U.S. payment networks. Before becoming CEO in September, Dave was president and COO at Dwolla for the last two years. Previously, he was a senior vice president at Mastercard. And I’m happy to turnover the interviewing duties today to my Protiviti colleague, Nathan Hilt, managing director and Payments and Fintech Solutions Lead at Protiviti. Nathan, I’ll turn it over to you to begin.
Nathan Hilt: Thanks, Joe, so much, and thanks Dave for joining us here. It was great to see you at Money20/20. Hopefully, everything was good, but thanks for taking the time.
Dave Glaser: Yes, you’re welcome. It’s great to see you again. It’s been a while. I’m glad we got to catch up after so many years.
Hilt: Agree. Yes. Well, it’s an exciting time for you and I think we’ve chatted a little bit, but I’d love to hear more about — you’ve been at Dwolla for a little bit of time. Recently, congratulations on taking over the CEO role. As you think about what are the challenges that Dwolla has and sort of your messaging is being this ability to empower innovators with modern payments and you have this flexible, reliable, and easy to use platform, tell me a little bit more about, are you changing the mission? Are you enhancing the mission? Really, what is the first couple of months looked like, and how was that going to take the company forward?
Glaser: Yes. Thanks, Nathan. Happy to tell you a little bit more about Dwolla. I’ve been with the company for just over two and a half years. I joined as president and COO. Surely, after we were coming out of the pandemic times when people were starting to get back to work, I’ve been in the payments industry for a long time, almost 25 years. It almost pains me to say those words now. [Laughter] It makes me feel old, and I’ll make you feel old too. You and I met probably 15 years ago or so as part of the Visa CyberSource work that you were doing, that I was a part of. So, yes, I’ve been in the industry for a long time, and as you know, there’s been so many changes where I started out in the gateway and e-commerce, card acquiring side of the business and spent most of my career there, at least the first 10, 15 years in that part of the business. First, with CyberSource, then with Visa, then even with Worldpay in London. It was interesting, when I was based in Worldpay, it was the time when the EU regulators were starting to look at modernizing and introducing this open banking schemes in Europe to really start to create a more level playing field for merchants, and businesses, and banks to provide payment solutions similar to the ubiquity of a card solution but with bank accounts. So, they introduced PSD2 and some other rules changes in the EU.
Getting to watch that and be part of that in Europe, and then following that assignment, I came back to the U.S. with my family and joined Mastercard. Mastercard has a really important strategy. They called it their multi-rail strategy and we were embracing not just the card rails but other rails too. Things like crypto and what they call Mastercard Send, which is similar to Visa Direct. A way to move money in and out of bank accounts but using card rails. So, as I was there, I’m seeing not only were these open banking concepts happening in Europe but they’re also happening in other parts of the world with the onset of faster payments and access to accounts and the linking of accounts, and ultimately, the API enabling of account-to-account payments was really taking off, and even in the U.S.
One of the leaders in that space in the US has been Dwolla, over the past 10, 15 years. And Dwolla has gone through a number of iterations over those years in terms of the types of solutions it’s offered innovators. I was really intrigued to have the opportunity come in and join as president and COO and helped the business scale. We were growing in about 40% a year during the crazy times coming out of 2020, 2021, and 2022, like a lot of fintech and payments companies were. It was great that we had the opportunity to really grow the business fast and to work with some terrific startup innovators.
Now, startup innovators have been impacted by higher interest rates and lower evaluations and less investing. So, what we realized a couple of years ago as we started to see those changes happened was that we had the opportunity to also serve mid, large enterprise customers as well with a similar API-based payment platform that allows businesses of all kinds, not just startup fintechs but businesses of all kinds, to modernize their payment systems, especially those that are sort of in the B2B space that use the traditional U.S. banking system or the ACH system, or the newer and faster payment rails like RTP and FedNow too. That’s where we’re focused. We continue to focus on providing tremendous value via a common set of technology interfaces to the U.S. banking system for innovators, and not just for the small really sexy ones, but for some of the big lumbering ones that are ready to digitally disrupt themselves and move into the 21st century.
Nathan Hilt: When you think about the next five to 10 years around the industry, what are things that get you excited? Where are the opportunities and how optimistic are you about the future? If there’s any challenges or something that might make you concerned, what would that be?
Glaser: I am optimistic. Payments wasn’t always sort of a sexy business. [Laughter] It was a little bit lumbering for a long, long time, even when I started my career, let’s say in 2000, when we were just learning how to build payment and payment-related systems for online businesses and e-commerce businesses. It’s still a little bit old school even then but then somewhere around 2010, right around that time where the Visa CyberSource acquisition happened, we started to learn more about Stripe and Square, some of these really interesting disruptors disrupting what was happening at the physical point of sale when payments started to become really interesting, and then the onset of cloud-based computing and API enabled computing has brought payments to life. Again, not just in the U.S. but everywhere.
We’re seeing this concept of disappearing payments. Uber sort of made that famous where we don’t dance with the credit card anymore in and out of the car. We just get in the car and get out of the car. It’s that kind of experiences that we continue to have more and more of and that we, I think, will have even more of. We can imagine there’s lots of situations where — and we don’t have to imagine because we probably have already used our card today or yesterday, right? Where we hand the card or even tap the card. Physical card experiences are becoming more friction-free and we’re seeing better user interfaces with mobile apps and other ways that, sort of that payment mechanism is disappearing. We’re just going to see more and more of that. We’ll see a lot of it through some of these secured tokenization platforms that companies like Visa and Mastercard but also banks and others are starting to launch, and they’ll become more mature.
We’re seeing a lot more sort of friction-free checkout. We’ve seen the Amazon Go model where you can just walk in the store, grab what you need, and walk out and you don’t pay, you don’t talk to anyone. There’s cameras and other devices in the building or in the room that detect and make that shopping experience seamless. I think we’ll just see more and more of that. I think we’ll also see blockchain technology becoming more and more used. While crypto has become sort of a dirty word in the last few years. So, as we venture out of our third, I guess, crypto winter, I think those technologies will continue to mature and they’ll become more and more mainstream. It might not be digital currency necessarily that solves all of our problems over the next 10 years, but certainly the digital ledgering technology that allows systems, diverse systems to talk to each other better, more streamlined, again reducing these concepts of friction in payments throughout all this different experiences, whether it’s B2C or B2B experiences.
Hilt: Yes. Someone told me yesterday that it was the 15th anniversary of Bitcoin this week and I think, “Wow. It’s been a while.” I agree that it might not be what it was once thought of but it’s still around. Then I totally agree that the blockchain will be something that is going to transform things. I guess shifting to the technology platform, because certainly, APIs are things that are now powering new platforms, but if you look about the next five or 10 years, what are things that would influence your infrastructure and what would that look like as far as transforming the customer experience, et cetera? Is there anything that you’re seeing out there that’s getting you excited?
Glaser: Yes, there is. It’s really all around where we started this discussion. It’s the whole pay-by-bank experience. I’ve used a couple of analogies of using our cards to pay, whether we’re businesses or individuals, but we’re seeing more and more growth in this account-to-account payment world. Again, knowing that it’s 50 years old, but it continues to expand and the reason it’s expanding is because we’re getting more and more granular in enabling how these payment mechanisms could be accessed and be utilized.
What I mean by that, there’s a couple of concepts maybe we could define together. One is open banking. I’ve mentioned that a couple of times. Another concept is embedded finance. I think when we combine those two things, it allows us to create these really amazing experiences for users and businesses. As we think about open banking, that’s all about allowing consumers to access their bank accounts in easy ways. So, what’s happening is banks or service providers like Dwolla and others are enabling APIs to interface with these traditionally closed bank systems. While we talk about the ACH network being an amazing 50-year-old network that allows payments to happen, there’s lots of other data and information that banks store, right? My bank know lots about me. All the personal information that I shared with them like my address, my phone numbers, my email. They know my spending habits though too, right? I can login and see all of my accounts that I have with a particular bank or brokerage, for instance. I can move money between those accounts. I can categorize the transactions in those accounts, so we know what I’m spending on or trends of spending. I can even see the deposits. So, my bank knows how much I get paid and how often I get paid and who pays me. [Laughter] If I’m using Venmo on the side, they know that too. There’s a lot of information the banks have about us and that is accessible now that we’re adding in these APIs to access that kind of granular information. That’s what this whole concept of open banking is. It’s allowing for banks to open their data for new and ingenuous use cases.
Now, when we overlay the concept of embedded finance, the idea there is — or better payments even — the idea there is by accessing that open banking data and embedding that data and those related services inside larger applications that are purposely built usually for an industry, we now start to see these really rich experiences that enable new things to be done. For instance, what’s very common now is if we — let’s say we’re shopping around for insurance and we find a new insurance company. We’re doing that online. We’re probably using our phone. We sign up for an insurance and we download their app. It asks us for our name. It asks us which bank we currently bank with, and we can see the logos of the most common banks. I bank with Fidelity Investments so I click on the Fidelity icon and it pops up a screen that allows me to enter my username and password to that online bank, and then magically, appears a list of my accounts. It’ll ask me, “Well, for your insurance premium, which account from Fidelity would you like to pay with?” and then I can see my accounts and I confirm that. Then, that account information is then used to underwrite me as well as to set me up for insurance premiums.
It used to be that I’ll probably call somebody. They’d send me a letter. I’d have to fill out a form. I have to write a check. I have to send the check in the mail, right? So, this embedding of payments and financial activities inside these applications that is reducing — we talked about reducing friction before, right? It’s allowing us to reduce these frictions, making payments just part of the experience. We see this happening across every industry. I mentioned insurance use cases but there’s property management use cases, there’s restaurant use cases. You name the industry, we’re seeing payments being embedded.
Hilt: I agree. Well, I think the insurance piece is — because my son recently got insurance and he doesn’t understand. I don’t even think he has checks. This idea of like the transit routing number, it gave you access to the account through this paper manual process versus you’re talking about actually getting access to the accounts, like getting all the account information. I think that really is the value and the change of the user experience. It’s quite powerful.
Glaser: Yes, it is. It is quite powerful, and some are concerned about that power as well. There’s a lot of data changing hands and sometimes, especially as consumers, we don’t realize when we sign up for those services or maybe click at terms and conditions check box, most consumers don’t like reading three or four pages of scrolling words in front of them and they’ll just say…
Hilt: They have 13 seconds of attention span or something, right?
Glaser: That’s right.
Glaser: So, inside of those terms and conditions, it actually explains how that data might be used, could be used, will be used, and each application provider that we as consumers are leveraging or the businesses are leveraging, are using that data in a different way. That is another opportunity we probably want to talk about today.
Hilt: If you think about — I know you talked a little bit about privacy, identity, I mean there is so much data out there, and even if we go into the whole ISO 20022, there’s even more data that’s carrying along with these messages. Where do you see fraud and crime and things in the future that we really should be concerned about, and how do you protect people from that?
Glaser: Well, we’re already seeing a major shift happen towards account-to-account payments. The fraudsters are turning their attention to that space. It’s been really interesting, even in the few years that I’ve been deeply in the space here at Dwolla. When I first got to Dwolla, we were proud to say that we never saw fraud. We didn’t have to say that we were great at protecting against fraud. We just never saw it. There was very little fraud in the network, in the system, very few attempts. There are good controls in the ACH network and that’s a powerful commitment that the banks and other service providers have provided, but the fraudsters were all focused on the card environment because for a long, long time, it was pretty easy to write programs and steal cards, then use stolen card information to try to steal goods and services online especially, but with the onset of PCI which allowed merchants — that data security standard allows merchants and businesses to better protect against breaches, that really slowed down the number of cards that were being stolen, the card numbers that were being stolen, and then the onset of the tokenization technology that the card brands and others have made ubiquitous, which basically turns card numbers into meaningless characters. So, even if they are stolen, they can’t be used anywhere. It’s a really interesting combination of securing the data but then also obfuscating and changing the data in real-time.
When we combine those things, it’s made it really hard for the fraudsters to commit crime now with stolen credit card data. What have they done? They paid attention to the trends that we’re talking about, Nathan, and they shifted their attention towards account-to-account, embedded finance, open banking, and so, yes, we are starting to see more and more trends and more fraud, and there’s two types. There’s this sort of stealing credentials and then using the credentials to commit fraud. It’s not just the payment credentials. It’s the identity credentials. I might be able to fool you telling you that I’m someone that you should trust and can trust, and you push money to me, say, via your PayPal or Venmo for instance, or another digital wallet platform. When you do that, as soon as you move the money, it comes to me or my wallet or whoever was acting like me and then that money is gone. It’s gone for good. You don’t have a way to get it back.
Hilt: So, if you think about — last question. Okay. Take your crystal ball. You head off of Dwolla and just think about the industry as a whole, 10 years from now, I know we just had Money20/20 and it’s 2023, and so if you think about Money20/35 at some point, are there any bold predictions, anything you see? Are we still going to be using cash at all? What do you think is going to be out there 12 years from now?
Glaser: Yes. Well, I’ll start with that. I think there’d be a very little cash. I carry no cash. I haven’t carried cash since, probably March of 2020. I stopped carrying cash. I’m a payments geek so we do things a little bit ahead of the rest of the non-payment geek world. I think that is a safe assumption. There would be very little cash changing hands certainly in developed markets, probably would be some sort of cash in non-developed markets. However, what we’ve already seen in emerging markets is the skipping of some of these technologies and platforms that we had to build to get to where we are today. The emerging markets are sort of building on the shoulders a giant and they’re going straight to the phone-based payments, digital payments, fast payments right from scratch, right from the beginning of their electronification of payments. I think we’re just going to see more and more of that convergence where cash disappears. There’s automatic routing technology inside these disappearing payment mechanisms where you and I, and even businesses, won’t think about our payment method necessarily. We’ll just say, “I need to pay Nathan. It needs to get there by tomorrow morning,” or, “I need to pay Nathan and it needs to get there today.” Nathan does a job for me. Is he willing to pay an extra 2% to get it as soon as the job is finished, or does he want to get that payment for free in his paycheck two weeks from now? All of that, what we call payment method, selection, the least cost routing, the speed of routing, that orchestration of payments will all become digitized as well as the access to information about the payments in the account. All of that would be digitized. We will have a completely API enabled world and payment system across almost every country and every region, and we won’t think about payments the same way we do today. That’s for sure.
Hilt: Well, Dave, I really, really thank you for your time. Like I said, great to catch up in person in Money20/20 and taking the time to give us a little bit of your vision for the future and what’s going on at Dwolla. I wish you all the best. Exciting. Congrats on your role. Yes, thanks for your time today.
Glaser: You’re welcome. Thanks, Nathan. Great to see you again.
Hilt: For sure. Okay. Over to you, Joe, for the wrap-up. Thank you so much.
Kornik: Thanks, Nathan, and Dave, we appreciate those insights, and thank you for watching the VISION by Protiviti interview. For Nathan and Dave, I’m Joe Kornik. We’ll see you next time.
Dave Glaser is CEO of Dwolla, a payment service provider that offers a modern API for businesses to seamlessly connect to the U.S. payment networks. Before becoming CEO in September 2023, Dave was President and COO at Dwolla for the last two years. Previously, he was a Senior Vice President of Acceptance Solutions at MasterCard and Vice President, CyberSource Global Business Operations and Global Services at VISA.
Nathan Hilt is a Managing Director with Protiviti. Based in San Francisco, he serves as the cross-solution payments strategy leader within Technology Strategy and Operations (TSO) Technology Consulting practice for the Financial Services Industry. Prior to joining Protiviti, Nathan served as a Director within PwC's Financial Services Advisory practice where he was responsible for leading and growing its electronic payments, digital, and fintech business and client base. Prior to PwC, Nathan was Vice President of Global Brand Management at Visa International.