Dwolla And BBVA Turn on a Real-Time, Tokenized Payments Service

A real-time payments system featuring tokenized transactions opened to all comers on Wednesday when Houston-based BBVA Compass Bank announced its connection with processor Dwolla Inc. is live for commercial use.

“We’ve been in a live environment [with BBVA] for the last two to three weeks with friends and family but today it’s available to everybody else,” Ben Milne, Dwolla’s chief executive and cofounder, tells Digital Transactions News. “We’re really excited about expanding that relationship.”

The new service, which BBVA and Des Moines, Iowa-based Dwolla first announced in October, allows BBVA customers to make real-time payments to other customers of the bank using a technical protocol developed by Dwolla called FiSync. Real-time payments, which are said to clear in seconds, are also possible with customers of Waterloo, Iowa-based Veridian Credit Union, which adopted FiSync three years ago Veridian’s investment arm, Veridian Group Inc., is an investor in Dwolla.

Dwolla’s ordinary pricing applies to the BBVA service. The company charges the recipient 25 cents per transaction for payments of $10 or more. Payments under $10 are free.

In December, Dwolla introduced its Direct service, which lets persons who don’t have Dwolla accounts receive payments from Dwolla users. These payments use the automated clearing house network and clear in one to three days.

With BBVA, Dwolla has introduced digital tokens that replace the user’s actual account and routing numbers. Once the user designates a funding source and authorizes the payment, BBVA generates the token, which is unique to the authorization and can be revoked by the user, the bank, or Dwolla if need be. Tokenization to replace user credentials has taken on added importance with recent data breaches and the commercial introduction of such technology by Visa Inc. and MasterCard Inc. to support card transactions using Apple Inc.’s Apple Pay mobile-payments service.

BBVA Compass, a unit of BBVA Compass Bancshares Inc., operates 672 U.S. branches, with more than half of them in Texas. It is not only the largest bank so far to adopt FiSync, it is also positioned to serve businesses, which Milne sees as the initial adopters of the real-time transaction service for payments to other businesses and to consumers. “There’s all this pent-up demand,” he says. “Businesses ask us, ‘Where do we get this?’ Well, you can go to BBVA. Credit unions are limited by their membership rules. A Silicon Valley company couldn’t just open an account at Veridian.” Dwolla, however, is “absolutely talking to other banks,” Milne adds.

BBVA Compass Bancshares is a wholly owned subsidiary of Spain’s BBVA, an institution founded in 1857.

The new service comes as the payments industry is moving toward faster settlement of electronic payments. The Federal Reserve has been leading an effort toward near real-time payments. And NACHA, the regulatory body for the ACH, has developed a plan for same-day settlement of transactions on the ACH.