An uncertain outlook for financial technology startups has led Dwolla to restructure its leadership and accelerate a plan to offer easy payment upgrades at more established clients.
Dave Glaser, who has been Dwolla's president and COO since 2021, is the new CEO, replacing Brady Harris, who has left Dwolla after three years in the top job. Skyler Nesheim, who had been Dwolla's senior vice president of technology, was named chief technology officer. The payment firm has also eliminated an undisclosed number of jobs. Dwolla did not provide comment on how Glaser and Nesheim's old roles would be filled.
Dwolla has made a calculated shift to focus on Dwolla Connect, an application programming interface that is designed for mid to large enterprise businesses. Dwolla views that as the best strategy for the current economic environment.
"Dwolla traditionally brought solutions to very small innovators and fintechs. In today's market those businesses have been hit by macro trends, especially higher interest rates," Glaser said, noting the unsteady economy has been particularly rough for venture capital-backed fintechs that sell to real estate companies or any business that is rate-sensitive.
"We've seen a lot of these firms go out of business in the past year. And it will be a while before that investment comes back," Glaser said.
Venture capital funding to fintech startups fell 49%, from about $45 billion to $23 billion, in the first half of 2023, according to
Fintechs saw an increase in investments in 2020 and 2021 as the pandemic caused a rush to e-commerce. As that investment cooled, fintechs have seen their
Glaser originally joined Dwolla in March 2021 and has focused on scaling Dwolla and advancing the payment company's onboarding processes. He has more than 20 years of experience in payments, including past roles at Visa, Mastercard, Cybersource and Worldpay.
Dwolla in August released
By using an API, Dwolla hopes to make upgrades easier for new and existing clients. Dwolla does not plan to abandon small businesses and fintech startups entirely, but it's looking for more mature companies in an uncertain economy. "We are doubling down on midsize businesses or large businesses that have treasury accounts with larger banks," Glaser said.
As the RTP network and FedNow pick up adoption for real-time payments, there will be pressure on both banks and larger corporations to support them. And many of these firms still use batch processing, which accumulates transactions during business hours and processes payments at night, according to Richard Crone, a payments consultant. Real-time payments require a separate application to move funds at all times, Crone said.
"That is the opportunity for Dwolla," Crone said. "This is very lucrative but it's also very competitive."
The insurance industry has seen rapid growth in
"These insurance firms are moving off of a mainframe system to a more modern, cloud-based mobile first system," Glaser said. "This migration will enable these established insurance agencies to accept digital payments for customer premiums, or make claims payments or payments to brokers."
Restaurants that use digital point of sale systems such as Shift4 or Toast often need to use checks to pay suppliers, using B2B payment systems that are older or paper-based, according to Glaser, adding that that provides another route for Dwolla to gain ground. "We can automate their connections with their bank and their suppliers' banks," Glaser said.
Dwolla, which was founded in 2008, is privately held, has about 650 clients and about 30 million users. It processed about $45 billion in payments in 2022, up from $30 billion in 2021 and $20 billion in 2019. About 80% of its clients are small businesses. Glaser hopes to bring that mix to 50-50 in the next "couple of years."
The firm did not disclose how many of its clients have gone out of business in the past year. Dwolla has raised more than $70 million, including $21 million of funding in 2021, according to
Dwolla, which has about 120 employees, downsized in August, cutting roles in development, marketing and sales to small businesses. Glaser did not say how many people were laid off.
Another payments company,
Dwolla and its competitors could find demand from larger companies that don't have the time or budgets to completely replace their legacy core processing systems to handle new payment flows.
Technology that enables enterprises to evolve their payments ecosystem without having to rely entirely on legacy core systems is a move forward, according to Albert Bodine, director of commercial and enterprise payments at Javelin Strategy & Research.
"The pressure is on the legacy cores that will have to open their environments to APIs that allow organizations to access data more freely and inexpensively," Bodine said. "The alternative is that the legacy cores will slowly see their market share diluted by neo-cores founded on the principles of open banking."
