Dwolla Corp., an online payment business (www.Dwolla.com) launched in Des Moines earlier this year, has secured $1 million in equity financing, co-founder Ben Milne said.

The Veridian Group Inc., a wholly owned subsidiary of Waterloo-based Veridian Credit Union, and The Members Group (TMG), a Clive-based financial and credit union service organization, have committed to the investment in Dwolla, Milne said.

“Essentially, we’re becoming part of a financial institution, and that’s big,” said Milne, who with partner Shane Neuerburg developed a proprietary software system that enables users to transfer funds online without using a debit or credit card. A key benefit of the system, which charges a flat 25 cent fee per transaction, is that it enables users to avoid card “swipe” fees that can cost a merchant 3 percent or more of the sale.

The Members Group will provide the primary distribution channel for Dwolla’s product to financial institutions and provide development expertise to the company. Jeff Russell, TMG’s executive vice president, said the current economic climate has caused businesses to seek less expensive payment alternatives.

“Online and mobile payments adoption is proceeding at unprecedented rates, and we’re excited to help our clients tap this next evolution in financial transactions,” Russell said in a press release.  

“Dwolla is a true leader in the financial services industry,” Nick Evens, president of The Veridian Group, said in the release. “Our collaborative investment with TMG in this Iowa-based company will help bring innovative financial services to credit union members.”

Dwolla last year raised $250,000 from individual investors and received a grant of $55,000 from the Iowa Department of Economic Development earlier this year. The new institutional funding will enable Dwolla to further develop its product, which is already being used by a number of Greater Des Moines merchants.

“What this allows us to do in short order is to design a product for use by financial institutions to allow them to access Dwolla customers,” Milne said.

Dwolla plans to lease 1,100 square feet of office space in the Midland Building downtown and will hire three full-time employees, Milne said.

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