Dwolla, the cash-inspired payment startup based in Des Moines, today announced an upgrade to its financial services product, FiSync, that will enable the real-time transfer of money from one bank account to another. The web service syncs financial accounts with Dwolla’s payment network and partnering financial institutions, providing integrated banks and credit unions with a cash-based, real-time credit and debit solution.

The key to FiSync 2.0 is that it circumvents the Automated Clearing House (ACH), the traditional conduit for electronic payments in the United States. Dwolla co-founder and CEO Ben Milne says ACH leads to delays, exposure to fraud and additional costs. 

Milne, who was scheduled to present this morning in San Francisco at FinnovateSpring 2012, wrote in a blog post published today that the upgrades provide a "helping hand" to an outdated system for processing electronic payments. "What worked well back when Disco and rotary phones were a good idea doesn't work well now," Milne said.

"What worked well back when Disco and rotary phones were a good idea doesn't work well now," Milne said.

The first partner to officially integrate Dwolla's new version of FiSync is Waterloo, Iowa's Veridian Credit Union, which will go live with the product on June 4. Dwolla is offering FiSync 2.0 to banks, credit unions and service providers for free. The FiSync Software Development Kit is accessible via Dwolla’s integration portal, fisync.dwolla.com.

The upgrade will be instituted automatically for Dwolla users when their bank or credit union integrates FiSync. From a user standpoint, Milne said, the new FiSync will cut the wait time on transactions from 3-5 days to real-time. He also said additional verification required by FiSync will make it more secure than traditional processes.

Dwolla announced the first release of FiSync in March of 2011 and had been working on it in one form or another well before that. But, Milne said, "none of the iterations offered the most disruptive component: an engine to power real-time transaction of real funds. As of today, we're excited to announce that we've designed a real-time system that solves this problem."

"By standardizing, streamlining and authorizing transactions directly between two financial institutions, FiSync makes batch processing, 2 to 3 day wait times, and 90 days of ACH exposure a thing of the past. This means that, for the first time, a $33.9 trillion bank transfer market can benefit from real-time capabilities," Milne said in a press release. "Insured, regulated and secure, financial institutions are amazing at protecting their customers' funds, so our goal with FiSync wasn't to create a product that challenges the way the industry holds money, but to speed up the way we exchange it."

Credits: Screenshot from Dwolla blog