Mobile Technology & ACH Payments: The Gift That Keeps On Giving with Bitmo

As more and more initiatives aim to decrease the use of plastic, one innovative company is replacing plastic gift cards with mobile technology to help both consumers and retailers.

That company is Bitmo, a mobile application helping its users send digital gift cards through a simple text message. Recipients receive a notification that they have a gift ready to claim and can redeem the gift by downloading the Bitmo app for free. Bitmo’s users have over 120 stores and restaurants to choose from and if a recipient receives a gift card for a store or restaurant they don’t visit, he or she can exchange the gift card for other brands for free.

Mike Smallwood is the Founder and CEO of Bitmo and has worked with mobile software since 2006. Through research and experience, Smallwood estimates that 40% of plastic cards are lost or not redeemed. When a plastic card is not lost, Smallwood notices that many consumers forget their actual plastic gift cards or wonder if there’s even any value on a card.

“That’s billions of dollars lost,” Smallwood says. “Retailers want to recognize that revenue and they can’t until they bring you into the store. But even more, retailers want to engage with their customers to invite them in and spend that money.”

In 2017, Smallwood incorporated Bitmo in the San Diego, California area and launched a pilot program with a Starbucks partnership on the San Diego State University campus.

“That was the foundation and tipping point when I realized we were on to something,” Smallwood says. “We could take this beyond campus walls.”

Since that pilot program in 2017, Bitmo has surpassed 100,000 gifts sent and expects to surpass 1 million users on its platform by the start of 2020.

“Dwolla was a plug-n-play solution,” Smallwood says. “For us, the process of credit card payments would take two or three percent of our transactions, so a big concern for us was moving money efficiently. Especially with smaller transactions, Dwolla solved that for us.”

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Bit by Bit

Simply downloading the app and registering with Bitmo allows a consumer to receive a mobile gift card. Attaching and verifying an existing bank account will allow the user to easily send and receive gifts.

After the successful pilot program in 2017, Bitmo integrated with its first payment provider to create virtual bank accounts with an online wallet for its users.

David Peace, Bitmo CTO, says initially they had an onboarding pain point where 20 to 30 percent of customers signing up would be held up because of “overly aggressive” identity checks.

As the problem persisted—and eventually worsened—Peace said they became very “motivated” to find a new payment provider.

“Dwolla was the name that kept coming up,” Peace explains.

Jason Pang, Bitmo COO, says they considered building their own integration to process ACH payments but in the end, it was a matter of priorities.

“Payments isn’t our focus,” Pang says. “ Looking at Dwolla, they’ve been doing this already and are the backbone of so many other companies. We didn’t need to build something that already exists.”

As they investigated Dwolla’s capabilities, Pang said they wanted to make sure Dwolla could “move at our speed.”

“Dwolla’s additional features, like Next Day ACH and Plaid for instant bank account verification, was big for us,” Pang says.

“Everything on the tech side was very pleasing and our customers were excited to know they were actually getting through,” Smallwood says. “Once we switched to Dwolla, it was a night and day shift for our user experience because customers weren’t getting caught in these overly-aggressive checks.”

Peace estimates user onboarding with Dwolla was a “300 percent improvement” compared to their previous payment provider.

“That whole experience initially was very poor,” Peace says. “Dwolla having such a seamless integration with Plaid was beautiful. If I send $25, I can link my bank account with Plaid and route that money through ACH using Dwolla.

“There was a collective sigh of relief when we switched to Dwolla.”

More and More

Switching from their old payment integration to Dwolla was made simpler by Dwolla’s responsive and accessible Customer Success team.

“It’s nice we have these direct lines of communication where when we do actually have to ask a question, we typically get a response within the hour,” Peace says.

Compared to their previous provider, the process of resolving an issue—whether that be an increase in transaction volume or user onboarding issues—required too much time to suit Peace’s needs.

“With Dwolla, we don’t have to worry because there’s nothing to remediate,” Peace says.

“There really hasn’t been this magical moment where things all came together, Dwolla has just worked right from the start,” Smallwood says. “Dwolla solved the pain point and allowed us to focus on other areas of the business, which has been really nice.”

Smallwood says as 2019 progresses into 2020, the Bitmo team is working to continue user growth on their application, as well as attract and partner with more small and mid-tier retail establishments to go along with the big box stores.

“We are seeing more of the smaller and mid-tier establishments come to our platform because through mobile payments, they can compete with Wal-Mart, Target and Amazon,” Smallwood says. “These smartphone devices are changing lives and influencing how we transact and make payments. What we do is meet the consumer where they are and bring them into brick and mortar stores.”

As more consumers and retailers join the Bitmo platform, those same consumers and retailers can move away from plastic gift cards—bit by bit.

“Keeping away from plastic philosophically is important to us,” Pang says. “Letting our users pay however they want to pay is important, while making sure we have the right tools to make intelligent decisions around security and risk analysis. Why wouldn’t we go with Dwolla?”