Swank auctions with bidding paddles and international galleries are no longer the only ways to interact with multimillion-dollar pieces of art. Today, you can invest in a $4.2 million Andy Warhol or a $110.5 million Jean-Michel Basquiat from the comfort of your home.
Masterworks facilitates this type of fractional investment and is democratizing part of the estimated $1.7 trillion asset class that is art and collectibles investing.
“Given today’s investment landscape, we’ve shown there’s a real demand for investing in art into this market that wouldn’t otherwise have existed,” says Masterworks Co-Founder and Chief Marketing Officer Hai Minh Tran.
Since going live with Dwolla in 2018, Masterworks went from transferring “a couple hundred thousand dollars” through the Dwolla Platform to facilitating tens of millions a month in art investments during 2021.
“As the business grows, our goal is to do $1 billion in transactions in 2022,” Tran says. “Dwolla’s platform has effectively handled our larger transaction volumes and has been a very quiet, scalable solution for us.”
Offering Frictionless Investments
Since launching in 2017, Masterworks has grown to become the largest Contemporary Art buyer in North America, planning to purchase over $1 billion in art in 2022.
Having a frictionless transaction experience was crucial to attract and retain new end users.
For Masterworks’ end users, having the ability to make a quick and easy investment is a significant step in making art acquisition more accessible. And for Masterworks, the flexibility and ease of account-to-account payments with Dwolla means they let the API work in the background with little to no intervention from their engineers.
“Having any friction or delay while waiting for funds to clear via manual payment processes, sometimes a matter of days or weeks, can create a lot of user experience problems,” Tran says. “By using Dwolla, we don’t see those problems.”
Once a Masterworks end user attaches a funding source to the platform, Dwolla’s platform helps facilitate the transfer of funds from the end user’s account to the escrow account Masterworks has set up for each individual piece of art.
“Dwolla provides us with frictionless payments. People come to our website and understand what it is. They can become investors in minutes and not hours.” Tran says.
Masterworks uses standard ACH transaction timing not only as a check against fraud but also as a peace-of-mind payment method that lets them know how much money is in the bank and when it will arrive. The company has prioritized implementing robust Know Your Customer (KYC) processes and, with the help of third-party account verification providers, enjoys a return rate of less than one percent.
Dwolla has quietly run in the background as daily transaction limits for Verified Customer Records grew to $500,000, giving investors on Masterworks’ platform the flexibility they need to invest at the price point of their choice.
“It’s been great having a partner with tooling and technology that just works, can scale and doesn’t require a lot of babysitting. It enables us to focus on the parts of the business that do need attention.”
Finding a Low-Touch Payments Solution
As Masterworks grew from a small startup to a company valued at more than $1 billion, engineers’ interaction with the Dwolla API remained minimal. This gave their team the space to work on other areas of the business as they hired more employees, bought more art and grew their user base north of 180,000.
“It’s been great having a partner with tooling and technology that just works, can scale, doesn’t require a lot of babysitting and is not high touch for us,” says VP of Engineering Ben Sgro.
When you’re moving fast and working in uncharted territory, as Masterworks is, there’s no time to harp over a third-party service that isn’t performing.
“Dwolla is reliable.” says Sgro. “The technology continues to perform year after year.”
Currently, only U.S. investors can sell shares on Masterworks’ secondary market. The more art the company acquires and the more end users they bring on, the faster the business will grow. As part of that growth, Masterworks is excited about Dwolla’s upcoming expansion into international markets.
Disrupting the Art Market
Masterworks is on a mission to democratize investing in art and to make it uncomplicated and unemotional. In addition to facilitating investments in art, Masterworks has created a catalog to track the value of art pieces. Search from a library of 60,000 data points and 70 years of history to see which art or artist is increasing in value.
How do you take a $10 million painting and make it available to everyone? With the Masterworks platform and account-to-account payments powered by Dwolla, what was once seen as an asset class only for the wealthy and well-connected is now an app on your cell phone.
“We’re continuing to scale all facets of the business, all different departments, and Dwolla has scaled with us,” says Sgro.