dwolla logo 260x70 Move over PayPal, online payments just got social with DwollaWaiting for the day when wallets will become obsolete?

We’re getting there…As long as you have a smartphone with web access, you can pay for many things, peer to peer style over the Web. PayPal is an obvious choice with over 94 million users worldwide.

I’ve been using PayPal for quite some time now. In fact, it’s how I receive my salary. But the problem with PayPal is that they charge 30 cents per transaction plus 2.9% for receiving purchase payments under $3,000 and that chunk of change can add up quickly.

Native Iowan Ben Milne thought the financial and banking industry needed a little disrupting. “I was sick of feeling like they were taking a percentage of my money without deserving it,” he explains over coffee in New York City. Milne teamed up with Shane Neuerberg (pictured below) to work on Dwolla, a portmanteau of sorts, combining the words dollar and web. They developed a P2P payment system with an extremely low cost exchange– no matter the amount, Dwolla only charges the recipient 25 cents per transaction. And the money sender has the option to assume this cost.

dwolla shane ben Move over PayPal, online payments just got social with Dwolla

But what further defines Dwolla is their meaty inclusion of Facebook and Twitter. This past November, Mark Zuckerberg said in an interview“You can integrate a person’s friends into anything and make the app instantly more engaging and viral. It’s not intellectual, it’s hard wired into humans to focus on what people around you are doing. It’s a visceral need.”

And Dwolla has done just that, leveraging social networks in the financial space. You can register on their site by logging in with your e-mail address or a Facebook or Twitter account. Once you’ve registered and confirmed your e-mail address, add your Facebook and Twitter accounts under the “Send Money” tab. Once your accounts are connected, sending money to friends is really, really easy. Just search for their name, for example, “Alex” and every Alex you know on Twitter or Facebook will appear. From there it is easy to send money on the site and it is transferred in a Twitter DM or in a Facebook wall post. The guys call it “passing the Dwolla.”

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Watch this video demo “Send Money To Sean Parker” of how to send money on Facebook:

Dwolla offers two account options: Business accounts for merchants, businesses or charities looking to make big transactions that want to avoid PayPal fees and Personal accounts, for individuals who want to pay their friends on social networks. Dwolla provides each user with an ID # like “818-493-3788″ and a “hub” page, which is essentially a microsite for each user to request or send money. This hub page could work particularly well if say, you’re asking friends and family for money so you can fly to Ghana to teach children to read English.

The “Silicon Prairie” company out of Des Moines, Iowa officially launched on December 1st, 2010. Not two months later and the site already has 4,000 registered users, tallying up half a million social connections. The company has raised 1.3 million in funding and is backed by financial investors like the Veridian Group. Dwolla founders Milne and Neuerberg assure me that they are “good stewards of your money,” and all of the cash that passes through Dwolla is insured by industry professionals. Their site’s security includes front end SSL encryption and frequent penetration testing.

CBM: So what’s it like running a start-up in Iowa?

“Well, there’s a cost benefit to working in Iowa. But there also aren’t too many distractions. We can keep our head down for a few weeks and really get some work done. We don’t need to go into a big dark room to do so, because we have a big dark state… My beach is a cornfield,” jokes Milne.

Merchant history 260x390 Move over PayPal, online payments just got social with DwollaPayments on social networks has been done before but with little long-term success, like Pay Me, a P2P Facebook app with Paypal integration and TwitPay. New start-ups like Venmo don’t even require a smartphone and allow you to send your friends money vis SMS, although the largest single transaction a user can make on Venmo is $999.

Dwolla’s open API means apps for everyone! (Except you Blackberry.) Check out Dwolla for the iPhone if you’re interested in “passing the Dwolla” and if you’re a merchant interested in receiving Dwolla on the iPhone, check out their merchant app here (pictured right). Android users, don’t worry, they didn’t forget about you. Windows Mobile, here you go.

International users? Sorry, Dwolla is just in the U.S. for now. Looks like I’ll have to stick to PayPal to receive my salary for the time being.