A money-exchange business created by an Iowa man is expanding to include a system that uses smart phones to pay retailers. Dwolla, was created by Ben Milne two years ago to compete with on-line payment systems. Now Milne says they’re introducing “Dwolla Spots” which uses geo-location technology to allow you to pay for things.

Milne says the phones are capable of recognizing the location you’re in using geo-location, and they tried to find a way to link that system to their payment system. The end results allows customers to pay with their phone at merchants who’re part of the system.

He says you can complete a transaction based on your location without swiping your credit card, or paying any of the card fees in the current system.

Dwolla charges 25 cents per transaction compared to a two to five percent fee charged by credit cards. Milne says they are trying to get ahead of what will be the new way to pay. Milne says cellphone payments are the next generation of payments and merchants know cellphone payments are going to be something that is going to impact their business, much like credit and debit cards did. He says if you don’t accept credit and debit cards you are going to lose business and that’s the case with phone payments.

Milne says the Dwolla Spots system offers businesses a way to get on board without a lot of new equipment to accommodate phone payments. Milne says they have around 500 merchants set up right now and they plan on rolling out an education campaign to let merchants know how to set up the payment system and it won’t cost merchants anything. Milne says the company he started in Des Moines has been growing substantially since they first rolled it out.

Milne says their transaction volume has grown from being minimal to almost one-million dollars a month. He says they are seeing “good user adoption” and a strong increase in transaction. Milne says they are now looking at expanding their low-cost network to create value added products. Milne says Dwolla Spots is one of the value added products.

It is currently exclusive to the Apple iOS. You can find out more about Dwolla at: www.Dwolla.com