Taking on legacy financial technology firms may require going where they have not gone before.
Aeropay, based in Chicago, does the same. Pay-by-bank suppliers for businesses began by assisting cannabis sellers and gaming firms with payments, and they are now improving Visa and Mastercard payment networks.
Dan Muller, CEO and co-founder, was head of product for a digital solutions firm for brands and retailers. When mobile came online, Muller worked on native mobile applications for Best Buy, Adidas, and Express, giving him payment expertise.
“When you peel back the layers of the legacy way to solve digital payments, it was either easier to accept the card online, like Stripe or Square, or you could attempt something really grand, which was to go around the system,” Muller told Eltrys.
Aeropay lets companies accept regulatory-compliant, cashless, and contactless digital payments in-store and online. The business produced Aerosync, a bank aggregator that links bank accounts and allows customisable connections via open APIs.
Once the business links to one of over 12,000 banks, buyers can pay like any other e-commerce site. Merchants may accept QR code payments without fees or cash. This would allow the merchant’s customer to specify payment amounts and confirm them at checkout. Muller said retailers pick the amount and confirm a digital wallet submission for consumers.
Unlike other digital payment solution providers that started with a product, Aeropay began with regulatory and compliance in mind, according to Muller. Compliance was an afterthought. He thinks merchants may reduce return and fraud risks. Aeropay transfers funds directly between banks via the Automated Clearing House, bypassing card networks. It benefits the cannabis sector, which cannot use payment card networks.
Becoming the ‘next great payment network’
The concept has caught on. Muller claimed Aeropay processed over $1 billion in volume last year and reported a 10x revenue increase (but wouldn’t specify). He said it became cash-flow profitable in Q4 2023.
Group 11 led its $20 million Series B financing, which included Chicago Ventures and Continental Investors. This investment brings Aeropay’s total capital to $35 million.
Aeropay wants to be “the next great payment network,” Muller said, but doesn’t compete with Visa and Mastercard. Merchants spend the most on card swipes, but Aeroplay eliminates them and integrates with their current systems without applications or hardware. That requires cheap trains, a fantastic user experience, and minimal fraud and risk. Muller said the organisation has those three traits, but it needs additional retailers to get Visa or Mastercard status.
Muller: “We need distribution to reach the same type of level.“ The objective of this capital is to achieve a uniform distribution that will yield the advantages we have established, such as seamless bank connections, reduced fraud and risk, and merchant affordability. A bank transfer account is cheaper than a card swipe, so they can pass on the savings to customers.
Muller will utilise the extra capital to expand the go-to-market, technical, compliance, and risk teams. Aeropay invested in customer care teams last year to transition from standard to 24/7 service, and Muller expects that to expand this year.
Playing to your strengths
Dovi Frances, Group 11’s founding partner, told Eltrys that “no one has touched it because it is so complicated.” He hopes Aeropay will fill regulatory gaps and grow.
Israeli-related financial technology businesses incorporated in the Americas are the focus of 12-year-old venture company Group 11. One of the initial supporters of cost management business Navan, accounts payable company Tipalti, and real estate technology company Homelight, it has $1 billion in assets under management.
Frances met Muller three years ago but didn’t invest in Aeropay. Frances recalled that Aeropay was working on cannabis and “nobody wanted to touch the cannabis industry.”
Throughout that period, Frances kept in contact with Muller and Aeropay.
“Then I saw that they were now at a point where the solution seems robust enough from a technological perspective; it has attracted significant clients, and the C-suite is starting to look like the C-suite I would like to see at a company where I make significant investments,” Frances said. “I’m talking about seriously investing, not seed investment.”
Frances divides financial technology into architecture, coordination, and application. He sees Swift, Visa, and Mastercard as architectural infrastructure leaders. Coordination-layer firms like Square lie between the application and architectural layers. Neobanks are an example of the application layer.
Aeropay can rival Visa and Mastercard at the coordination layer, he says.
“Undoubtedly, it is payment on steroids,” Frances added. Aeropay was one of the last financial technology sectors to experience disruption. A competent team has been implementing this goal for years, targeting a huge market.
