The key to competing with legacy players in the financial technology industry may be to expand into areas they have never gone before.
That's what Chicago-based Aeropay is doing. The provider of enterprise banking payment solutions started by helping cannabis retailers and gaming companies with payments, and now it's moving into the Visa and Mastercard space by innovating its payment network.
Co-founder and CEO Dan Muller has a background as head of product for companies that built digital solutions for brands and retailers. At the time, mobile was coming online, and he ended up building native mobile apps for brands like Best Buy, Adidas, and Express, which gave Muller first-hand experience with payments. is completed.
“If you peel back the layers of traditional ways of solving digital payments, you can easily accept cards online like Stripe or Square, or you can try something really grand by crawling around the system. '' Mueller told TechCrunch.
Aeropay allows businesses to offer compliant cashless and contactless digital payments to their customers both in-store and online. To achieve this, the company created its own bank aggregator called Aerosync, which connects bank accounts and uses open APIs to enable customizable integrations.
It can connect to over 12,000 banks, and once merchants connect their bank accounts, customers can make payments just like in any other e-commerce environment. Sellers can also use her QR code for payment, eliminating the need to pay transaction fees or have cash on hand. This allows, for example, a merchant's customers to select the amount to pay and confirm it at checkout. If the customer uses a digital wallet, the merchant selects the amount and confirms sending it to the digital wallet, Mueller said.
One of the differentiators from other companies developing digital payment solutions is that Aeropay started with a focus on regulation and compliance, unlike other companies that started with a product and compliance was an “afterthought.” That's true, Mueller said. As a result, he believes merchants can minimize the risk of returns and fraud. Aeropay facilitates direct bank-to-bank transfers using an automated clearing house. This means no card networks are involved. That's why it's a good thing for the cannabis industry, which doesn't have access to payment card networks.
Becoming “the next great payment network”
Aeropay's account-to-account payment app. Image credit: Aeropay
The concept has taken hold. Mueller said Aeropay has recorded 10x revenue growth over the past year (though he declined to comment on what those revenues are) and processes more than $1 billion in annual processing volume. he said. He said the company will reach cash flow surplus in the fourth quarter of 2023.
It currently has a $20 million Series B round led by Group 11, with participation from Chicago Ventures and Continental Investors. This new investment brings Aeropay's total funding to date to $35 million.
Aeropay doesn't currently compete with Visa or Mastercard, but Mueller said it wants to be “the next great payments network.” Card swiping is the biggest cost for merchants, and Aeroplay not only eliminates it, but it also integrates with merchants' existing systems without the need for an app or new hardware. To achieve that, we need affordable rails, a great user experience, and low fraud and risk. Muller said that while the company has those three characteristics, it lacks one thing to become Visa or Mastercard: make it available to more merchants.
“We need distribution to get to the same level,” Mueller said. “The game for us with this funding is the benefits we have generated, seamless banking connectivity, really low fraud and risk issues that we are seeing, and primarily the It's about reaching an even distribution to get affordable prices.'' Bank transfer accounts will be much more affordable than card swipes, and they will be able to pass those savings on to consumers. ”
Mr. Muller will use the new funding to develop and strengthen his team in go-to-market, technology, compliance and risk. Over the past year, Aeropay has invested in his team to care for his customers, as the company has moved from standard support to his 27/7 support, and Muller expects that to grow this year.
Take advantage of your strengths
Card networks are effectively “so complex that no one touches them,” Group 11 founding partner Dovi Frances told TechCrunch. He sees Aeroplay entering areas where other players can't from a regulatory perspective and then growing.
Group 11 is a three-year-old venture firm that invests primarily in Israeli financial technology companies operating in the Americas. The company has approximately $1 billion in assets under management and was one of the original backers of expense management company Navan, accounts payable company Tipalti, and real estate technology company Homelight.
Francis met Mueller about three years ago but did not initially invest in Aeropay. That was back when Aeropay was working on cannabis, and “nobody wanted to touch the cannabis industry,” Francis said.
Instead, Francis remained in touch with Mueller and the Aeropay team during that time.
“Then they've now reached a stage where their solution seems robust enough from a technical standpoint, they've attracted important customers, and their executives are like the executives I want for the company. I see it starting to become 'I'm investing a lot in there,''' Francis said. “I'm not talking about seed investing. I'm talking seriously.”
Francis typically categorizes financial technology into three buckets: architecture, coordination, and application. In the architecture space, he sees companies like Swift, Visa, and Mastercard as leaders in infrastructure. The coordination layer would be a company like Square that sits between the application layer and the architecture layer. An example of an application layer is a neobank.
He believes Aeropay is in the coordination layer and could pose a challenge to traditional card networks like Visa and Mastercard.
“Without a doubt, it's being done on steroids,” Francis said. “At Aeropay, we have found a last stronghold in one of the last disrupted areas of financial technology. This is a huge market worth capturing, and we have been implementing this vision for many years. We have an incredibly talented team.”