Aeropay CEO Daniel Muller has big dreams for ushering in the next era of payments in the U.S., but that doesn’t mean it’s going to happen anytime soon.

Muller, 37, founded Aeropay in 2017 and has been slowly expanding the company’s pay-by-bank brand of payments one vertical at a time.

Pay-by-bank is part of a broader account-to-account, or bank-to-bank, payment method that relies on the ACH Network. It has been gaining ground in the U.S. for years, mainly because it’s a lower-cost means of sending payments, but ACH transfers are often slow, unless a user pays up for same-day service. 

Last year’s launch of FedNow, the Federal Reserve’s instant payments system, has the potential to speed up bank-to-bank money movement, and that could increase the allure of such payments. However, that requires the uptake of FedNow by more banks.

“There is a lot of interest around this concept of pay-by-bank, being able to use your bank account essentially as the way that you would use cash,” said Peter Tapling, a payments industry consultant based in the Chicago area.

Nonetheless, merchants and consumers aren’t that familiar with the concept at this point. “Pay-by-bank is evolving — everybody doesn't understand how it works yet,” Tapling explained. “So, one of the things that Aeropay offers is portions of that ecosystem that help the merchants and the consumers understand how it works.”

Starting with SMBs, moving to gaming

Aeropay began by catering to small and mid-sized brick-and-mortar merchants looking for a cheaper way to receive payments. Then, it turned to providing payments for cannabis clients with unique regulatory needs. Last year, the company zeroed in on gaming companies in a big way, now channeling billions of dollars in volume on Aeropay’s platform for millions of users. 

Aeropay’s gaming segment accounts for about 80% of the company’s revenue, with clients that have tens or hundreds of millions of dollars in annual revenue and thousands of employees, Muller said during an interview at the company’s Chicago headquarters this month. 

One of Aeropay’s biggest customers is PrizePicks, an app-based fantasy sports service that lets users place bets related to professional sports players.

Beyond gaming and cannabis, Muller considers lots of other use cases as ripe for the company’s account-to-account approach. Potential growth areas include payments on online marketplaces as well as for subscriptions, rental payments, utility bills and in retail and travel, the CEO said.

“Being able to do a deposit on a digital wallet, whether it's for a fintech use case or for a sports gaming app, as well as being able to make a purchase online on an e-commerce site, whether it's for delivery or pick-up in store, those are all things we do a ton of,” Muller explained.

Pitching across service fronts

Aeropay pitches four main offerings that can be purchased separately, or in a bundle. Those pay-by-bank related services include bank connections, risk management, money movement and fixing failed transactions. It’s a business-to-business play that also eventually reaches to consumers.

While rivals compete on some fronts with Aeropay, none of them have put all of those pieces together the way that Aeropay has, Muller argues, referring to Trustly and Plaid as rivals in certain areas.

The company has been in stealth mode to some extent, but now it’s seeking to gain more visibility, first in selling its services to merchants, but ultimately with the end-user consumers, the CEO said. 

“We are dead set on having a payments brand that is consumer-friendly,” Muller said. “With our complaints, we try to reply to everything. We want to make sure people see us, like we're real people. We're going to answer your call, your email.” 

While Aeropay takes on each industry as a commercial proposition, it also focuses on each vertical’s particular compliance needs. For instance with cannabis, there were obstacles to resolve in handling a product that was still illegal on a federal basis despite being legal in some states. Putting standards in place to meet the regulatory requirements of the cannabis industry have better prepared Aeropay to embrace its next areas of growth, Muller said. 

Taking on the credit card industry

The company has picked up a string of investors as it has evolved. Muller’s mentor and a former Google group manager, John DiCola, was an early seed investor, then came Continental Investment Partners and Chicago Venture, and the latest $20 million round in May was led by Dovi Frances’ Group 11 Los Angeles-based venture capital firm.

Those backers are already potentially benefiting from their investments. Aeropay is a profitable business, Muller said, though he declined to detail the company’s revenue or profits beyond saying that the projected annual revenue this year is expected to be four times what it was last year, and the company has a goal of doubling this year’s revenue next year.

As Aeropay expands its business one vertical at a time, it’s seeking to push aside debit card payments, cash and electronic check use. Eventually, Muller sees moving past credit cards too, doing away with the complicated card processes that include so many middlemen profiting along the way. 

Still, he has no illusions about replacing the credit card industry soon. He understands many American credit card users are tied to their rewards programs, and that there isn’t a robust system in place allowing merchants to use pay-by-bank at the point of sale. 

Tapling also notes that credit cards offer consumers a service beyond being a means of payment, and that is the credit that lets them buy goods and services when they don’t have money in the bank. In addition, an increase in pay-by-bank use would generally mean changing consumer habits. “Consumers are malleable, but their appetite for new things is not infinite,” Tapling said.

There are a slew of rules constructed around credit card use addressing fraud, disputes and other issues that aren’t as well-defined in pay-by-bank, he said.

Real-time payments, in the form of FedNow and its private sector rival, the RTP network, are likely to give a push to account-to-account services, said Rocio Wu, a principal at the venture capital firm F-Prime. Wu notes that Aeropay is also connected to FedNow and RTP for faster payments.

“The consumer demand is there, and I think a lot of startups are starting to realize that leveraging real-time payments can really help them to drive payments efficiencies and also increase the overall competitiveness of their product offering,” said Wu, whose firm hasn’t invested in Aeropay, but does have a portfolio that includes fintechs. 

Building the next payments grid

For now, Aeropay’s pay-by-bank services are a complement to credit cards. Still, Muller’s ultimate objective is to build a new network that will be more cost-efficient for merchants, and ultimately consumers.

“The real long-term vision here is we want to be the next great, next-generation payment network,” Muller said, acknowledging it’s an ambitious goal. Visa and MasterCard “are incredible businesses with unbelievable unit economics and global distribution — that is where we want to go. We want to be the better way.”

Overall, executives in the payments industry have been dismayed with the slow U.S. progress in modernizing the payments system, Muller said, citing the overall lack of around-the-clock services as one example. “I would say there's national frustration that we're not where we could be,” Muller said.

Still, he praised the Consumer Financial Protection Bureau’s recent move to update Section 1033 of the Dodd-Frank Wall Street Reform and Consumer Protection Act to promote more open banking policies in the U.S.

And Muller is working with Federal Reserve officials and industry professionals that have organized as part of the Chicago Payments Forum in an effort to advance the U.S. payments infrastructure. He’s hopeful that some of his company’s real-world experience can help upgrade the country’s payments infrastructure.