The adoption of open banking and instant payments is moving slowly in the United States compared to other markets around the world, for example Brazil. That said, the new FedNow program launched in July 2023 and data sharing regulations are imminent, so more possibilities are on the horizon.
Until then its co-founders Zoom Rails say consumers’ experiences with payments continue to be fragmented, meaning companies need to build a technology stack to provide a wide range of services to their customers. The Montreal-based company takes the approach of providing an all-in-one payment gateway that combines open banking with instant payments.
Marc Milewski and Miles Schwartz started the company in 2019. Milewski’s background is in treasury payments and was an early employee at accounts receivable automation software company Versapay. While there, he worked on what eventually became Canada’s first webhook-enabled EFT portal.
“You learn about all the problems that everybody has in moving money,” Milewski told TechCrunch. “Open banking was discussed, but I thought it was more about payments. Miles and I talked about building an entirely new portal that unified these experiences. Companies don’t want to be payment experts — that’s our job.”
They started building software to simplify the complexity of moving money through different payment rails so that companies can use whichever approach makes sense for their business. Their technology leverages “omni rails” for payments, be it traditional credit, debit or electronic money transfer options. It also provides real-time options through partners including Visa Direct, Mastercard, MX and Canada’s Interac network.
Zūm Rails manages the flow of money, including reducing fraud and failed transactions, by verifying a customer’s identity, connecting directly to bank accounts, and facilitating payments through the customer’s chosen method.
The company now processes more than $1 billion in payments through its platform each month for more than 500 companies, including Questrade, Coinsquare and Desjardins, which is a major credit union federation in North America. Last year, the company grew over 200% and launched in the US in late 2023.
Milewski and Schwartz created Zūm Rails, building it on a team of 30 people. Last year, the couple decided to raise venture capital.
“We’ve reached the point where we realize that bootstrapping is no longer healthy for our business,” Schwartz told TechCrunch. “We have some big initiatives that we want to work on and grow. Now it makes sense to do it all at once, and it’s healthy for the business to now go all-in and use the fuel.”
Zūm Rails technology leverages omni rails for payments, whether traditional credit, debit or electronic money transfer options. Image Credits: Zoom Rails
They closed a $10.5 million Series A funding round, led by Arthur Ventures, and plan to invest in US growth and expansion of their payments offerings which will include introducing new banking-as-a-service features for merchants. In addition, Zūm Rails is working on a US FedNow offering that will allow businesses to send and receive FDIC-insured payments in seconds.
Zūm Rails’ performance to date “has been really impressive,” Jake Olson, vice president of Arthur Ventures, told TechCrunch. He called the company “ideal” for its investment thesis, which is B2B software companies with high growth and capital efficiency.
“Achieving profitability without outside capital is impressive,” Olson said. “Their product positioning is also really exciting. Rather than patching together disparate systems, Zūm Rails can provide organizations with an end-to-end solution that empowers the entire transaction journey and allows them to have a seamless experience for their end users. Any organization that sees streamlined digital financial interaction combined with the ability to make instant payments as a competitive advantage will be a great fit for Zūm Rails.”
