This week we have a super-clear dive into Fintech Payments companies with Hiroki Takeuchi CEO and co-founder of GoCardless. GoCardless, founded in 2011, are experts in recurring payments (where they process over $1bn per annum (via the direct debit "pipes").
Their clients range from gyms and scout groups include the UK Government, Tripadvisor, Virgin, the Financial Times and Funding Circle – so clearly they have had their tires kicked and found rock-solid by some high profile names.
They are backed by some very blue-chip VCs including Balderton Capital, Accel partners, Passion Capital and Y combinatory. Their Series A in 2013 raised just over $3m, Series B $7m in January '14 & a large Series C is rumoured to be in the works.
Their nice, simple strapline is “GoCardless is the quickest and easiest way to take one-off and recurring payments online”. They currently take payments from bank accounts in the UK, Sweden and the Eurozone.
Topics discussed on the show include: - running businesses and getting married
- Hiroki's journey; especially around entrepreneurship; Silicon valley, Y Combinator
- where the entrepreneurial meme in young folks life comes from - from next to non-existent at Oxbridge 305yrs ago to having entrepreneurial societies there these days
- the importance of cultural context be it films or communities online in promoting entrepreneurialism - "a lot more awareness of what's possible"
- Hiroki's main lesson from his time in the US - the advantage of US culture in this context
- Payments divide into three main mechanisms in any given country (some have more); "cards" (Visa/Mastercard/etc), "push" (in the UK FPS, BACS), "pull" (UK: Direct Debit, US: ACH, Europe: SEPA)
- only cards are currently "global"; the other systems are fragmented and vary across country/region [pull and push systems often run on the same underlying mechanism]
- the importance of "schemes" - the set of rules that sit on top of the "pipes" that carry the payments
- GC's strength is in connecting push-mechanisms seamlessly together to enable simpler bank-to-bank payments for businesses
- one for a future podcast - opening up access to lower levels of the payments systems rather than "sitting on top"
- innovations in payments in the past 10yrs have been at a fairly superficial level on top of the underlying infrastructures
- the biggest payments innovation in the UK in recent times is FPS (which is a purely banking system)
- BACS basically doesn't exist anymore in the UK as FPS is a much faster "push" payment system
- the challenge for a payments company is that they are in essence "Person C" setting up/initiating payments between "Person A" and "Person B" (and historically the whole system has been designed that only Banks are "Person C"s)
- at present this can only be done via GC having relationships with banks
- a practical example of the benefits if the LFP set up some recurring payments scheme via GC; (1) it couldn't be done for a small number of payments; (2) the process is simpler and smoother; (3) transnational is a pain (at best - in practice via a card system is the only practical way)
- Paypal build on top of various payments systems but act like a credit card provider (hence the level of their fees)
- credit cards as poor ways of handling recurring payments; the average life of a credit card is 18mts, so every month about 1/18 of your payments will fail
- current payments systems don't suit the web; you would never design systems from scratch as they exist today
- GC's vision is to create a global bank-to-bank coherent payment mechanism - at present they use SEPA/Direct Debit/Sweden's syst...
