GoCardless Raises $95M for Open Banking and Recurring Payments

GoCardless, a London-based financial technology company focused on providing businesses with a comprehensive solution for accepting recurring bank payments from customers worldwide, has secured $95 million in Series F funding.

Reports in The Telegraph suggest this funding round elevates the company to unicorn status. However, assessments indicate GoCardless is valued at slightly above $970 million, leading to its description as a “soonicorn” – a company nearing a $1 billion valuation – for those who consider such classifications important.

This latest investment was spearheaded by Bain Capital Ventures and follows a 46% year-over-year growth rate for GoCardless, driven by the increased adoption of e-commerce and online payment methods during the pandemic. The total capital raised by the company now amounts to $240 million.

GoCardless plans to utilize these funds to further develop its open banking strategy, integrating open banking-enabled bank-to-bank payments with its existing global bank debit payment network. The company explains, “Merchants will now have access to the advantages of both systems for recurring payments: Instant open banking payments will offer enhanced transparency and speed, while bank debit will continue to maximize cash flow and reduce customer churn through automated fund collection – all at a lower cost compared to card payments.”

Furthermore, GoCardless intends to extend its services into the broader e-commerce sector, introducing a straightforward and secure method for making open banking-enabled bank-to-bank payments as a cost-effective alternative to traditional card payments.

The company has consistently promoted direct debits as a superior method for recurring payments, particularly for subscription-based services and regular business-to-business transactions. This is largely due to the fact that debit and credit cards have expiration dates, which can disrupt recurring payment schedules. By incorporating bank-to-bank payments, GoCardless is directly challenging the dominance of Visa and Mastercard in the payment network landscape.

“We believe the strength lies in combining open banking payments with our established direct debit platform,” explains Hiroki Takeuchi, co-founder and CEO of GoCardless, when discussing the company’s entry into the evolving open banking payments space.

“These two systems are highly complementary; open banking offers speed and security, while direct debit provides flexibility and reliability. This combination will create a novel and unique offering that will not only improve our product for current customers but also allow us to target new markets.”

Takeuchi confirms that GoCardless already possesses the necessary FCA authorizations for processing open banking payments, and new products are currently in development with anticipated launches in the first half of 2021.

“We have been closely monitoring the development of open banking and felt it lacked the necessary reliability and smoothness for payments until recently,” Takeuchi adds. “Conditions are now changing, and we believe this is the ideal time to focus on open banking payments.”

An interesting development in open banking is the current consultation by the U.K. regulator regarding plans to enable recurring payments through open banking, potentially offering an alternative to direct debits. Given that GoCardless’ primary strength is its global recurring payments network, I asked Takeuchi whether open banking presents both an opportunity and a potential threat to the company.

“We are not concerned by this – we are neutral regarding the underlying infrastructure we utilize,” he responds. “Our priority is to move money from one bank account to another as efficiently as possible. In fact, we processed the first – and possibly the only – variable recurring payment via open banking last year as part of a test project with the open banking team.”

“If open banking provides infrastructure that replicates direct debit functionality, we will readily adopt it. It’s important to remember that the payment itself is only one component of the overall value we deliver to our merchants – other essential aspects such as reconciliation, refunds, international settlement, and foreign exchange services are equally crucial. Therefore, we are confident in our continued ability to innovate and provide value.”