GoCardless has become somewhat of a poster child for the London fintech scene. Offering an alternative to card payments, the startup provides a simple way for businesses to set up and accept bank-to-bank payments online (also known as Direct Debit), and is now processing £1 billion worth of payments annually. That’s up from £500 million in July — a figure that co-founder and CEO Hiroki Takeuchi tells me is on track to double.
Meanwhile, to build on that traction, the company is disclosing that it’s raised a further $13 million in funding, money Takeuchi says will be used to increase spending on sales and marketing, including further international expansion, and to meet growing demand for the payments platform.
The round is being led by new investor Notion Capital, with participation from existing backers Balderton Capital, Accel Partners, and Passion Capital. It brings total funding for GoCardless to $25 million.
Founded in 2011, and after unsuccessfully trying its hand at group payments, GoCardless has built out a platform to make it infinitely easier for small and large business to accept bank-to-bank payments as an alternative to card payments. In particular the startup is targeting subscription-based commerce or any other type of business that relies on recurring payments.
That’s because by taking money directly from a customer’s bank account, many of the pitfalls of card-based payments are avoided. This includes when a card is lost, stolen or expires, contributing to a failure rate of up to 15 per cent for card transactions. Direct Debit/bank-to-bank payments offer a potentially much more robust means of accepting regular payments.
To that end, Takeuchi says GoCardless is now open for business in Spain, Sweden, and the Netherlands, adding to existing operations in the U.K., France and Germany. That’s no mean feat when you factor in the considerable technical, trust and regulatory barriers needed to cross when the company expands to a new country.
Not only does GoCardless have to build new technology to interface with the various disparate banking systems in each new geography, but it has to persuade country-specific banks that it can be trusted as the middle-person able to offer businesses of all sizes access to their bank-to-bank payments systems.
In fact, arguably, it’s the banking and regulatory relationships, underpinned by GoCardless’ anti-fraud and anti-money laundering ‘secret sauce’ — which sees it on-board new customers and maintain ongoing checks in a relatively automated fashion — that makes the company’s offering fairly defensible. Takeuchi says it would take a lot of resources and time to replicate the GoCardless platform.
In total, GoCardless says 16,000 merchants are using its wares. Customers include major brands such as Thomas Cook, The Financial Times, and Trip Advisor, as well as SMEs. That’s noteworthy when you consider that the startup charges a fee on each transaction.
Listen to TechCrunch’s interview with GoCardless CEO and co-founder Hiroki Takeuchi recorded last July