In this installment of the Challengers series, Rodolfo Passeri spoke with Hiroki Takeuchi, CEO and Co-founder at GoCardless, a payment company that makes collecting payments by direct debit easy for everyone. The GoCardless global payments network and technology platform take the pain out of getting paid for 65,000 businesses worldwide, from multinational corporations to small businesses.
Hiroki, could you please introduce yourself and explain what made you start GoCardless together with Tom and Matt?
The idea of starting my own business goes back to my university days when I joined the Oxford Entrepreneurs, and a summer internship with Y Combinator (the Silicon Valley incubator) gave me the 'start-up bug'. But it wasn't until after a stint at McKinsey that I took the plunge to start my own business. That's where I met Matt Robinson and Tom Blomfield, and we came up with the idea of a group payments start-up.
We got a place on the Y Combinator programme, which helped us hone in on the problem we were looking to solve and provided an excellent grounding in building a tech start-up. To be honest, we had no experience in payments whatsoever, just a strong sense that the existing payments infrastructure was never designed for the internet. In our minds, payments were and still are, broken - and we were on a mission to fix them.
How did you three turn your idea into an emerging Unicorn? Which was the most crucial decision you have taken so far?
Our original idea was around group payments - we knew how painful it was for a group, for example, a grassroots football club, to chase and accept payments from their members. This soon morphed into the idea of making it easier for all businesses to get paid, given the high costs and challenges inherent in existing payment methods. So we founded GoCardless in 2011 with a mission to take the pain out of getting paid.
We initially focused on automating recurring payments (subscriptions, invoices, and installments) through bank debit (known as Direct Debit in the UK). We brought bank debit online, designed an easy-to-use dashboard interface, and most importantly, made it accessible to all businesses, regardless of size. Today we have close to 70,000 businesses using GoCardless to process their payments.
One of the crucial decisions we made early on was to build an API to integrate with partners such as Xero, Quickbooks, Zuora, and Salesforce. The potential of our partner ecosystem is huge, and it means that businesses can access GoCardless through the systems they are already using to run their business.
How has Open Banking changed payments? And what's next for GoCardless?
At GoCardless we're investing heavily in open banking. We predict there'll be a shift away from cards to account-to-account (A2A) - where payments are made directly from a payer's bank account to the merchant's bank account. This negates the need for all intermediaries currently involved in card payments and their costs to the process.
At GoCardless, we've always believed that account-to-account methods are the best way to collect recurring payments. So we've built the world's first global network for recurring payments from the ground up using bank debit, making it easy for merchants to get paid by pulling funds directly from the bank accounts of customers across 30+ countries. But bank debits aren't the only type of bank-to-bank payments. Open banking is making more bank-to-bank use cases possible, and we're hugely excited about the potential it brings to the payments space.
We recently launched Instant Bank Pay, a simple way to collect one-off payments from your customers' bank accounts, which uses open banking to authorize and provide instant confirmation of the payment. And we have more open banking developments on our roadmap.
What are your views on the threat that open banking posts to card networks? Have you seen pressure on MDR due to this?
The internet took payments online - but the reality is that we've primarily digitized existing payment methods rather than inventing new ones. Open banking is set to change that. It provides a viable alternative to the incumbent card networks, meaning people can pay directly from their bank accounts, making faster, cheaper, and more secure payments.
Card networks are responding to the demand for 'non-card' transactions with alternative solutions such as 'Pay with bank transfer' from American Express. We've also seen Visa's failed attempt to acquire Plaid, which clearly indicated that they see open banking as a competitive threat and a space that they must start to play in. We've seen Visa and Mastercard postpone rate increases this year, but that's due to the pandemic more than anything else.
How important is customer experience in FinTech today? And what does GoCardless do to address this?
Most Fintechs are founded to solve a specific problem for their customers. They know there's a way to do things better, and they want to change the status quo. That's why customer experience is a central tenet in most Fintechs, and it's definitely one of ours. We deal with the commodity that is the lifeblood of all businesses - their cash. So we have to create an experience that fosters trust. Trust that we'll collect payments from their customers and make payouts to our merchants on time, every time. And if there is a problem, we'll sort it out.
We have operating principles that provide guideposts to help everyone navigate working together and decision-making. One of these principles is 'Think like a customer.' Its purpose is to help our employees think about our decisions' impact on our customers and then hold ourselves accountable for those decisions. We also default to being transparent with our customers at all times.
What do you think the next wave in fintech will be?
I think open banking will start to play an even bigger role as banks come to realize it's a tool for innovation rather than a regulatory burden. We'll begin to see the banks fostering closer relationships with Fintechs to commercialize their own banking services in new ways as a result of the innovation being created by open banking.
As part of this trend I expect to see an acceleration in the wider adoption of account-to account payments. Variable recurring payments (VRPs) are set to launch in the UK, real-time payments will accelerate in the US, SEPA will enable more real-time push payment capability and the PayTo functionality will be released on the New Payments Platform in Australia.
Another trend that I am 100% committed to is sustainability. I think we will see a more significant focus on this - both in how FinTechs run their businesses or the solutions they offer around sustainable finance. It's a topic that should be high on the agenda for everyone. GoCardless is a founding member of TechZero, and we have committed to measuring all of our emissions, setting a net-zero target by the end of 2021.
Any advice you feel to give to aspiring Fintech entrepreneurs out there?
These are the top three tips I'd give to anyone looking to start their own business:
Don't underestimate the length of the journey. We're nearly ten years in, and it doesn't even feel close to the end. Be conscious of what you're getting into and be ready for it, because if you're up for the challenge and the length of the journey, it can be the most rewarding thing that you do.
Reflect on what you want to achieve when founding a business. The motivations are important because it'll be easy to be disappointed if you're purely in for the end outcome. You have to be in it for the journey itself. The fun of it for me is that I don't know where this is going - the vision keeps evolving, what you think you can achieve keeps getting bigger, and I find that exciting.
Hire the best people around you. It sounds obvious, but I never really appreciated that starting a business meant you would lead people. I found the transition from being a founder with a small team, working as peers to get the job done to being a CEO and leader of a bigger business very challenging. But the reality is, all of the team built the business. So it's essential to hire good people around you, particularly if they bring different experiences that you can learn from.
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