Go Cardless approaches unicorn status

Darren Sinden

Research conducted for GoCardless suggests that between 10 and 15% of all card payments fail and GoCardless maintain that by using their services that figure can fall to well below a 1% failure rate.

Electronic payments platform GoCardless is edging closer to achieving Unicorn status helped by increasing demand for digital payments solutions during 2020. The appraised a further $95 million dollars last week in a funding round that was led by Bain Capital’s venture division.

The latest funding round has pushed GoCardless’s valuation to $970 million just a stone’s throw (relatively speaking) from attaining the exalted Fintech status of Unicorn named after the mythical beast.

Not a bad performance for a business that was formed in 2011 and whose valuation has therefore effectively grown by $100 million per year.

Based in London, GoCardless has attracted investment from the likes of Salesforce and Alphabet, the parent company of search engine giant Google.

GoCardless services allow businesses of all sizes to collect electronic payments from customer across the world and the business has a particular emphasis on recurring payments such as subscriptions and direct debits. GoCardless counts the UK Government, insurance giant AON and review site Tripadvisor among its clients.

GoCardless aims to increase customer engagement and tenure by reducing its clients failed payment rates. Helping to improve cash flow, reduce costs and removing barriers to overseas trade for both small businesses and larger enterprises alike.

Research conducted for GoCardless suggests that between 10 and 15% of all card payments fail and GoCardless maintain that by using their services that figure can fall to well below a 1% failure rate.

Gocardless systems can be integrated into 200 software applications including Salesforce, QuickBooks and Sage and they provide end-users with payments tracking and analytics tools.

GoCardless can provide business users with API access and integration and pre-built payment pages that can be customised and embedded into existing websites. GoCardless currently operate in 30 different countries and its service are utilised by 55,000 businesses around the globe.

GoCardless had not intended to raise new money until 2021 but the changes to life encountered in 2020 have driven unexpected levels of growth with revenues at the business growing by 46% year over year in November 2020. According to companies house filings, so it seized the opportunity to tap investors earlier than planned.

Previous growth hasn’t led to profitability, however, indeed losses at GoCardless in 2019 almost doubled to £27.30 million after revenues jumped by 31% to £29.3 million.

The firm is processing around $18.0 billion or £13.50 billion worth of payments annually but hopes to build on that by taking advantage of the growth of open banking initiatives in the UK and Europe. It is developing payments to work in conjunction with these so as to be able to take money directly from end customers accounts, bypassing traditional payment processors such as Visa and Mastercard in the process.

Matt Harris, a partner at lead investor Bain Capital Ventures was quoted as saying that: “As we see the chessboard, the real opportunity is in these new types of payment — huge flows where a card is not the best instrument (to use)”

Payments processing is a low margin business that requires large volumes to make it profitable. Quite where the critical mass will be and how long it takes GoCardless and its peers to get their remains to be seen.

Let’s not forget, however, that in the past banks have been happy to step out of or subcontract marginally profitable businesses to third parties. This has often been the case when they are trying to reduce their own internal costings and don’t wish to invest in legacy systems and procedures. Could something similar happen in the recurring payments space in the near future I wonder?

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