Creating a Global Payment Network with Hiroki Takeuchi (GoCardless)

Foreign Thank you for having me so you've had a Fantastic year but maybe let's start With uh explaining what good cardless is In a few words yeah I've rarely seen a Startup name that is as self-explanatory As it is because the name says it right Here yeah you don't believe in card Payments you think companies should go Cardless and switch to direct debits Yeah why is direct debit so powerful Yeah so what we do is we help businesses With recurring models to collect those Payments uh via direct debit mechanisms And the reason we think that's Interesting is because obviously there's Been a lot of it Disruption and Innovation on uh payments In general but it's all been focused on E-commerce and Retail and as we see more And more businesses move to recurring Models like subscription models Invoicing models like usage-based models Um that that kind of way of taking Payments doesn't work very well Um and so what we're focused on is Building Technology on top of the the Rails that are designed specifically for These recurring business models and Making them much easier much more easily Uh usable online uh and more globally Available as well and it seems like the Perfect solution for like utility bills For instance if you want to pay for

Electricity water it's there's a very Low fee there is much less Um like dropouts because it doesn't Expire over time yeah Um but what about some other areas that Could take advantage of direct debits is It just for utilities no no absolutely Not so we work with about 50 000 Businesses collecting around 15 billion Dollars a year through the platform and It's a huge wide range of businesses Everything from really small you know uh One-man band kind of accountants Professional Service firms which are Billing their clients on a regular basis All the way through to much larger Organizations and working with uh bigger Technology companies like like DocuSign Or uh like uh xero to help them to Enable their customers to to get paid so You know it's a very wide range of use Cases and especially as we're seeing More and more of the economy move to These kind of subscription-based models Uh we're seeing a wider range of Industries adopting this kind of way of Getting paid okay one more question About direct debits yeah I think Customers are pretty happy about sharing Credit cards numbers online is there Some friction when you're asking Customers to enter banking information Directly yeah and not just a credit card Number well it's funny because when we

First started we always had this sort of Worry right we thought about this a lot And especially when we were in the us When we first started and obviously in The US everyone's very focused on credit Cards uh so it was something that we Worried about a lot but actually we've Seen that that's not been the case at All and uh as we've kind of expanded and Gone across lots of different markets We've done quite a lot of research into The way that people prefer to pay for Things and and so you know in most European countries and and also a lot of Other countries around the world as well Uh these kind of debit mechanisms are The way that people prefer to make these Kind of payments right they like the Fact that they can see what's going on From within their bank account they like The fact that it's more reliable so they Don't have to keep on you know changing Their information all the time Um and so you know it's like the number One way for customers preference wise to Pay in a lot of different markets so Actually that's not been a problem at All and is there some protection against Fruit for instance if a fraudulent Company yeah is using Yeah so there's obviously it varies from Country to country but most countries Will have like a kind of a guarantee Scheme in place to protect customers if

Something goes wrong so it's a very safe Way of paying so go car less has been Around for eight years nine years now Yeah it's uh I guess we're coming up to Nine years yeah and in the middle of Building this business you had an Accident a terrible accident yes Um I'm sure it has been a challenge as Well because you had to spend some time In a hospital I did indeed tell us more About that yeah so I I had a cycling Accident in London uh about just over Three years ago Um which left me paralyzed from the Chest down Um so that's that's why I use this Wheelchair Um and yeah I mean I had to be in Hospital for quite a long time Um so I was sort of out of the the out Of action so to speak for uh about three Or four months uh where I was just sort Of living in hospital and recovering Um so you know it it was quite a Challenge like obviously personally uh But also professionally you know from The perspective of you know Um Being able to to continue to run the Company and you know I think that we Were I was quite lucky because we were Established enough and you know a big Enough company that uh we were able to Keep on going without without me being

Around Um and I had a very supportive set of Investors supportive board supportive Team and then also supported family to To give me the space to to kind of Recover before I went back to work let's Talk about the team in particular Because I'm sure while you were Recovering you you couldn't be here day To day like actively talking with the Team and interacting with the team yeah How did that play out with the team well I mean I think that for me it was uh it Was actually quite a positive experience In a way because you know obviously when When you've been you know running a Company for a long time you you kind of Get stuck working on lots of different Things and I think what I realized was That actually The team were ready to take a kind of a Step up and take on more responsibility And you know cover for me basically Right because I wasn't I wasn't around So I wasn't doing anything Um and so you know it was great to see The way that the team kind of uh came Together and uh and stood up to the Challenge and and then actually it gave Me an opportunity to When I went back to work rethink what my Role was and you know how could I add The most value and and have the biggest Impact for the company and so uh it was

It was actually quite a positive Experience I had to say so it was kind Of a very weird sort of Bittersweet kind Of experience because obviously on the One hand you know personally it was very Very challenging and it's been it's been Tough but uh it's from a professional Perspective it's actually been uh quite Positive I'm very impressed by the fact That you're saying it's positive yeah Well you have to take some kind of Silver Linings from it I guess yeah and So you said you had to rethink the way You work and you roll in the company Yeah is there a change in the framework Around you like new leaders that are Willing to take some more Responsibilities yeah so I mean we've Since I've come back uh from my injury That the company's grown a lot so I Think we were probably around 100 people Uh when when my accident happened we're Now around 400 people about three years Later so we've scaled the team quite a Bit we've brought in a lot of kind of Executives and and people to help run The company As well during that time so it has Changed quite a lot but I think what's Been for me quite uh a sort of a useful Uh I guess outcome from from the whole Experience was that because when I went Back I was I was I'd basically made Myself redundant right like I wasn't

Doing anything Um it meant that I was I could be very Selective about what I focused on and And you know what I continue to let the Team do and I think I realized that Actually without you know being Conscious of it I was micromanaging a Lot before uh this injury you know I was Getting involved in a lot of things Where actually the team did a much Better job without me there right so so I think it made me realize you know that It's it's better to to give the team More uh more kind of I guess uh latitude And uh more scope to kind of run with Things Um and and then I just kind of focus on A few bigger issues yeah as you Mentioned briefly you've come back Stronger than ever because the company Is doing really well right now so this Year I think you've raised 75 million Dollars yeah you said you have 50 000 Kians and you handle like billions of Dollars in transaction yeah and it seems Like you have a new Focus right now you Want to push further and further when it Comes to Global expansion uh how do you Think such a local payment system can Become a global company yeah so I mean I Think that for for me this is uh one of These examples of something that in the Early days was a really big frustration But we've managed to turn into an

Opportunity because you know what one of The problems with these direct debit Systems is that they're very tied to the Banking system right and uh so as a Result they're very geographically Constrained like every country has its Own version of a direct debit system and Unlike the card networks you know like The Visa and the MasterCards of the World there is no kind of global way of Collecting payments like this Um and so what we've been focused on Over the last couple of years is Building out that Global Network which Connects all of these directed systems Together uh into a single uh platform And and so you know we've gone from uh You know I guess a product that was very UK focused initially to now being able To collect payment across over 30 Countries which covers about 70 percent Of recurring payment volume globally and So you know that that's been a really Big uh challenge to build that but I Think that what we think is that by Doing this we've built something very Unique because we're able to empower Businesses that have customers all Around the world to collect payment via The mechanism that makes the most sense Without having to worry about lots of Different partners and lots of different Payment Models All Around the World Um and so you know that that's taking us

Into new markets uh helping us to have Conversations with businesses with a Much larger footprint from a Global Perspective and we think we've we've Kind of created something very unique There so you mentioned visa and MasterCard do you think it would be fair To say that you want to become the sort Of Visa of direct debits yeah absolutely I think that's a that's a nice way of Putting it yeah on MasterCard I don't Know which one you prefer I I mean They're both great companies Either would be good no I think they're Great for what I I do right I mean I Think the point here is that Um a lot of a lot of the time people go Okay you're competing with these other Payment companies and that is kind of True but actually payments is a really Large uh market right and the reality is It's not a single Market it's a set of Quite fragmented markets fragments are Both from a geographic perspective but Also from a use case perspective and so You know what we're not trying to go and Like I mean I know that our name is Go-cardless but you know we're not Trying to go and say okay well let's go And like eat Visa or MasterCards lunch Uh you know I think that cards make a Lot of sense for retail and e-commerce But they don't make as much sense for These kind of recurring business models

And so we think that there needs to be Different ways of collecting depending On the use case and so you know it for Me like you know what we're really doing Is building a Global Network dedicated To recurring payments uh and that that We don't think exists in the world so It's not so much a competition it's more Of a different path and one of the main Arguments against card payments is that Fees are kind of high and you have lower Fees in general I would say yeah so Let's talk about the business do you Think it makes sense over the long term To take low fees like that and you're Going to become you know profitable at Some point yeah I mean I think that you Know at the end of the day one of the Reasons why card networks are quite Expensive is because there's a lot of Parties in between each transaction and If you think about uh the the way in Which the card networks were built and They were built in a world where the Internet didn't exist right so it was You know the problem they were trying to Solve was how do I pay for my meal in a Restaurant when that restaurant has no Connection to the banking system and the Internet doesn't exist so it's a very Different Challenge and as a result you Have a lot of these different uh players In between each transactions so you have You know the processors the acquirers

The networks themselves the issuers and Each of those parties needs to take a Cut of every transaction right so There's this kind of structural problem Where you know you have like interchange With when it comes to cards and it's Very difficult for the industry to to Get below that or cut that down because You know at some point someone has to Either disappear or take a lot less Margin Um and so you know one of the benefits Of these direct debit systems is that Because they're built directly into the Banking system that there isn't that Same sort of layered effect in terms of A number of parties in between each Transaction Um and so you know we think that it's Possible to offer lower fees in a quite A sustainable way because of the the Nature of the the mechanism that we're Building on top of and and I think that You know probably in the long term this Is kind of a trend that we'll see across Every all payments right where you know As this becomes more commoditized and You know it becomes easier to transact And there's multiple options I think That we'll naturally see that fees go Down but at the same time scale goes up Right you know I think that payment Companies are becoming increasingly Global and so I think that you know that

I'm not too worried about the Sustainability of the model Even though you hired a ton of people This year like does it does it make Sense like let's look at Revenue today Like what does it look like when it Comes to profits or losses yeah well I Mean like for us you know we focus on Two things right one is How profitable and sustainable is the Underlying model right Um so you know can we create good gross Margins uh are the customers that we on Board are profitable to serve that kind Of thing and then there's like growth Right um and what we're really trading Off between is you know profitability uh Sort of an overall basis with growth Because like you know we can always be Profitable just by investing Less in Growth and then you know we'll be Profitable we'll grow as fast and and Our view is that we really want to be Investing in growth as much as possible So we focused Less on the short-term Profitability because we have a lot of Confidence in the underlying economics Of the model and then we invest that you Know uh so lack of profit into growth And if you can still see a clear path to Profitability I always yeah I mean I Think that for us we're always in a Position where we if we want to be Profitable we can just slow down

Increasing investment and then wait for The revenue to catch up because it's you Know always naturally growing so uh it's Very easy to be profitable uh let's Switch gear a bit a few weeks ago you Announced a partnership with Transferwise a company not far from from Regardless in London Um essentially well tell us how it works Exactly yeah so I guess when we were Talking about this Global Network that We've been building Um one of the big challenges is that Because you're collecting payment Directly from someone's bank account you Can only collect in the local currency Right so you know if I may you know uh Business based in Germany and I would Have a customer in Australia I can Collect directly from their bank account Using our platform but I can only Collect in on Australian dollars and you Know if you're a really large company With a lot of sophistication and Operations around the world that might Not be a problem because you probably Have you know employees in Australia you Have a bank account in Australia but a Lot of businesses don't have that right And so you know one of the things that's Been really important when we think About this network is the ability to Collect payment from anywhere in our Platform to anywhere else in our

Platform without worrying about the Currency and so that that obviously uh Leads to FX and you know when we were Building that capability we wanted to Partner with the best provider and you Know for us uh Um transfer is a a really great partner We have very shared kind of routes and Also very shared uh sort of culture in Terms of believing a lot in transparency In Simplicity Um and so you know it was a very natural Fit when we were thinking about how to Build this into the network and you know What what this partnership enables us to Do is enables us to open up the the Network that we've built to a much wider Variety of businesses and no matter Where they're based and what size they Are so it also means that if some Something goes wrong with transferwise It could be an issue for you why did you Think it would be better to partner with A company instead of building this Feature in-house Well I think that you know that that's Kind of a decision that you make all the Time right when you know software Companies are building their products I Think is really important that you find Your area of Focus right you know it's Very easy to say okay well you know you Could make the same argument about using AWS or Google Cloud you know it doesn't

Make sense for you to go and like start Going and building Cloud infrastructure If you're building a SAS platform right Um and so you know I think this is a a Decision that you we make all the time And you know I think that for us we see That our area of focus is building that Connectivity into all of these direct Debit systems and then Building Technology on top of them to make them Really easy to use and making them much Better than if you went and built the The integration yourself Um and you know that FX isn't really Part of that core Focus for us that you Know I think that it's a really core Part of what enables the network to Thrive but we think that you know we're Much better place partnering with Someone like transferwise that has a lot More scale and a lot more expertise on There than trying to you know rebuild What they've built from scratch let's Talk about the other payments tech Companies yeah thinking about stripe Again like many of them started with Card payments they've also expanded to Direct debits in one way or another You're probably the experts in the room Um in this space yeah but how do you Feel about competition with this sort of General payment players Yeah so I mean I think the the first uh Thing that we think about is like these

These are really large markets Um so you know we don't think it's a Problem to have competition we actually Think is a good thing because it you Know pushes you to try and improve Um and you know so I think I don't think That payments is going to be a market Where there's going to be a single Winner right you're seeing really really Large companies uh be built and you know Even you know just now today like you Have PayPal stripe at the end these are All companies that are worth tens of Billions or if not hundreds of billions Of dollars Um so you know there's definitely like a Lot of space to thrive right so you know We don't worry too much about Competition per se Um I think that you know for us the way That we think about differentiating and And building something unique is by Taking at that different Focus right so What we see most payment companies Focusing on is e-commerce and Retail And a lot of uh The Innovation right now Is happening by merging retail and E-commerce right so you're seeing Companies like rdn and stripe and PayPal Buying like point or building point of Sale technology so that they can be in Store as well as online that kind of Thing right that that's a huge space and A huge problem

Um but I think that as a result you know When they build technology on top of These direct debit systems and when they Build technology for these recurring Models it's really like their secondary Focus you know maybe it's 10 of their Focus maybe five percent of their focus But it's clearly not 100 of their focus And you know for us the way we Differentiate is by saying okay well Look we're going to be 100 focused on These recurring business models and We're going to build the best possible Way of collecting recurring payments Um and that Focus leads you down a Different path with a different solution And we think by taking that you know Clear Focus we can we can build Something very unique so you know I Guess the the way we think about Differentiation is through the Perspective of focus so one last Question because we're running out of Time yeah do you think you're going to Pull a stripe and expand to card Payments for instance no we don't have Any plans for that no all right thank You very much hierarchy thank you for Having me cool [Applause]