"We're being very open-minded around potential acquisitions and mergers in order to continue our growth."
GoCardless CEO Hiroki Takeuchi expressed that his firm was "very open-minded" regarding potential mergers and acquisitions following the acquisition of Latvian open banking startup Nordigen last year. He foresees a plethora of consolidations in the payments sector in light of the troublesome macroeconomic environment. "We've observed a shift in the market conditions during the last 18 to 24 months," Takeuchi added, emphasizing that it has become more challenging for startups to raise funds. "Thus, we are open to looking into mergers and acquisitions as an avenue to continue our development."
GoCardless, the British fintech company that is backed by Alphabet's venture capital firm GV, is exploring potential mergers and acquisitions as they seek to strengthen their standing in the fiercely competitive online payments sector. In an exclusive interview with CNBC, GoCardless CEO and co-founder Hiroki Takeuchi said, "We're constantly evaluating the market for opportunities that can accelerate our growth, add value to our core payment platform or enhance our open banking offering." Last year, GoCardless acquired the Latvian open banking startup Nordigen in its first major acquisition. Although financial details of the deal remain undisclosed, the acquisition was intended to increase access to banking account information for GoCardless' customers around the world. Takeuchi said, "Are we looking at more of these kinds of deals? We're open to it, not only for us but in general. The payment space is going to have a wealth of consolidation and M&A opportunities, particularly when some firms are likely to come through these challenging times more resilient and even stronger."
GoCardless is a well-known presence in the British fintech industry, having processed more than $30 billion in payments across over 30 countries in a single year. In the first half of 2021, the U.K. fintech sector attracted $2.9 billion in investment – although this was a 37% decrease from the previous year as investors pulled back from money-losing high-growth startups due to difficult market conditions. Despite this downturn, Britain is ranked second on the list of nations with the most fintech "unicorns" – companies that are valued at $1 billion or more – according to Statista data analysed by CNBC.
Takeuchi identified Visa's acquisition of Swedish open banking fintech Tink for $2.2 billion in 2021 as an example of the types of transactions to observe in the potential future. In August, London's fintech firm Rapyd procured PayU GPO, part of PayU's payments sector which is concentrated on emerging markets, from Dutch tech investor Prosus for $610 million.
He stated that the company has been focusing on perfecting its core offering to merchants in order to drive business growth despite the changing market conditions of the past 18 to 24 months. Open banking is an important consideration for GoCardless, which saw a year-over-year revenue increase of 3.5% to £70.4 million ($85.9 million) in FY 2022, yet suffered an increased loss of £62.7 million in that fiscal year. GoCardless' technology enables customers to conveniently pay for subscriptions, such as gym memberships and meal kits, via direct debit. Takeuchi intimated that some companies in the payments sector are facing difficulties in terms of fundraising and may potentially be targets of corporate takeovers. However, he added that their approach to any acquisition will be disciplined and in line with their existing strategy. He also reported that the integration with Nordigen was going well, with GoCardless investing heavily in ensuring a successful amalgamation of their teams. Moreover, the Nordigen technology will be utilized to provide variable recurring payments to third-party firms, which enables them to conduct series of variable payments and intervals on behalf of bank users.
Open banking refers to a set of emerging technological standards that enable third-party tech firms to obtain access to account data held by established major banks, which can then be used to provide new services.
GoCardless has enabled fintech businesses like Coinbase and Robinhood to easily access customers' bank accounts, allowing them to add funds and make payments. These services cover things like money management apps that help customers monitor their spending, as well as credit assessment products that rate a person's creditworthiness on their past spending activities, instead of using major credit bureaus. Takeuchi noted that GoCardless has been receiving interest from Payment Service Providers (PSPs) in incorporating its technology to provide their customers the option of direct debit payments. This is because businesses are getting more selective with their payment service providers, due to increasingly difficult economic conditions. In fact, GoCardless' research found that 50% of businesses used three or more PSPs for their payment needs, while 10% of companies worked with a minimum of five different providers. Cost savings was the most important factor for businesses, as two thirds of firms surveyed by GoCardless wanted to reduce how many PSPs they used, and 34% planned on doing so in the next year. Takeuchi couldn't comment on which payment service providers the company was in contact with, but he did point out Stripe and Adyen as examples of the kind of providers that would be classed as PSPs.
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