Interview

May 14, 2024

'We need to get to profitability quickly' - GoCardless CEO Hiroki Takeuchi's new sense of urgency

The payments fintech sees a future in open banking-powered payments amid a strive to reach profitability next year


Tom Matsuda

5 min read

GoCardless CEO Hiroki Takeuchi

Speaking to GoCardless CEO Hiroki Takeuchi in today’s market comes with a note of urgency that might have been less obvious during the boom years of venture investment.

“We’re very clear in our mind that we need to get to profitability quickly,” he tells Sifted.

“We have shifted [away] from what was historically a focus around growth at all costs, we weren’t really focusing on profitability at all with the very significant investment we had.” 

GoCardless — which has raised more than £500m from investors including Passion Capital, Accel and Balderton  — primarily makes money from facilitating direct debit payments for businesses, taking a transaction fee of around 1% depending on the jurisdiction and pricing plan. But now it’s building up a whole new business line — one which Takeuchi says could be a big opportunity for his company.

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One of the factors attributed to its increased costs in its latest financial results was the price of developing its open banking payment feature Instant Bank Pay. Open banking is a system that enables the sharing of financial data between third parties, such as GoCardless, and banks. 

It’s long been talked about for its ability to facilitate account-to-account payments (A2A) where transactions move directly from one account to another bypassing intermediary card networks — like Mastercard and Visa — and the fees they charge. 

“If you were to design a payment system with the internet in mind, this is much closer to what it should look like,” says Takeuchi. “And that’s why we think it’s going to trend in the long term.” 

Going cardless with A2A 

A2A has long been positioned as a challenger to traditional payment methods — and has seen big-name acquisitions by Visa and Mastercard in the last few years. 

Even so, adoption has varied globally. According to a recent report on global payments by Worldpay, it captures 7% of global transaction volume in e-commerce compared to the 50% accounted for by digital wallets and 22% by credit cards.

While it’s seen a slow uptake in countries such as the US and the UK, where credit and debit cards are widely used, Takeuchi sees open banking-powered payments as a valuable addition to its portfolio of payment methods. 

“There's a lot of ways that you can combine all of these different pipes sitting underneath our platform to improve the transaction experience for both the customer and the merchant,” he says. “We look at it as more of an enabler to create a better experience as opposed to a completely different product.” 

Despite the open banking push, Takeuchi maintains that the company isn’t dependent on the payment method in its drive to reach profitability thanks to the relative strength of the direct debit product it’s known for. 

“We can continue to drive growth in our core direct debit products and that gives us the ability to be patient on how the open banking market develops, which is still very nascent,” he says. “We’re not reliant on a completely new mechanism being adopted en masse in the short term.” 

The path to profitable payments 

GoCardless is aiming for profitability next year after its recent annual results showed that the thirteen-year-old payments fintech is still operating in the red. Figures covering the 12 months to June last year say that while revenue grew 31% year-on-year to £91.9m, net losses also increased to £79.6m from £62.9m in the prior financial year. 

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The results also show a nearly 50% increase in international market revenue with a focus on Europe, Australia and New Zealand and North America. Still, the UK, where the company is headquartered, accounts for around 75% of its total revenue. 

“We’re only just scratching the surface in the international markets,” he says. “You have to take a long-term view on these things. If you don’t invest in those things, you’ll never get that.” 

Takeuchi claims that next year’s results will paint a very different picture and doubled down on its previous commitment to reaching profitability next year.

“One of the things that I’m proud of over the last nine to twelve months, is that we’ve been able to accelerate our path to profitability significantly,” he says. “We’ve been able to maintain a strong growth rate throughout the period but we’ve now gone from what was significant loss-making to now being very close to profitability.” 

It's part of a wider change at the company as it shifts away from a growth mentality to one with profitability in mind. It’s a pivot that hasn’t exactly been smooth sailing either. In a bid to prioritise profitability, it cut 15% of its workforce in June last year. 

Even though GoCardless is loss making per its latest annual results, Takeuchi says the company could make further acquisitions. 

In recent years, the fintech has started to buy other companies with the aim of becoming the “world’s bank payment network”. In March it acquired account-to-account payments business Nuapay, following a 2022 takeover of Latvian open banking data company Nordigen. 

“We obviously need to be very mindful of how any acquisitions impact our profitability and we’re continuing to manage that,” he says. “But being able to buy other companies that accelerate our strategy while not altering our path to profitability is a great way of leveraging the capital we have.”  

Tom Matsuda

Tom Matsuda is a fintech reporter at Sifted. Find him on Twitter and LinkedIn