Fintech
The fintech is open-minded towards further acquisitions and is aiming for profitability in 2025
Hiroki Takeuchi co-founded GoCardless in 2011 with Matt Robinson and Tom Blomfield, who later co-founded Monzo in 2015. Photo credit: Rachel Takeuchi
London-based payments fintech GoCardless is evaluating further acquisitions in the open banking space as it looks to recover from a challenging 2023 and achieve profitability next year.
The company, worth $2.1 billion (£1.7 billion) in a 2022 funding round, is poised to jump on a looming wave of consolidation among fintechs as part of efforts to become “the banking payment network”.
Fintech valuations have generally peaked in 2021, with the sector grappling with interest rate hikes and higher financing costs that have hampered investment.
“One thing that is true for most financial services companies is that significant scale is needed, especially when you think about compliance requirements and fixed costs,” GoCardless co-founder and CEO Hiroki Takeuchi said City AM
“This combined with the change in the financing environment it means that previously there were more opportunities to grow on that scale with more funding. Now, that may not actually be feasible.
GoCardless, founded in 2011, made its first major acquisition in 2022 when it acquired Latvian start-up Nordigen, which claimed to have the broadest open banking connectivity in Europe.
“We are in a very fortunate position where we have already achieved a significant level of scale. We raised significant funding before the environmental change,” Takeuchi said. “We want to take advantage of opportunities to accelerate.”
In March, GoCardless agreed to buy open banking rival Nuapay from Australia’s EML Payments for €33m (£28m) in a move that would “unlock new verticals and use cases” in areas such as payroll, utilities, insurance, gaming and gambling.
Takeuchi said the company is evaluating further mergers and acquisitions. “We are absolutely open-minded,” he added. “But I think the key thing is that we want to stay very disciplined. We don’t want to go and acquire things just for the sake of acquiring them.”
Profitability in the very near future‘
Takeuchi’s comments come as GoCardless pushes toward profitability as quickly as possible after a difficult 2023. Last month, recorded a loss by £78m for the year to June 2023, an increase of 21% on the previous year.
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The company said the outcome was expected and highlighted its investments in product development as well as the compliance costs involved in serving customers globally. There has also been a higher rate of customer cancellations, partly due to merchants going into administration in a challenging macroeconomic environment.
GoCardless launched a redundancy program last June that saw more than 200 people, or nearly a quarter of its workforce, leave the company. “We’ve made some painful changes. We had to let some people go. I don’t think it’s rare,” Takeuchi said.
“Whereas before we were much more focused on growth at all costs, now we are very focused on how to continue to grow, but in a more profitable way.”
The company said in April that it aimed to reach profitability within the next 12 to 18 months.
“We have made really great progress in this regard over the last year,” Takeuchi added. “There are many reports on historical accounts, but they are from June 30, 2023, so they are almost 12 months out of date.
“We’re pretty close to profitability now, and we’re in a position where we’re very well capitalized – we have a lot of cash on the balance sheet. We think we will cross this path and operate profitably in the near future.”
Takeuchi added that the company has grown its volumes and revenues between 30 and 40 percent over the past 12 to 18 months, with nearly 100,000 businesses now collecting payments through its platform.