Fintech ‘open’ to further acquisitions as it expects profitability in 2025

Saturday, May 11, 2024 at 9:00

Hiroki Takeuchi 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 considering further acquisitions in the open banking space as it looks to bounce back from a challenging 2023 and achieve profitability next year.

The company, valued at $2.1 billion (£1.7 billion) in a 2022 funding round, is poised to challenge the coming wave of consolidation among fintechs as part of its efforts to become the “world’s banking payments network”.

Fintech valuations generally peaked in 2021, and since then the sector has grappled with interest rate increases and higher financing costs that have hampered investment.

“One thing that is true for most financial services companies is the need for scale, especially when you consider compliance requirements and fixed costs,” said GoCardless co-founder and CEO Hiroki Takeuchi. City AM

“This, combined with the change in the funding environment, means there was previously a greater opportunity to develop on this scale with more funding. This may really be impossible.”

Founded in 2011, GoCardless made its first major acquisition in 2022, acquiring Latvian startup Nordigen, which claimed to have the broadest open banking connectivity in Europe.

“We are in a very fortunate position because we have already achieved a significant level of scale. We raised significant funds before the change in environment,” Takeuchi said. “We want to take advantage of opportunities to accelerate.”

In March, GoCardless agreed to buy open banking rival Nuapay from Australian company EML Payments for €33m (£28m), a move it said would “unlock new verticals and use cases” in areas such as payroll, utilities, insurance , games and gambling.

Takeuchi said the company is considering further mergers and acquisitions. “We are completely open,” he added. “But I think the most important thing is that we want to remain very disciplined. We don’t want to go and just acquire things for the sake of acquiring them.”

Profitability in the “very near future.”

Takeuchi’s comments come as GoCardless aims to reach profitability as quickly as possible after a difficult 2023. Last month it reported a loss of £78m for the year to June 2023, an increase of 21% on the previous year .

The company said this result was expected and cited investments in product development as well as regulatory compliance costs associated with serving customers around the world. There has also been a higher rate of customer churn, partly due to retailers going into administration in a difficult macroeconomic environment.

Last June, GoCardless launched a redundancy program that resulted in more than 200 people, or almost a quarter of its workforce, leaving the company. “We made some painful changes. We had to lay off some people. 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 we will continue to grow, but in a more profitable way.”

In April, the company said it aimed to achieve profitability within the next 12 to 18 months.

“We’ve made really good progress on this over the last year,” Takeuchi added. “There are many reports of historical accounts, but they date back to June 30, 2023, so they are almost 12 months out of date.

“We are already close to profitability and we are in a situation where we are very well capitalized – we have a lot of cash on the balance sheet. We believe we will cross this path and operate profitably in the near future.”

Takeuchi added that the company has increased its volume and revenue by 30-40 percent over the past 12 to 18 months, and nearly 100,000 businesses now collect payments through the platform.