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What's up at GoCardless: November 2016

📷 Matt Heath @mattheath

2nd November - The DevOps Series: Insider Talks

The Insider Talks is the first event on GoCardless DevOps Event Series. Our own Chris Sinjakli presented "Lessons Learned the Hard Way: Postgres in Production at GoCardless" and Simon Vans-Colina presented "DevOps at Monzo". Stay tuned for more information on the next event!

16th November - Trans*Code London Remembrance Social

The Trans*Code community has had a busy year. It was one marked by incredible accomplishments from members of our community, but also touched by loss. One of our much loved community members, Emily Voukelatos, passed away earlier this year. Her coworkers, friends and members of the Trans*Code community created an event to gather and remember her, while looking back at the year that's ended and forward to the one ahead.

21st November - The Family. Stop Paying for It: How to Not Waste Money as an Entrepreneur, by Oussama Ammar

Join TheFamily for a talk by Oussama Ammar, Co-founder & Partner at TheFamily, to hear about how you can stop wasting cash. 💸

Wondering what we’re up to next month?

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GoCardless helps Bacs break new records

Bacs broke new records recently when it processed the staggering figure of 109.3 million payments in just one day. The figure, achieved in September, overtakes the previous daily high of 103.7 million transactions, recorded in April, and represented an increase of 5.4%.

Thanks to this achievement, Bacs already looks set to overtake the figures it set in 2015, when over 6 billion transactions were processed for the first time, reaching a value of £4.6 trillion. That included an impressive 3.9 billion Direct Debits, an increase of 239 million compared to the previous year. Bacs (short for Bacs Payment Schemes Limited) is the organisation behind Direct Debit, the popular UK payment system.

Direct Debit has played a key role in enabling the success of Bacs, with its continuing popularity in the UK certain to have boosted the organisation’s growth. Latest figures show that 9 out of 10 adults in the UK have at least one active Direct Debit and pay around 73% of their household bills using this payment method.

The success of Bacs and Direct Debit spells good news for the cutting-edge payments solutions that are now supporting them, such as the Direct Debit payment system offered by GoCardless. As the UK’s number one Direct Debit provider, it’s interesting to consider where we fit into this.

We’re not only simplifying Direct Debit for businesses large and small, but we’re also supporting the growth of Bacs as we go. In fact, between April and September 2016, we increased our volume of Direct Debit transactions processed by 36% - contributing to the overall 5.4% that Bacs managed to achieve. Pretty impressive, if we do say so ourselves!

Direct Debit has been around for many years. In fact, it’s the UK’s favourite payment method with its usage continuing to grow. Direct Debit has gained such a strong reputation in part because customers are protected by the reliable Direct Debit Guarantee. Direct Debit is also very simple to set up - with money is taken automatically from your account on the specified day. There’s no need to update your details, unlike when using credit and debit cards.

Bacs CEO Michael Chambers sees the great results of Bacs and Direct Debit as a vote of confidence in “simple, reliable and convenient solutions for users”, which form an integral part of the UK’s financial infrastructure.

At GoCardless, we’re playing our part in supporting the UK’s innovative payments environment, while also helping Direct Debit to grow and flourish. In particular, we’ve opened up access to Direct Debit for many small businesses that couldn’t use it before. At the same time, we’re offering customers such as Vax and Thomas Cook a new way for their customers to pay - in convenient instalments.

The future looks bright for Direct Debit, which has consistently proven its worth as a reliable, safe and convenient payment method.

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GoCardless recognised as UK's fastest growing FinTech company in Deloitte Fast50

We’re thrilled to announce that GoCardless took first place in the fintech sector in the prestigious UK Fast 50 Awards. We were also awarded second place overall. Our growth rate was an impressive 6661%!

Robert Whiteside, our VP of Sales, said: “We’re so pleased to recognise the hard work done by the team over the years to build a great solution that our customers love using.

“It’s exciting to see that you can take a proven and popular payment method like Direct Debit and make it fit for the digital age, unlocking so much potential for our merchants who are working hard to bring modern solutions to the market. We’ve been privileged enough to help great businesses get off the ground and scale, and in turn grow with them to such an extent that we’re recognised as a leader in our peer group.”

The Fast 50 awards are a fixture in the UK technology arena, having been around for almost two decades. Deloitte launched the award programme in 1998, to recognise growth driven by the leading technology companies. Today, the awards celebrate the UK’s finest examples of innovation and entrepreneurship. Now in its 19th successful year, the Fast 50 is an acknowledgement of the UK’s 50 fastest-growing companies, with rankings based on revenue growth over the previous four years.

In the fintech industry, GoCardless, Smarkets, KANTOX and WorldRemit reached the top ten of the Fast 50. Overall, the 50 top companies generated £884 million in total annual revenue in the year 2015/16, employed more than 7,100 people and recorded an average four-year growth rate of 1,240%.

Previous Fast 50 winners have included companies of all sizes from across the UK, including some of the country’s most dynamic players. Between them, the companies focus on many diverse areas of technology, including specialists in fintech, biotech, digital media technology, life sciences, software and telecommunications.

As this award win demonstrates, our success is due not only to an innovative product that solves pressing business problems, but also to our genuine commitment to making GoCardless a great place to work and do business with.

We’re very excited about our plans to expand both domestically and internationally over the next few years. Our vision is to turn payments into one less barrier to doing business with anyone, anywhere in the world.

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What’s the deal with PSD2?

If you’ve been following any conversations on payments or fintech, you’ve probably heard about ‘PSD2’. It’s applicable from January 2018 and there’s been a lot of discussion about all the changes it could bring, but what exactly is PSD2?

First, let’s take a step back. The first Payment Services Directive (PSD) came into force in 2009. The Directive was developed by the European Commission and then transposed into national law by each of the Member States. The aims of that first Directive were to:

  • Create an integrated payments market across the EU and encourage competition and innovation
  • Create a new category of regulated firms that could provide payment services
  • Establish a set of rights and obligations that apply both to payments providers and to consumers

Many companies, including GoCardless, took advantage of the opportunities PSD presented for new players to provide innovative payment services and to expand across the EU.

Since then, there have been changes across the market and brand new services have launched that the first PSD doesn’t cover. The regulators have also seen a need for stronger consumer protections and want to encourage even greater innovation. This has led to the development of PSD2, also known as the Revised Payments Services Directive.

Ok, so how does PSD2 differ from the first PSD?

There are several updates and changes, though the core of PSD2 remains similar to the first PSD. Key additions include:

  • The creation of two new categories of payment services (Payment Initiation Services and Account Information Services) which mean that providers of these services will need to be authorised
  • Changes to the types of providers and payment services that will be exempt, to create greater consistency across the EU
  • Common and secure standards of communication between the various parties to an electronic payment
  • Requirements for ‘Strong Customer Authentication’ for account access, electronic payment and remote communications
  • A ban on surcharging for the vast majority of card payments

Isn’t it all about APIs?

You’ve probably heard quite a bit about open banking APIs and the potential impact they will have on the market. Banks and other payment account providers must allow third parties (with customer consent!) to access their accounts and account data. In practice, this means that some form of open API will probably be needed across the market and the European Banking Authority (EBA) has been tasked with developing the common and secure standards that will apply.

This will enable consumers and businesses to use innovative services to initiate payments and better manage their finances. For example, businesses collecting payments may be able to check a payer’s account for funds before a payment is initiated, leading to reduced failures. Consumers might use an account information service provider to see all their finances at a glance in real time, with information pulled directly from their accounts.

Will my data be protected when it’s shared?

Of course, access to financial data requires protection. PSD2 outlines requirements for ‘Strong Customer Authentication’ (SCA). Account providers will need to make sure that account data is only accessed by Trusted Third Parties (TTPs) with the explicit consent of customers according to the requirements of SCA. Remote electronic payments (i.e. those taken through mobile or the internet) will also be subject to SCA.

When is all this happening?

Banks, regulators and payment service providers are working on implementing these changes as we speak. There is a lot to coordinate and the technical standards for these changes are still being hammered out. The EBA is due to deliver its recommendations by 13 January 2017.

We expect that some banks are ahead of the curve and providers such as ourselves will be able to test out their APIs soon, while others may take longer to launch.

However, PSD2 is just one driver for change in this area. Separately, UK regulators have been leading a project to open up access to banking services and stimulate competition through innovation. The Competition and Markets Authority (CMA) in the UK recently mandated the largest nine banks to create open APIs by early 2018, and the UK's Payment Systems Regulator is keen for this open access to be rolled out more widely, so the UK may be the first market where we see significant change.

What does this mean for me?

Most of the changes will be happening behind the scenes, so consumers and businesses will mainly see new products launch, as well as improvements to the services they already use. There’s lots of talk about how the opening up of data could help provide greater access to finance while also enabling the development of better financial products tailored to customer needs. More tangibly, you may see the way you authorise payments online change to be compliant with SCA.

Some of the items coming out of PSD2 (like SCA) are significant topics in their own right. We’re paying close attention to them. GoCardless is well positioned to take advantage of the changes taking place and leverage these opportunities to make collecting payments online even easier and more secure. Stay tuned!

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What does Europe think of Direct Debit for subscription payments?

Back in September, GoCardless launched a UK-wide survey focusing on the popular subscriptions industry. We wanted to explore what members of the public thought about the various payment methods used to pay for subscription services. With the rapid rise of subscription services in the UK for everything from magazines to bacon, we thought this was an unmissable opportunity!

The results confirmed our suspicions - the UK loves Direct Debit. Despite its advanced age, the popular payment method is still the country’s most trusted choice. But our curiosity didn’t stop at the UK border. As GoCardless is a European payment provider covering Bacs, SEPA and Autogiro, we wanted to bring in essential insights from our key markets in France, Germany, Sweden and Spain.

So, do subscription customers in Europe love Direct Debit as much as those in the UK do?

We commissioned YouGov to survey the state of subscriptions payments in these four European markets. Like last time, we wanted to know how comfortable people were with using different payment methods to pay for their digital or physical subscriptions. This could be any product or service for which they pay a regular monthly fee.

The research produced some intriguing results about the state of subscriptions payments across Europe.

Subscriptions in France

Direct Debit: Just as in the UK market, Direct Debit performed very well in survey results among French consumers. Almost one third of those surveyed - 29% - reported feeling ‘very comfortable’ with using Direct Debit for subscription payments. In contrast, only 11% said they were ‘not at all comfortable’ with it.

Credit cards: Paying by credit card is not a popular option for French subscription customers. In fact, 39% of those surveyed rated it rock-bottom, as the payment method that they were ‘not at all comfortable’ with using. Only 8% said they were ‘very comfortable’ with credit card payments.

Debit cards: This was a fairly popular option among French subscription customers, with 28% claiming to be ‘very comfortable’ using debit cards for making recurring payments. Only 11% said they were ‘not at all comfortable’ with this method; a stark contrast to the results for credit cards. It looks like people feel more reassured knowing that their recurring payments are coming out of existing funds in their bank accounts, rather than from credit.

Subscriptions in Germany

Direct Debit: The results for Direct Debit among German consumers were more subdued than those in the other markets. 17% of respondents rated themselves ‘very comfortable’ paying by Direct Debit, but on the other hand 12% said they were ‘not at all comfortable’.

Credit cards: As in France, paying by credit card is not an especially popular option for German subscription customers. 22% of those surveyed said they were ‘not at all comfortable’ with paying by credit card. Only 11% said they were ‘very comfortable’ with credit card payments.

Debit cards: 16% of German respondents claimed to be ‘very comfortable’ using debit cards for making recurring payments. Only 14% said they were ‘not at all comfortable’. There’s not much to choose from between the two extremes here.

Subscriptions in Spain

Direct Debit: In Spain, our survey found that subscriptions consumers love Direct Debit almost as much as in the UK, with a large 31% reporting that they were ‘very comfortable’ using it. Only 10% said they were ‘not at all comfortable’ with using Direct Debit.

Credit cards: Both card-based payment methods fell somewhere in the middle, with 14% of respondents ‘not at all comfortable’ with credit cards, compared to 22% who said they were ‘very comfortable’.

Debit cards: Debit cards came out almost level with credit cards, scoring 12% of responsdents who were ‘not at all comfortable’, and 23% who said they were ‘very comfortable’.

Subscriptions in Sweden

Direct Debit: The biggest surprise of our research project was found in Sweden. Here, the popularity of Direct Debit blew all other payment methods away. An entire 37% of Swedish subscription users rated it the payment method they were most comfortable with. Only 10% of the respondents were ‘not at all comfortable’ with using it.

Credit cards: Among Swedish consumers, credit cards lag behind other payment methods, with only 20% of respondents saying they were ‘very comfortable’ in using them, while 19% were ‘not at all comfortable’.

Debit cards: Debit cards emerged as the second more popular payment method in Sweden, with 31% of respondents rating debit cards top, while only 8% rated them bottom.

What does all this tell us about the state of European subscription payments?

For subscription providers focusing on these European markets, there are clear differences that should be kept in mind in order to provide the most effective service tailored to specific market needs.

With GoCardless, you can manage all payments seamlessly, taking advantage of low fees, flexible timings and a fully-automated system. The sign-up process is quick and easy with no minimum term. We even integrate with popular accounting packages including Sage, QuickBooks and Xero.

Sign up now and start taking European subscription payments with GoCardless today.

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