There’s much talk of a venture capital funding drought but that’s clearly not stopped some companies from opening investor’s wallets. GoCardless, the London-based digital direct debit start-up, has just closed a $13m (£9.1m) ‘series c’ funding round led by Duedil backer Notion Capital.
GoCardless claims to make it easier for small companies to set up direct debit payments from their customers and keeps the cost down by grouping payments together. Today it also announced it is now processing payments worth more than £1bn a year – a pretty big milestone for a company founded just five years ago. Today’s funding news means it has now raised a total of almost $25m and it's using the cash to expand abroad.
'Our expansion into new markets is picking up pace,' said its CEO and founder Hiroki Takeuchi. 'We are now serving businesses in Spain, the Netherlands and Sweden. They add to our growing presence in France and Germany.'
The company has tapped into consumer (and investor) appetite for alternatives to the traditional financial services companies. Though strict regulation has made it hard for upstarts to displace banks in their core markets (current accounts and investment banking), so-called ‘fintech’ (financial technology) start-ups have been chipping away around the edges.
Transferwise, for example, lets consumers save money on transferring cash abroad. Zopa cuts out the middle man between savers and borrowers. Payleven and iZettle’s credit card machines make it easier for retailers to take payments in person.
Of course most of these still rely on the banks in one way or another. GoCardless’s service functions as an intermediary between two existing bank accounts. Zopa doesn’t let you lend and borrow using cold card cash.
But dismantling the grip that the big financial institutions have had on loans, payments, savings and asset management reduces their control of the sector. And with fully-fledged online challenger banks like Mondo and Atom coming after their core customers, HSBC, Barclays and co are in for a fight.