GoCardless and TransferWise create global network for direct debits

GoCardless has worked with TransferWise to create a network that enables businesses of all sizes to take direct debit payments in different currencies, with no hidden costs and no need for a bank account in multiple countries.

The two fintechs, both eight years old, are enabling businesses to avoid banks and credit card companies when receiving regularly recurring payments from customers in multiple countries.

London-headquartered GoCardless collects direct debits for businesses ranging from very large organisations, such as accounting software supplier Xero, right down to small window-cleaning businesses. It sets up direct debits for customers, carries out actions such as know your customer (KYC) checks, and works with the bank to receive payments. Transferwise is a cross-border payments fintech.

GoCardless has been working on the project for two years.

Traditionally, if a business wanted to set up direct debits for customers in another country, it had to have a bank account in that country. Alternatively, businesses could take card payments, which are supported by the Visa and Mastercard payment networks, or could use PayPal.

But organisations often prefer direct debits because they are easy to set up and offer predictability about when money is paid to them. But, unlike card payment networks, there has been no global standard.

Neil Morgan, chief marketing officer at GoCardless, said: “Every direct debit network is different in every country. What we have effectively done is basically created a Visa for direct debits.”

The new network sits on top of all the direct debit schemes across the world and business customers can set up direct debits for customers in 30 countries from a single bank account. “In the past, a business would have had to set up bank accounts in 30 countries,” said Morgan.

Through TransferWise’s application programming interface (API), foreign exchange is completed in real time. A flat rate of 2% of the total payment is charged and is capped at £4.

Using direct debit to make payments is easy to set up for customers, is predictable because payments come out at the same time every month, and through Transferwise, the exchange rate is transparent. Small and medium-sized enterprises (SMEs) are often put off selling their products and services in other countries because of the complexity in setting up regular payments from customers, as well as the high charges involved.

Morgan said the new network could open up global markets to smaller companies that do not have a multinational presence.

Recent research by YouGov for GoCardless found that although 73% of businesses want to expand globally, 39% are being held back by the complexity of taking international payments.

It found that half of companies that want to expand globally are frustrated by the extra admin needed, such as setting up multiple bank accounts and dealing with different currencies. Half also said there is a lack of transparency, hidden fees, and complex pricing in current methods of being paid by overseas customers.

GoCardless CEO Hiroki Takeuchi said antiquated, fragmented and opaque payments systems are holding businesses back. “Our new network represents a major milestone in our mission to fix this broken system,” he said. “Companies of all sizes can now tap into the only global network for recurring payments, built on the tried-and-trusted method of bank debit, with real exchange rates powered by Transferwise.”