1025. News: GoCardless CEO lifts the lid on the Mollie deal as Monzo targets Revolut’s dominance in Ireland

0:04This is Fintech Insider News. This week, payments power move as Molly acquires GoCardless. Monzo makes major moves, securing a European banking license and acquiring mortgage firm Habito. And are millennials getting savvier with Christmas spending? We dive into the latest data. We'll be discussing all of this and more on today's show, so don't go anywhere. Retail investment in the UK is the lowest in the G7. According to the Bank of England, there is over£280 billion sitting in UK accounts earning no interest. Something has to change. Financial firms in the UK must look at making investing accessible, contextual and trusted through everyday platforms.

0:51That means bringing investment journeys to the point of need, alongside spending, saving and budgeting, and within platforms that already play a meaningful role in customers' lives. We dive into this and more in our latest report, Taking Advantage of the Embedding Investing Opportunity, produced in association with SECL. Download your copy today at alumnafest.com forward slash embedded hyphen investing.

1:27Hello and welcome to episode 1025 of Fintech Insider, brought to you by 11FS, the five-time consultancy of the year that works with banks, investment firms, digital banks, and fintechs to build the next generation of financial services. I'm Benjamin Ensor, Director of research and strategy here at 11FS. And this week, it's our final FinTech Insider News episode before we take a Christmas break. So before you swap FinTech for festive traditions and the out of office goes on, we're rounding up some of the last big stories of the year. Joining me to help unwrap these headlines is our panel. Let's meet them.

2:03First up, a very warm FinTech Insider return to Hiroki Takeuchi, Chief Executive at GoCardless. Welcome back to the show, Hiroki. Thanks for having me. Fantastic to be back. Obviously, a really big week for GoCardless, which we're going to dive into soon. But can you tell our listeners, perhaps particularly those outside the UK, a little bit about what GoCardless does and why you set the company up in the first place? Sure. So at GoCardless, we've been building a platform on top of the bank payment rails that exist around the world to make it easier for businesses to get paid by their customers.

2:34We focus mainly on businesses with recurring payment models, subscriptions, utilities, financial services, lots of different use cases, but where there's this ongoing relationship between the customer and the merchant. and we've been going now for almost 15 years, very much focused on those rails, which are a really great way to get paid in the sense that they're much more direct, they're more efficient, they're more reliable, but have not had as much technology built around them to make them fit for purpose in this world where everything is done online and you have APIs and everything else that makes payments more easy when it comes to the other rails around the card payment networks.

3:17And so that's what we do. And as you said, this week, or last week, I should say, we announced that we've agreed to combine with Molly and very excited to talk more about that in a bit. Congratulations to you and all of your team. Okay, and we have a FinTech Insider debut for Jaz Shah, FinTech product expert and author of FinTech Under the Hood. Welcome, Jaz. Would you also tell your listeners a little bit about you and all of the things that you do? Sure. Yes, I'm a product person. I've worked in financial services for nearly two decades. Career is kind of split into two parts, I guess. The first part was working at large traditional financial services organizations.

4:01So five years then at Citibank, building products inside their fixed income organization to basically help trade execution. Two and a bit years at Schroder's and then three and a bit years at Fidelity, again, building products inside those organizations. And in the past nearly nine years, I've been working with and for lots of different startups helping build a bunch of cool stuff. So neobanks in various regions help get a PFM app to market, scaled an SME lender here in the UK, and a bunch of other different products across the globe. Fabulous. Well, welcome. Okay, well, let's jump into the news.

4:43We said it was a big week for UK fintech, and the first story definitely proves it, which is the news that GoCardless is to be acquired by Mollie. So the Dutch payments firm Mollie has agreed to acquire the UK-based fintech GoCardless, signaling further consolidation in payments. Together, Mollie and GoCardless will serve more than 350 ,000 businesses with integrated card, local, and bank payment solutions. And a combined business aims to simplify payment infrastructure and support recurring revenue models, aligning with both firms' strategic goals. So Hiroki, obviously it's fantastic to have you on the show.

5:22congratulations to you and all of your colleagues on this. Can you tell us a little bit more about the deal? I mean, why Molly? What's sort of exciting about the logic of bringing those two companies together? Yeah, I think in very simple terms, the reason why we're doing this deal is that we believe that the combined business is much more attractive than the standalone businesses on their own, right? And the reason for that is that what we've built is very complementary to each other. So if you take what we've built, we've been very, very focused on a specific set of payment rails, which is around the bank payment rails.

5:58So things like direct debit, open banking, etc. And that's given us a platform to go and serve a specific subset of the whole payment ecosystem in a really compelling way. And then equally, MOLLE has built a somewhat different offering, more focused on e-commerce merchants and focused on a different set of payment rails. So the card payment rails, but actually also significantly around local payment methods. And one of the things that they've done a fantastic job of is building a really hyper-localized approach that caters to the differing needs of each market based in continental Europe. and when you look at the two businesses together you know we thought that you know from a product perspective the product suite was really compelling we often find that the customers that we serve have a need for the products that molly offer and vice versa um so if you just take a typical example of something like a gym right which is a very typical use case for go cardless will help them with their membership payments you know collecting subscriptions every month but they might also need in-store payments so that they can sell protein shakes and merchandise or they might need capital so that they can buy new gym equipment or open up a new location and we've not really been able to serve them for those other use cases because we've been laser focused on the bank payment side whereas Molly have been building out all of those other products and so we think the combination can serve our joint customers in a more compelling way and And we think by doing that, we can unlock a lot of value.

7:39And that's really what this combination is about. So the logic is you can sort of cross-sell the GoCardless capabilities and the MOLLE capabilities to sort of each other's customers. Yeah, absolutely. Yeah, and I think most notably what we think is unique about it is that there's always this tension between staying focused on one thing and doing it really, really well or going and building a broader set of products, right? And I think one of the things that we think is compelling about this combination is that we've spent 15 years building the best-in-class bank payments offering in the world, right?

8:13I mean, I'm confident that there's no one else that's done a better job than us of that. And equally, they've been laser-focused on their offering. And so as a result, you combine it, you don't just get a broader product set, you get best-in-class products, right? And I think that's something that we think is quite unique about this combination. So absolutely, we think it's a big win for our customers. Chas, I'm sure you're itching to come in. What did you make of this news? What do you think? I was going to say, I'm not itching to come in. I think you should hear from the person who's closest to us going on.

8:47Again, I mean, I echo what Hiroki said. It makes sense, especially if customers are maybe existing GoCardless customers are maybe at a point where they're growing and expanding and maybe their customer base want different options to pay, it makes a ton of sense. I mean, my direct experience with GoCardless is that I suggested, I'm part of Rebel Book Club, which is a book club that's kind of grown over the past few years, and they were struggling to figure out how they set up a direct debit payment for all of their use base, which has grown to around 5 ,000 now globally. And they were just like, oh, how do we take a payment from our customers?

9:27can't really go to HSBC, fees are quite expensive for what we're trying to do. And I was like, oh, Gokarnas are around, they've been around for a while. So I think it makes sense, especially as Gokarnas' customers and clients grow and want to expand the way they take payments. And I think it makes a ton of sense for Molly as well. Thank you. Hiroki, can you tell us a little bit about how the deal came about, who approached who? Had you been working with Molly in the past? Did you talk to them? Had you had any kind of partnerships or relationships? Or was this out of the blue? No, not at all. I've known Kuhn, who's the CEO there for many years now.

10:10I initially met him when he was the CTO at Klarna, and he brought us into Klarna as a customer. So they've always has been one of our big flagship customers that we've grown a lot with. And that's how I got to know him initially. He then went on to Molly, but also had joined our board. So Coom was on our board and we got to work very closely together, got to know each other's businesses really well. And at a certain point, we sort of got to this realization that, wow, we're facing a lot of similar challenges, but also the businesses that we've built are very complimentary. We talked a bit about the product set, but also when you look at things like the geographic footprint, the customer mix.

10:53There's a lot of similarities where you want there to be similarities and a lot of differences where you want there to be differences. And it became increasingly apparent to both of us that exploring a combination could make a lot of sense. And that's really where this first started. So you could just see a really strong sort of commercial logic. Yeah. Because when you came on the podcast last time, back in July of last year, 2024, before you said you felt the business had still a lot, that GoCardless had a lot of growth ahead of it. And there was a lot that was sort of really keeping you motivated, keeping your teams motivated.

11:26Has anything changed? Or is it just that you just realized that combining with Molly would just work better for both businesses and your customers? Yeah, I mean, from my perspective, I don't really see this as an endpoint, right? I mean, it's just a milestone. and we're not really doing this deal as a, even the structure of the deal, it's a predominantly equity-based deal, right? So it's not like it's everyone's just cashing out or something. We're doing this because we think that there's a lot of upside to what we can create together. And fundamentally, that's what drives me, right? Which is, I love talking to customers and hearing about how we're solving their problems, making their life easier.

12:07And if we can solve their problems even better by being part of a larger organization and combining with another business, then that's fantastic. And I think one of the things that for me is exciting about this at a really personal level is that this is not a situation where you've got a really big company that's acquiring a much smaller one and you just kind of disappear, right? This is a combination where we're really going to have to make it work together and we're going to be creating something of substantially bigger scale, but in more the spirit of partnership, right? I mean, they're requiring us and we're not trying to pretend anything otherwise, but it does definitely feel like we'll still be fulfilling our mission and it working in much the same way that we were before, but with a much more compelling product set by combining the two businesses.

13:00Yeah, sort of building jointly. Yeah, absolutely. You gave us that nice example of a gym earlier and saying, well, you know, you could have a gym that's got, you know, it's obviously, it's got the subscriptions coming in from the gym membership, but it also has lots of maybe point of sale and other types of payment and so on. Between MOLLE and CoCardless, have you actually gotten a number of sort of joint customers? And I realize, you know, your strengths are maybe in slightly different markets and so on. But did you already have some companies that were actually already starting to use MOLLE and CoCardless?

13:28Yeah, I mean, we definitely have a number of joint customers. We also see oftentimes customers that work with us will also work with other PSPs as well. So it's not just about customers that we already have jointly. And equally, we were already starting a partnership before we even started exploring this so that Molly could offer our bank payment solution to their customers as well. So they were seeing a very concrete demand from their customer base. I would say that in terms of the target customers that we've focused on, there is somewhat of a difference because, you know, we've been very much focused on these kind of recurring payment use cases.

14:08You know, they've been focused much more on these kind of e-commerce use cases. So, you know, there is a Venn diagram, you know, where there's something that meets in the middle, but they are somewhat separate. I think what's interesting though, is that the types of customers that we've targeted is quite similar in terms of like the size and scale of the businesses that we serve, right? Like we both started with small business customers. We've both gone up market gradually. And so, you know, in that sense, we know what it's like to serve, you know, the businesses that we serve. And there's a lot of similarities there.

14:39So different industries, but similar sort of scale. Jaz, I mean, Hiroki and his team have obviously got a lot of work to do to sort of integrate the two businesses, integrate the product suites, start, you know, thinking through how to take the sort of products to new products to the existing markets and new markets and so on. what kind of challenges do you think go cardless and molly are going to have sort of tackle over the next few months as they try and sort of merge and integrate um what sort of things do you think might trip them up and what sort of what are the opportunities i mean i guess it's probably maybe the positioning to existing clients and maybe new clients like what is that split because i think molly does offer a recurring bank payment solution um so it's what what's the split going to be?

15:25How do you position the go-to-market? But this is all stuff that can quite easily be mapped out and thought through. You look at the existing customer base, you look at, okay, look, what new markets are we trying to enter? Are we trying to grow market share in our existing customer base using our combined product stack? When and where do you point people to MOLLE versus GoCardless or GoCardless to MOLLE? That's the stuff that can be ironed out, to be honest, but as long as it's well thought out, and I guess it's not, you know, to Hiroki's point, this is a symbiotic partnership rather than a, look, we're acquiring you, we'll absorb some of your tech into our business and then we'll decide.

16:08It's more of a, you know, we're merging and we'll together come up with a compelling strategy to go to market with as a combined product set rather than as a MOLLE and go cardless. So I think, I I think there's challenges, but they're not major challenges from what I can see. I think one thing I would just add there, though, is that one of the principles that we've been very clear on through this whole exploration of combining has been that we really truly want to build a single platform. So it's not like we're going to continue having the GoCardless product and the Mollie product, and they're going to just sit individually in the market in the long term.

16:50We think that the real value of this combination comes from fully embedding both of our products into a single platform. And obviously, that's going to be a big technical lift. But one of the things that helps with that is that we've had very similar approaches to building products, very similar technology stacks. So we understand and talk each other's languages in a very fundamental way. and so yeah i think that's one of the things that we'll be really focusing on initially is getting to that point where almost like that that question that you raised jazz is almost a a moot one because you know you're not signing up for go cardless or molly you're signing up for the combination and then you get access to all of the suite of products in a really cohesive way and you know is through a single integration just just to cross question hiroki was was that one of the things that was looked at in as part of that that acquisition part of the merger is like how closely aligned are the tech stacks because yeah absolutely yeah when i've seen it before it's just it's almost like an afterthought it's oh you know you've got x number of customers um oh you know kind of similar icps but you don't do that the whiteboard of okay here's molly's tech stack here's go cardis's tech stack here's what it here's what steps one two and three look like to create a single compelling product.

18:09A lot of the time, that's kind of almost an afterthought. Yeah, I think that we're both quite product-oriented companies, right? I mean, like Kuhn is technically their CEO and CTO, right? I mean, so as you can imagine, he was quite involved in, you know, how would we actually technically do this, right? And we did think about that in quite a lot of detail for the stage that we're at in the integration. And so this isn't an afterthought. This isn't just a pie in the sky, wouldn't it be great? This is a pretty well thought through plan and it's quite a fundamental part of our vision. And so not to say it won't be difficult, not to say that we won't face complexities, but that is the goal.

18:51Fabulous. Last 30-second question to you, Chas. As Hiroki mentioned earlier, it's largely stock-based transaction. Do you think we may see sort of other deals like this where we're getting sort of consolidation in European fintech on a kind of stock sort of merger type approach? Yeah, I mean, I've worked on a couple where they're almost acqui-investments. They're like, we'll take stock, we'll invest 5 million or 10 million. We want your product, but we also want you to remain an independent entity. so there's there've been a few of those in the in the recent history and i've been part of a couple um but i think we'll see more just because i just think people are looking at long-term long-term gain making smaller bets rather than making full-blown acquisitions yeah yeah okay well on that note we're going to wrap up that story massive congratulations to you hiroki and all of your team for you know all the all the hard work you've done over the past 15 years building a great business.

19:53I'm a big fan of both CoCardless and Molly. So personally, I'm very excited to see the two businesses coming together. So best of luck to everyone at the two companies. Thank you. Okay, we will just take a quick pause here and we will be back very shortly. Hey, folks, David Breer here, CEO of 11FS. Here's something you might not know about me. I get a lot of people trying to impersonate me online, fake profiles, scam emails, the lot. And a big part of that comes from data brokers, hundreds of them, quietly collecting and selling your personal information. Your phone number, email, home address, job title, all out there and all fueling identity theft, scam calls and spam.

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22:09that blindsided us all, or the fintech glow up of the year. And no, we're not just talking about a rebrand. We've got you covered. And of course, we'll pause for that one jaw dropping moment that made everyone go, what? Host Laura Watkins is joined by 11FS experts Joe Colchester and David Barton Grimley to dissect it all. We even asked our community for input because honestly, there's a lot to get through. Find it on the same feed as this episode. And now back to the news. Our next story is that Monzo has secured a European license and opened an Irish waitlist. So Monzo has secured a full European banking license from the European Central Bank and the Central Bank of Ireland, enabling it to operate as a bank across the EU.

22:53The license supports European expansion strategy, with Dublin chosen as its EU headquarters. Monzo has opened a waitlist in Ireland ahead of launching personal, joint, business, children's and savings accounts with Irish IBANs or account numbers. The bank now serves over 14 million customers and hundreds of thousands of businesses, positioning itself as a major digital challenger bank across the UK, Ireland, and now Europe. Monzu has also made its first major acquisition, buying digital mortgage broker Habito to expand its all-in-one super app, building on strong demand with 450 ,000 users already tracking mortgages through its home ownership feature.

23:33At the same time, according to reports, Monzu is undergoing some internal turmoil as major shareholders are reportedly pushing to remove Monzo's chair and possibly reinstate the outgoing CEO, TS Anil, highlighting tensions over the bank's strategic direction, governance, and IPO plans. Wow, well, there's a lot to unpack there. But let's start with Revolut versus Monzo. You know, they started at a similar sort of time with similar sorts of strategies and then have gone in very different directions since um jazz what do you think uh is this monzo sort of finally following revolute strategy or do you think this is something different it's something different i mean revolute strategy was i guess very much the old school of build fast try not to break things i think in nick's own words they place bets they place a lot of bets kind of everywhere and they try and place big bets and hopefully they pay off but they you know they've gone largely the e-money route um and that's how they expanded across europe and probably why when you're comparing customer numbers and i see these on linkedin now and again of monzo versus revolute uh monzo's got 14 million revolute has 60 million it's not really a fair comparison because Revolut has largely expanded under an e-money license across a larger economic area with a bigger market.

25:04So it's a bit different. I mean, the playing field is more level now because obviously Revolut has their passport license from Bank of Lithuania. So they've already got a kind of banking presence. So the only place they're not a bank at the moment is in the UK, if you look at that area. So it's a bit different, but the playing field is leveled a little bit. But I'm sure the comparisons will still come out, the customer numbers to customer numbers, which again, it's not really an apples to apples comparison. I believe Revolut has a restricted banking license in the UK. So I'm not quite sure whether that does or doesn't quite make it a bank.

25:41But your point is absolutely vast. It doesn't. It doesn't. It doesn't. Right. It doesn't. Okay. It still doesn't. I know they obviously can't call themselves a bank. Hiroki, what did you think of this? Well, there's a lot of news here from Monzo, but particularly the news about the European banking license and opening up a headquarters in Dublin. Is Dublin the obvious place to go to expand into the EU? I mean, I realize you've been quite busy over the last couple of weeks. But did you have a view? I mean, look, I think from my perspective, what this really is about both on the sort of European front but also on the Habito acquisition is this kind of expansion both internationally and product wise right and I think this is a trend that I think we'll continue to see in fintech where in order to continue to drive significant scale and build significant value you need to be able to expand across markets and expand across product sets right and uh i think this is what we're seeing here with monzo um you know they've done an amazing job in the uk uh built a very strong leadership position here but if they want to continue to build a lot of value then they're going to need to be able to build not just in the uk but beyond right and then also you know being restricted to a narrow set of products really limits you how much value you can capture from each customer that you're onboarding And so the extent to which you're able to cross-sell additional products, I think, is also a really important point.

27:15And in some ways, I think that is something that Revolut has done an incredible job of, is being able to expand across so many countries and across so many products so effectively is a big part of the reason why they're in the position they are. So I completely agree with Jazz's point about comparing the numbers side by side might be a little bit misleading, But I think the general theme of international expansion and the general theme of product expansion is going to be something we continue to see. And one of the things that I know from firsthand experience is that doing that in financial services is really hard, right?

27:51Because there is a lot of differences from jurisdiction to jurisdiction, whether that's regulatory differences, cultural differences, different payment rails, different infrastructure rails. there is a lot of differences in the way that people consume financial services from market to market and so you know i think that's the one of the challenges that everyone will face indeed what do we think about ireland um not as a country um but as a market for for monzo to move into because ireland is quite possibly revolute's strongest market i mean revolute is a verb in Irish, you know, as in, I'll review that tenner I owe you.

28:34Sorry, I can't do an Irish accent, apologies. And you shouldn't, and you shouldn't do it. I have some Irish blood, but I can't do the accent. Do we think, is that too tough? You know, if you're trying to compete, you know, against Hoover and vacuum cleaners, is it too hard? Are they setting themselves, you know, an uphill struggle? Because you've really got to differentiate, you know, when something's that embedded, you know, Monzo's going to have to come up with a reason why Irish people should switch from Revolut to Monzo, or at least consider Monzo. What do you think, Chas? Do you reckon they'll be able to differentiate?

29:08I mean, on the first point of, I guess, why Dublin versus any other country in the EU, I think Dublin or Ireland is a no-brainer, not just for the culture and this is selfish reasons, but there's a lot of talent there's a lot of tech talent in dublin um i think 2010s 2010 2015 there's a lot of a lot of banks in canary wolf were setting up kind of subsidiary um secondary offices in dublin again i was at city bank in 2010 when lots of the tech team moved over there so there's lots of talent the language obviously helps and i think that it's a lot closer to london than it is Paris. So if you're going to set up a HQ to launch into Europe, then it's just, it's like the logical path of least resistance to start expanding into Europe.