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Carlos Gonzalez on frictionless payments

Tom Krackeler & Rachel English

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Carlos Gonzalez is the Chief Operating Officer at GoCardless. He’s a technology executive with a successful track record of delivering high-quality products to tens of millions of users globally. Previously, Carlos was the Chief Product Officer at Skyscanner, the travel search engine, and founder & CEO at Fogg, a hotels metasearch startup that was acquired by Skyscanner. He also served as deputy CEO of the IT service firm Netfocus, where he led digital security before the company was acquired by Hewlett-Packard.

We talk to Carlos about the role of payments in subscription businesses, the advantages of bank debits, and lots more!

Tell us a little bit about GoCardless -- the company’s inception and what you do for your customers.

At GoCardless, we are trying to make it very easy for businesses to collect recurring payments. We enable them to fully automate the invoice payments without having to send out invoices, having to chase customers to actually get paid, fully automated end to end accounts receivable payments. We have more than 50,000 merchants using us, processing $15 billion in payments and growing very fast. One of our key differentiators is that we use bank debit rails, which go by different names in different countries in the world. In the US they’re called ACH, in the UK it’s called BACS, and in Eurozone it’s called SEPA. These bank debit mechanisms are fantastic for recurring payments and many merchants that use us see their payment failure rates going down from 15-20% to 3-4%, which is obviously a massive amount of saved payment failures and subscribers that the business gets to keep.

Subscriber experience is extremely important in the Subscription Economy -- it can make or break a business. How can businesses make payments as frictionless as possible for their customers?

First, catering to the preferences of the customer. It’s important for subscription businesses that customers around the world can pay with their preferred payment mechanisms. These preferences vary quite a bit internationally.

For example, markets like the US are very card focused but in China, credit card penetration is significantly lower and you have other payment mechanisms that have significantly higher traction. And bank debit is the preferred way to pay recurring payments globally in many countries around the world.

So it’s important to cater to customers’ preferences and show them that they can use their preferred payment mechanism when subscribing to a service. Another angle connected to this is global coverage. It’s important to show that you can sell in as many countries as possible.

The second important thing is reliability. It’s important for subscription businesses to use a payment mix that ensures that the reliability of payments is as high as possible. Trying to avoid payment failures and involuntary churn is key and bank debit is a great choice for this reason.

Can you share an example of a subscription company that’s getting payments right?

DocuSign, one of our joint customers is really advanced in catering to customer preferences and offering global coverage. They’re always at the forefront of trying new payment mechanisms. They have not just cards, PayPal, etc., but recently rolled out bank debit globally with GoCardless and Zuora. They’re also really good at measuring and analyzing results and penetrating their payment choices based on global data. Another thing they do very well is making sure that the different payment mechanisms they use are very well integrated within their internal systems and processes.

Subscription businesses have to deal with the fact that the customers can churn at any point. And often these are a result of failed payments, not necessarily a product problem. What can businesses do to minimize involuntary churn?

A couple of things: One is ensuring a mix of payment mechanisms catering to customer preferences. You have to ensure that the mix of payment mechanisms makes sense and is also taking into consideration the reliability of these payment systems.

The best companies are ensuring a strong component of their subscription payments is essentially done using bank debits. A subscription billing process that has a high degree of bank debit payments is going to essentially reduce payment failures and involuntary churn. Achieving that equilibrium between catering to preference and reliability is crucial.

What we typically see in many of our top merchants is that they use us as the default payment mechanism in many, many markets worldwide such as Europe, Australia, New Zealand, Canada and other countries where customer preference is very high for bank debit. Where the preference for bank debit is very high, the conversion is very high, and they see a massive reduction in payment failure rates.

The second thing to focus on is recovery logic. Even if we maximize the reliability of payment mechanisms, there are going to be some failures and therefore, it’s important to use a sophisticated failure recovery logic and introduce software to help businesses recover payments after they have failed.

So in brief, making sure that the mix is right and making sure that the trade-offs between preference and reliability is right is number one. And the second one is having sophisticated failure recoverability mechanisms. 

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