New GoCardless president, a Mastercard vet, eyes global expansion

The U.K. payment fintech GoCardless has turned to a longtime card and bank executive to drive its next chapter amid heightened competition in the market for account-to-account payments. 

"The focus of payment innovation has traditionally been the card side of things, how to link new payment methods to cards," said Paul Stoddart, a former Mastercard executive who joined GoCardless as president about a month ago. "But that focus is getting wider now." 

GoCardless competes against fintechs such as Clik2Pay, Curve and Affirm, which offer account-to-account payments as a way to help merchants save money over what they'd pay in card fees. What's new in A2A is the growth of data-sharing tools that allow banks to access a variety of services from third parties; and improvements that add speed to payment processing and settlement. 

That sets the stage for payment innovation on a wider variety of transaction rails than just card networks, Stoddart said. 

"What we're really seeing at the moment is the account-to-account infrastructure getting the ultimate upgrade with real-time payments," Stoddart said. "A2A hasn't seen this type of innovation in 50 years."

At GoCardless, Stoddart will help lead the company's diversification beyond using A2A payments for recurring transactions such as subscription bills. Stoddart was most recently president of new payment platforms at Mastercard, executive chairman of Vocalink and a member of Mastercard's management committee. 

"The move for me was about coming to a business that was at a different stage in its growth and having more of an impact, and in a space like account-to-account that I know well from different angles," Stoddart said. "The opportunity is significant, especially entering the U.S. market." 

The London-based GoCardless is expanding in the U.S. and other markets such as France and New Zealand, and is adding products. One example is Bank Pay, which supports one-off payments between bank accounts. Another example is variable recurring payments, or VRP, which use application programming interfaces and open banking to connect bank accounts to third-party providers to execute recurring transactions that may be of different values, such as a monthly utility bill or a subscription that adds or subtracts features. It works like direct debit, though without needing to update card details or authenticate each transaction. Stoddart contends this process makes it easier to support more diverse use cases beyond monthly bills. 

Stoddart was CEO of Vocalink before the Mastercard acquisition and helped lead a business at Mastercard that was focused on supporting A2A payment use cases for the card brand. He also was an executive at Barclaycard and also headed merchant acquiring and e-commerce at NatWest.

"We had a business unit at Mastercard that was focused on non-card payments, and GoCardless was a customer," Stoddart said. That experience, as well as his time as Vocalink's CEO, provides him with a perspective of what merchants and consumers require to adopt A2A payments as the transaction types proliferate, Stoddart said.

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Real-time rails and APIs provide paths for bank-supported transfer systems such as Zelle to add different financial products beyond P2P payments and static recurring transfers. Banks, merchants, payment service providers and other financial companies can serve as platforms for innovations that connect directly to consumers, Stoddart said, adding payroll, buy now/pay later lending and more general consumer lending are among the products that can be built on top of A2A rails. The ISO2022 messaging standard, which allows more data to transmit as part of payment messaging, also plays a role in helping develop the A2A market.   

"Visa and Mastercard have interoperable card networks, we want to do that for moving money from one account to another," Stoddart said. 

There is a growing opportunity for A2A payments in the U.S., according to Dayna Ford, senior research director at Gartner. The driving forces include the number of banks that are adding open banking APIs, and joining real-time payment networks such as The Clearing House's RTP rail and FedNow, which is in pilot. 

"Merchants remain frustrated by interchange costs, funding delays and chargeback risk, all of which are potentially eliminated by A2A payments," Ford said. "B2B payments are a particularly good fit and ripe for disruption with significant volume still being sent by paper check." 

There is little inherent motivation for consumers to migrate from existing mechanisms such as debit cards or digital wallets to paying directly from a bank account, according to Ford.

"Merchants will likely need to incentivize consumers in order to achieve adoption," Ford said. "Existing wallets and card payments have evolved to be extremely frictionless and low effort."

As a concept, making purchases directly from an account is not new in the U.S., said Sarah Grotta, director of the debit and alternative products advisory service at Mercator Advisory Group. What's changing is the evolution of open banking and the ability to securely and accurately gather account details — making A2A payments an easier alternative, Grotta said.

What's missing is the development of a model that balances the needs of the merchant and the purchaser, Grotta said, adding many solutions are focused on benefits to the merchant, such as avoiding card-network fees and attaining greater control over payments.  

"For A2A to really take off, they need to provide the same or better level of benefits that cards do today," Grotta said.