IBS Intelligence Global FinTech Interviews
00:00:00 · Gaia Lamperti, Pranav Sood
[00:00:00] S0: Welcome to the IBSI views podcast. I'm Gaye Lamperti. And today I'm joined by Pranav Sood, VP Small Business at GoCardless. [00:00:09] S1: Hi, Gaye. Thanks for having me. [00:00:10] S0: Thank you for joining us. Today we're going to focus on recent research by GoCardless on late payments challenges that SMEs have to face constantly, right, Sanev? [00:00:22] S1: Yeah, absolutely. We've actually just, as you mentioned, run some research on the topic of awkward money. So anyone, I know you have listeners all around the world, anyone who's from Britain will know for sure that we find talking about money extremely awkward. And so it probably comes as absolutely no surprise to anyone that about 40% of the SMEs that we talked to basically said that we feel super awkward about chasing our customers for late payments. What was more interesting to me was how many of them were actually willing to give up revenue just because they're afraid to have that kind of discussion with their customers. So about 75% of SME owners said they were willing to give up to 10% of their annual revenues, just to avoid having a conversation that was about money and about the money that they were owed. So probably no surprise to your listeners that people find talking about money challenging and awkward, but definitely a surprise to me to learn how challenging and how willing they are to give up some of the cash that they're rightfully owed. [00:01:21] S0: Absolutely. Those are very interesting findings. If I remember correctly, there's also a gender component in this attitude, right?
00:01:21 · Gaia Lamperti, Pranav Sood
[00:01:21] S0: Absolutely. Those are very interesting findings. If I remember correctly, there's also a gender component in this attitude, right? [00:01:30] S1: Yeah, it's not just gender, actually. So it's both gender and location. You're absolutely right on the gender front, there was quite a big difference between men and women. So around a third of women SME decision makers felt like they were too uncomfortable to talk to customers or suppliers about money compared to only about 20% of men. So quite a big gap between men and women there. And then, again, for anyone who's in The UK, you might be interested to know that there are some real differences between the different regions or different parts of the country. Wales was by far the worst offender. I think nearly half of the people in Wales that we talked to said that they found it too awkward compared to about 20% of people in London. So some really interesting nuances coming out of the work as well. The driver of the gender difference. So the research basically showed that women are much more worried about seeming rude or seeming pushy than men are. So when we kind of heard from someone that they were looking to avoid a discussion about money, we asked them why. And about 55% of women said that they were just worried about being seen as rude or pushy compared to just under 40% for men. So quite a big gap there as well.
00:01:30 · Pranav Sood, Gaia Lamperti
[00:01:30] S1: Yeah, it's not just gender, actually. So it's both gender and location. You're absolutely right on the gender front, there was quite a big difference between men and women. So around a third of women SME decision makers felt like they were too uncomfortable to talk to customers or suppliers about money compared to only about 20% of men. So quite a big gap between men and women there. And then, again, for anyone who's in The UK, you might be interested to know that there are some real differences between the different regions or different parts of the country. Wales was by far the worst offender. I think nearly half of the people in Wales that we talked to said that they found it too awkward compared to about 20% of people in London. So some really interesting nuances coming out of the work as well. The driver of the gender difference. So the research basically showed that women are much more worried about seeming rude or seeming pushy than men are. So when we kind of heard from someone that they were looking to avoid a discussion about money, we asked them why. And about 55% of women said that they were just worried about being seen as rude or pushy compared to just under 40% for men. So quite a big gap there as well. [00:02:43] S0: Right. And these late payments or sometimes non existing payments have quite a bent effect on small businesses, right? And what are the sort of challenges that come from a late payment fee that would mean a lot for a small business?
00:03:01 · Pranav Sood, Gaia Lamperti
[00:03:01] S1: Yeah, it's a great question. And I think there are three big impacts that small businesses and their owners face. Number one is clearly the financial impact. So if you don't get the money that you expect to get on the day that you expect to get it, that has an impact on your working capital. It might have an impact on your ability to make commitments that you've already got as a business, whether that's payroll or debt financing or something else. The second impact is about your workload. And clearly, if you're not getting money that you expect to get, you're probably having to chase it. And you're probably having to spend time manually going after people, maybe reconciling things that they're sending you piecemeal instead of settling the invoice in full. And then I think the third impact after the financial and after the administrative is probably the most important one. And that's the emotional impact. That's the impact that people feel in themselves, in their family dynamics, at home, worrying about where the money that they're rightfully owed is. And you can't quantify that. You can't put a number on it in the same way as you can on the working capital or the admin. But it's the one that I think almost all the small business owners in the world would sympathize with and have felt at some point in their professional lives. [00:04:16] S0: So true. And one of the proposed solutions is automation of payment and payment intelligence tools. How is GoCardless helping SMEs to put them in practice?
00:04:16 · Gaia Lamperti, Pranav Sood
[00:04:16] S0: So true. And one of the proposed solutions is automation of payment and payment intelligence tools. How is GoCardless helping SMEs to put them in practice? [00:04:27] S1: To put it really simply, at the most basic level, what you're doing is attaching a payment method to an invoice. And so when you send somebody an invoice for a service or a product that you provided to them, you're also telling them or asking them to pay using a method that you're specifying. And so for us at GoCardless, we allow people to pay both using instant bank pay, which is an open banking powered feature that we've got in The UK and soon will have elsewhere, but also using direct debit, which is a pool based payment method that some of The US listeners might know as ACH and others around the world will have different names for. And so effectively, what you're doing as a small business owner is you're saying, Hey, here's my invoice and here's how I want you to pay me. And in that moment, you're helping your customer to pay in a timely fashion. And you're helping yourself as a business owner to have that visibility and that predictability about when you're going to get the money that you're owed. [00:05:23] S0: Absolutely. Do you have any success story you'd like to share with us?
00:05:28 · Pranav Sood
[00:05:28] S1: Gaia, this is only a ten minute podcast. I could talk for ten hours about all amazing stories we've got. So we serve about 70,000 small businesses every month. And so there are tens of thousands of businesses and their owners who are benefiting from our product. But a couple that I spoke to recently, one is a gentleman called Matt from an acting coaching agency. He's an amazing guy. He basically helps actors and actresses to kind of improve their skills to go on TV or go on the stage and so on. And his business, as you can imagine, is the kind of business where COVID really hit him hard because previously what he was doing was offering people classes in person in town halls or in venues that he'd rented. And suddenly he had to pivot everything to online. And so in that moment, he moved from a payment system where people would pay when they turned up often in cash. And often if they didn't turn up, they wouldn't pay him, which wasn't hugely helpful given that his costs stayed the same regardless of the class size to a world where he has to do everything over Zoom or online. It's amazing to hear him talk about GoCardless because he's implemented it. It saved him a ton of time. It's helped him collect a ton of money. And I think he might be the most enthusiastic advocate of our product I've ever met, which is amazing given that we have a company full of them. So Mats is a story that I really liked. Another one that I loved recently, a lady called Eva, who is the artistic director of a baby ballet studio. So she's amazing lady, super creative, super passionate about dance, hates talking about money or gets really emotional when she talks about money. And so was telling me she always used to just delegate the act of chasing money to people in her team rather than doing it herself because she gets so mad about having to do it. And then they discovered GoCardless and suddenly nobody has has to do it because everyone pays on time every time, every month. And so those are just a couple of literally people I've met in the last couple of weeks that have really stuck with me, but we're super, super fortunate to count many, many tens of thousands of customers as people who benefit from our product every month.