GoCardless launches open banking-powered fraud prevention tool

GoCardless, a leader in direct bank payment solutions, has launched Verified Mandates in the UK, a feature within its global bank pay platform which combines the Account Information Services (AIS) capabilities of open banking with direct debit to stop fraud before it happens.

„This represents a new approach to tackling the age-old issue of payment fraud, when “customers” intentionally try to receive goods or services from merchants without paying for them,” according to a company’s blog.

The problem is particularly acute for recurring revenue businesses that collect payments via direct debit, with research indicating three in ten merchants (30%) consider payment fraud the primary threat facing their business today. Despite this, over half of businesses (55%) say they still provide goods or services before confirming if a customer’s bank information is authentic and true. 

A few clicks, a better way 

Until now, businesses that are especially exposed – including those that invoice, offer free trials or ask for payment after usage – didn’t have much recourse. But the introduction of Verified Mandates represents a new era of intelligent fraud prevention that doesn’t compromise on customer experience.

Verified Mandates works in a simple, three-step process which can be completed in less than a minute. 

1. A customer who enters a merchant’s checkout flow will be asked to complete a standard direct debit mandate creation form. 
2. They’ll be prompted to choose their bank, log into their online banking platform using their usual method, and authorise the setup of their direct debit mandate. 
3. The merchant will receive instant confirmation of the successful verification and the customer can complete the checkout flow as usual. 

Better for businesses, better for payers 

Besides the seamless checkout experience, payers also gain peace of mind: the chances are much lower that a fraudster would successfully complete this authentication process to make unauthorised purchases, compared to using stolen card details. 

New research from GoCardless also reveals merchants that take an active role in fraud prevention benefit from a halo effect. 91% of British consumers who make online payments believe businesses are responsible for protecting their customers from fraud, and among the same group, 87% say they would be more likely to shop with or use a brand in the future if they believe the company takes fraud seriously. 

However, these consumers aren’t willing to give up speed for security: 56% indicate they are likely to abandon a purchase if there are too many steps at checkout. With Strong Customer Authentication recently coming into force, there’s never been a better time for merchants to seek new solutions that let payments flow while fighting fraud.

Hiroki Takeuchi, co-founder and CEO at GoCardless, said: “We’re proud to introduce a new way to tackle payment fraud, a primary threat for businesses everywhere. By taking advantage of the latest in open banking technology, we’ve created a feature which helps businesses protect their hard-earned revenue while meeting the high standards consumers now expect for any checkout process. We see Verified Mandates as the latest example of the power of open banking, enabling payments that offer a better experience for everyone.”

Commenting on the potential for Verified Mandates to benefit the company and its users, Daniel McClure, Co-Founder and VP of Technology, Cuckoo Broadband, said: “We’ve been looking forward to the availability of Verified Mandates from GoCardless – it will give Cuckoo added security as we grow and expand locally and internationally. Verified Mandates is an easy and simple way to ensure a seamless customer experience whilst protecting Cuckoo from fraud.”

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The launch of Verified Mandates is the latest milestone in the company’s roadmap to expand its footprint in open banking. In 2021, GoCardless launched its first open banking feature, Instant Bank Pay, in the UK and made a series of strategic hires with deep expertise in the space. Most recently, GoCardless secured its Series G funding round of USD 312m to accelerate its open banking growth, giving the fintech ‘unicorn’ status with a valuation of USD 2.1bn.

The merchant research cited in this release was conducted by GoCardless and covers 900 businesses across the UK, US, France and Australia. The survey was carried out online in February 2021.

The consumer research figures are from YouGov Plc. Total sample size was 2179 adults. Fieldwork was undertaken between 21st – 22nd March 2022.  The survey was carried out online. The figures have been weighted and are representative of all UK adults (aged 18+).