GoCardless, a Series F funded (at the time of writing) British fintech company gave me this take-home assignment in one of the later rounds of their Product Manager recruitment process. GoCardless allows merchants to collect recurring payments from their customers via the popular UK Direct Debit scheme which is nothing but the bank mandate process which most countries with mature baking systems offer in similar shape and form.

Situation

We want to "solve" recurring payments to provide a flawless experience for merchants and their customers. Pillar III of our product strategy is all about "Better than direct debit", where we want our network to overcome some of the fundamental downsides of the underlying infrastructure we currently use to collect payments.

Problem

One of the problems with direct debit is that it's slow. Below is a timeline for a typical direct debit transaction in the UK.

• Merchant calculates the amount due from the customer. This must be before the next step but could be further in advance (e.g. if the customer is invoiced by the merchant with payment terms of 30 days)
• At least 3 working days prior to collection: Merchant must notify customer of the collection (we do it ourselves for 99% of merchants) and submit payment to GC
• On the day of the collection: Funds are transferred from the customer's account into GC's client monies account
• One working day after the collection: GC receives notification of any failed payments (~2% of payments. 90% of failures are due to insufficient funds available in the customer's account). We do not receive explicit "success" notifications, and we continue to receive a small amount of failure notifications over the following 2-3 working days after this. On this day we send the merchants a "confirmed" notification for any payments that have not failed - this informs them that the payment has (99% likely) been successful and they will receive the funds the next day
• Two working days after the collection: GC pays out funds to the merchant, aggregating all of the payments ready to be paid out at the same time into a single transaction. We offer daily payouts, so if a merchant collects payments every day we also pay out every day, but with a lag.
• Afterwards: GC deducts any "late failure" payments from subsequent payouts to merchants (very low percentage). Some payments are also "charged back" by customers (~0.2%), mostly in the following 8 weeks but with no time limitation - these can be both legitimate (the customer was defrauded or received very poor service) or illegitimate (the customer used the service and decided to defraud the merchant)

Many of our merchants have cash flow concerns. Part of our value proposition is improving this by avoiding late payments, but nonetheless, it's sub-optimal across the chain from payment initiation to settlement and merchants wants more. Merchants also suffer cashflow problems due to finding out about success or failure late and suffering losses from chargebacks.

Question:

• How would you go about understanding how to solve cash flow for our merchants?
• As a simple pointer make sure to include the following as part of your answer:
  • Break down the problem space with a clear explanation of your approach.
  • Describe how you will determine the impact of solving each aspect of cashflow.
  • Show some creativity in exploring a range of solutions and how these solutions could impact the problem space.

Solution

Even though the recommended time for this exercise was 2-3 hours but I must have gone way overboard with this. Partly because I had to go through tonnes of links and GoCardless tutorials to understand the problem, how Direct Debits function before even contemplating what could be the potential areas of improvement.

In the end, I felt I did a bit too much. The interviewer (who was a Group Product Manager) went more on the line of playing a devil's advocate to whatever I said. Sure the rigor helped me in countering his questions but in the end, I felt I could have gotten away with less brain-racking while delivering the report itself.

Anyhoo, you get to enjoy my fruits of labor 😅

<aside> 💡 I would look to add the raw Google Doc as well - the comments I had added for the benefit of the reader were 💰 (Yes, I self-proclaim)

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