Adyen proves the 'payments slump' is really a PayPal problem

The company has grown as a middleman, not aiming to compete with merchants or banks, while adding more and more services for retailers.

Pieter van der Does, chief executive of Adyen.

Adyen is a middleman and doesn’t offer a branded payments service itself or build relationships directly with end customers, which is key for large merchants that want to control that relationship.

Photo: Adyen

Payments company Adyen is growing amid the latest phase of the pandemic, avoiding some of the pandemic-related problems that have hit its competitors.

PayPal revealed it had missed earnings expectations this month and said it was pulling back its plan for growth in users and focusing on more active, higher-spending users and blamed inflation, supply chain issues and the pandemic for curbing shopping.

Adyen, meanwhile, has continued to grow, posting $342.7 billion in payment volume and $646 million in net revenue in the second half of 2021, which was up 72% and 47% year-over-year, respectively. Excluding interest, tax, depreciation and amortization, it earned $408 million for the period, up 51%. It lists customers such as eBay, Uber, Spotify and Etsy. Shares jumped 10% Wednesday on the news.

The company, which went public in 2018, has seen its shares fall this year in the tech downdraft, and is still smaller than rival PayPal, which has a market cap of around $143 billion. But Adyen’s market cap is now $69 billion, larger than Block at $64.5 billion. Stripe was last valued in private markets at close to $100 billion.

Because it handles a broad range of in-store, self-serve checkout, curbside and online payment options, Adyen could weather the pandemic and changes coming out of the pandemic, said Pieter van der Does, chief executive of Adyen.

“The strength that [merchants] know us for is that we are helping them to sell in all channels. Often they take us for point-of-sale and think it's only in years that they're going to do online — and now with COVID that’s quicker,” he said. “But the ultimate promise is that we will help them whatever comes their way.”

During the pandemic, many Adyen clients quickly moved to online or contactless curbside options — even luxury merchants who would have previously turned up their noses at such sales methods. Adyen sold new services for many existing customers while also adding new customers. (More than 80% of growth came from existing merchants and churn based on volume was less than 1%.) As a result, it wasn’t as affected by changes or drops in revenue volume of its merchants, van der Does said.

“We just get more share of the wallet,” he said. “If a merchant starts with us for one brand, and they like it, they roll it out over multiple brands or regions.” McDonald’s, for example, started in 2019 with Adyen for mobile payments in the U.K. and later expanded elsewhere.

Adyen’s take rate on transactions has declined as it has grown and added large clients, and its average transaction value has grown, the company acknowledged.

The company also has grown by expanding outside of Europe, with 40% of net revenue outside of EMEA for the first time. North America net revenues grew 74% in 2021, faster than the company overall.

Adyen also got a banking license in the U.S. last June, which has made it easier to operate and enables things like faster payouts, van der Does said.

While some of its rivals have grown through acquisitions — look at PayPal’s acquisitions of Braintree, iZettle and Paidy, or Block’s recent Afterpay deal — Adyen, founded in 2006, generally prefers not to acquire companies and believes building its own technology to meet the needs of clients provides the best products, while avoiding costly and distracting integration issues, he said.

Another key difference: Adyen is a middleman and doesn’t offer a branded payments service itself or build relationships directly with end customers, which is key for large merchants that want to control that relationship, van der Does said.

Adyen plugs into many “buy now, pay later” providers, but doesn’t provide that service itself. But it looks to offer new payment methods as soon as they’re available, he said, citing Brazil’s Pix, a new electronic payments system.

Update: This story was corrected on Feb. 10, 2022, to reflect the correct timing of PayPal’s earnings announcement.

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