Thank you - I think your salary estimates are way too low. 59 kEUR ~ in tech role is too small in Amsterdam example as SW you get around 100 kEUR salary
No worry I am actually very glad that someone is crosschecking my analysis... this is one of the goal. Also the 100k Amsterdam is a good data point thanks
Very detailed and thorough analysis. However, I am wondering if the growth slowdown in NA is primarily related to EBay, why wouldn't the Adyen management call it out as such? thanks
Yes good point. I mean it was indirectly mentioned in the report by saying that ex eBay platform went up 85%. But why not puting all the blame on eBay. Maybe there is also Uber or another major client in the picture. Maybe they have a policy not to comment specifically on individual customer. eBay was discussed more openly at the Goldman Sachs conference so they are more open to put the blame on this. But you have point.
Hi Govro... enjoyed your thorough write-up for Adyen. Gave me great and quick insight into a business I didn't know much about before. A few follow-on questions I'd really appreciate your insights on:
1. What market share do you estimate Adyen has (versus the new players like Stripe, and then overall if you include the legacy providers)? Since growth is so key to their thesis I'm trying to understand how much runway they have left.
2. It seems like Stripe is their main competitor and then you mentioned the flexible payments software being implemented by the likes of Uber to switch between providers depending on the type (and size) of transaction. Do you know where Adyen is more or less competitive in terms of transaction type? So are they better priced on the smaller transactions (like Uber rides and presumably Amazon purchases) or the larger transactions (like Nike purchases for example)? And is this competitiveness purely because of their pricing strategy or does it have to do with their software setup relative to competitors like Stripe?
3. What makes Adyen (and Stripe) able to take market share from the legacy providers... is it the fact that their software can't be replicated because of the legacy systems and this gives them a cost / service advantage? Or is it because they're integrating both the gateway and acquirer functions in one package and selling them collectively at lower prices whereas the legacy providers play in one or the other segment?
Fantastic questions M. Le Roux and not easy to answer but let me briefly address those the best I could:
1) market share: There is digital only and unified services. On digital only Adyen has the largest market share with digital only large merchant about 20% in USA from what I gathered. customers ..Uber, Spotify, Netflix, Ebay. booking.com airnbnb, Here they are going mostly against Braintree and Stripe in this order but also legacy players which are charing less. The fact that Adyen is the largest and is always innovating first.. makes them likely that it will win a lot of the new contracts etc.. So in terms of market share gain, I am seeing Adyen slowly gaining market share there.. against legacy players like chase, worldpay, etc.. but not as fast that it was gaining market share from 2016-2022. Braintree and Stripe and legacy have finally catchup in terms of offering and players like uber, booking com etc are finally able to support multiple payment processor... so super product but still some downward pressure. .. so market share will not grow as fast as before. .. the digital only pie does grow and market share will grow..say 20% moving to 25% over the next few years.. (but not as fast as going from 0% to 20% in 5 years!!!
On the unified front... Adyen is very strong in terms of offering on the unified front.. combining both on premises and digital online. Adyen technology is unique.. everythning is developed inhouse and so in contrast to legacy players.. for them on premises or digital is coming from the same code base. I was a SW architect and system engineer before being a full time investorm and I can tell you that if a code base is not yours.. this is a mess. The unified offering is critical for major manufacturers and retailed. Think about LVMH.. where they want to have great visibility on thier payment whether it is online with Sephora or in their premises. The vast majority of retailers are using Legacy players (Chase payment 3T$+, Fiserv 2.5T, WorldPay 1.3T) but they want an advanced digital solution but legacy players are very slow to offer new services due to their code base. Stripe and Braintree doesnt have a similar on premises offering. So I think Adyen will gain more and more market share in the uniified front from wholesalers (Nike, LVMH) and retailer/online by offering much better services, better authentication, fraud prevention, visibility than legacy. Their current market of traditional on premises is tiny. So lots of potential.
2. In terms of pricing, I think the pricing is mostly geared towards overall volume. So the more your system goes through Adyen, the lower it will cost you. So the multiple processor narrative is misleading from my point of view... If I funnel all my payment through Adyen I will probably get a discount from Adyen.. based on volume.. This is something I dont understand. I am sure Adyen is addressing with current customer..If you put more volume we will cut fee. We have to be careful with narrative on the internet. Sometimes if a stupid idea gets repeated many times it start to be believed to be true.
Stripe had an intital small merchant user focus so they dont scale well in terms of large merchant according to an interview from an expert with Ben Thompson. So Stripe may have some scalability issue when offering more services for large merchant.. it was not build from the start go to handle very large volumes merchant. In an interview with Stripe CEO, it was clear to me that Stripe main focus was still the small merchant market and they see their competitive advantage as their capability to onboard easily small merchant.
Braintree is 'the enfant pauvre' of Paypal. They were bought in 2013 I think and since their capability to innovate was not viewed important for Paypal. All Paypal cares is Paypal. Braintree is viewed has just a way to put more Paypal button on the website's customer. This is a lost leader for them. I personnaly think that in 5 years they will have lost their way. Adyen will continue to innovate.. but Braintree will slowly become stale and will not be able to follow. Legacy players is even worse.
3. Adyen's main competitive advantage is that they have a unified platform - single SW platform completly controlled by then .. not relying on 3rd party which gave them scalability and capability to innovate constantly. Legacy players have old and stale code base often they have to maintain different code base doing the same thing as the code base was brought from a series of geographical acquisitions.. WorldPay is the result of 20+ acquisitions. Their code base must be a mess. Braintree was down prioritize since the Paypal acquistion. Stripe has a initial focus on small merchant and onboarding and they do not have a on premises solution. Adyen will always provide the best response time (scalability) and performance (FRaud and authentication rate). They were the first to offer tokenized solution in 2020. Now Stripe is offering that in late 2022 just as an example. They were the first to offer the tap to pay... with an iphone this year. You basically need only an iphone to process a transaction for a merchant.
The fraud war is a constant battle... frauders always innovate and so payment processor must always innovate to block the fraud. I dont think Braintree or Stripe can just follow Adyen once (like the token support) and thats it... Adyen has lost their competitive advantage. The race is always on. The competitive advantage is the platform or the capability not a specific feature.
Thank you - I think your salary estimates are way too low. 59 kEUR ~ in tech role is too small in Amsterdam example as SW you get around 100 kEUR salary
I calculated the 59keuro cost for a 6 month period or 1 semester. So annual expense X2 is 118 keuro
Oh yes I see - sorry for misreading
No worry I am actually very glad that someone is crosschecking my analysis... this is one of the goal. Also the 100k Amsterdam is a good data point thanks
Very detailed and thorough analysis. However, I am wondering if the growth slowdown in NA is primarily related to EBay, why wouldn't the Adyen management call it out as such? thanks
Yes good point. I mean it was indirectly mentioned in the report by saying that ex eBay platform went up 85%. But why not puting all the blame on eBay. Maybe there is also Uber or another major client in the picture. Maybe they have a policy not to comment specifically on individual customer. eBay was discussed more openly at the Goldman Sachs conference so they are more open to put the blame on this. But you have point.
Hi Govro... enjoyed your thorough write-up for Adyen. Gave me great and quick insight into a business I didn't know much about before. A few follow-on questions I'd really appreciate your insights on:
1. What market share do you estimate Adyen has (versus the new players like Stripe, and then overall if you include the legacy providers)? Since growth is so key to their thesis I'm trying to understand how much runway they have left.
2. It seems like Stripe is their main competitor and then you mentioned the flexible payments software being implemented by the likes of Uber to switch between providers depending on the type (and size) of transaction. Do you know where Adyen is more or less competitive in terms of transaction type? So are they better priced on the smaller transactions (like Uber rides and presumably Amazon purchases) or the larger transactions (like Nike purchases for example)? And is this competitiveness purely because of their pricing strategy or does it have to do with their software setup relative to competitors like Stripe?
3. What makes Adyen (and Stripe) able to take market share from the legacy providers... is it the fact that their software can't be replicated because of the legacy systems and this gives them a cost / service advantage? Or is it because they're integrating both the gateway and acquirer functions in one package and selling them collectively at lower prices whereas the legacy providers play in one or the other segment?
Thank again.
Fantastic questions M. Le Roux and not easy to answer but let me briefly address those the best I could:
1) market share: There is digital only and unified services. On digital only Adyen has the largest market share with digital only large merchant about 20% in USA from what I gathered. customers ..Uber, Spotify, Netflix, Ebay. booking.com airnbnb, Here they are going mostly against Braintree and Stripe in this order but also legacy players which are charing less. The fact that Adyen is the largest and is always innovating first.. makes them likely that it will win a lot of the new contracts etc.. So in terms of market share gain, I am seeing Adyen slowly gaining market share there.. against legacy players like chase, worldpay, etc.. but not as fast that it was gaining market share from 2016-2022. Braintree and Stripe and legacy have finally catchup in terms of offering and players like uber, booking com etc are finally able to support multiple payment processor... so super product but still some downward pressure. .. so market share will not grow as fast as before. .. the digital only pie does grow and market share will grow..say 20% moving to 25% over the next few years.. (but not as fast as going from 0% to 20% in 5 years!!!
On the unified front... Adyen is very strong in terms of offering on the unified front.. combining both on premises and digital online. Adyen technology is unique.. everythning is developed inhouse and so in contrast to legacy players.. for them on premises or digital is coming from the same code base. I was a SW architect and system engineer before being a full time investorm and I can tell you that if a code base is not yours.. this is a mess. The unified offering is critical for major manufacturers and retailed. Think about LVMH.. where they want to have great visibility on thier payment whether it is online with Sephora or in their premises. The vast majority of retailers are using Legacy players (Chase payment 3T$+, Fiserv 2.5T, WorldPay 1.3T) but they want an advanced digital solution but legacy players are very slow to offer new services due to their code base. Stripe and Braintree doesnt have a similar on premises offering. So I think Adyen will gain more and more market share in the uniified front from wholesalers (Nike, LVMH) and retailer/online by offering much better services, better authentication, fraud prevention, visibility than legacy. Their current market of traditional on premises is tiny. So lots of potential.
2. In terms of pricing, I think the pricing is mostly geared towards overall volume. So the more your system goes through Adyen, the lower it will cost you. So the multiple processor narrative is misleading from my point of view... If I funnel all my payment through Adyen I will probably get a discount from Adyen.. based on volume.. This is something I dont understand. I am sure Adyen is addressing with current customer..If you put more volume we will cut fee. We have to be careful with narrative on the internet. Sometimes if a stupid idea gets repeated many times it start to be believed to be true.
Stripe had an intital small merchant user focus so they dont scale well in terms of large merchant according to an interview from an expert with Ben Thompson. So Stripe may have some scalability issue when offering more services for large merchant.. it was not build from the start go to handle very large volumes merchant. In an interview with Stripe CEO, it was clear to me that Stripe main focus was still the small merchant market and they see their competitive advantage as their capability to onboard easily small merchant.
Braintree is 'the enfant pauvre' of Paypal. They were bought in 2013 I think and since their capability to innovate was not viewed important for Paypal. All Paypal cares is Paypal. Braintree is viewed has just a way to put more Paypal button on the website's customer. This is a lost leader for them. I personnaly think that in 5 years they will have lost their way. Adyen will continue to innovate.. but Braintree will slowly become stale and will not be able to follow. Legacy players is even worse.
3. Adyen's main competitive advantage is that they have a unified platform - single SW platform completly controlled by then .. not relying on 3rd party which gave them scalability and capability to innovate constantly. Legacy players have old and stale code base often they have to maintain different code base doing the same thing as the code base was brought from a series of geographical acquisitions.. WorldPay is the result of 20+ acquisitions. Their code base must be a mess. Braintree was down prioritize since the Paypal acquistion. Stripe has a initial focus on small merchant and onboarding and they do not have a on premises solution. Adyen will always provide the best response time (scalability) and performance (FRaud and authentication rate). They were the first to offer tokenized solution in 2020. Now Stripe is offering that in late 2022 just as an example. They were the first to offer the tap to pay... with an iphone this year. You basically need only an iphone to process a transaction for a merchant.
The fraud war is a constant battle... frauders always innovate and so payment processor must always innovate to block the fraud. I dont think Braintree or Stripe can just follow Adyen once (like the token support) and thats it... Adyen has lost their competitive advantage. The race is always on. The competitive advantage is the platform or the capability not a specific feature.
Hey Govro thanks again, good read! You have probably already read this one but wanted to share just in case. If you have any other opinions then keen to hear https://www.techfund.one/p/problems-for-adyen-and-paypal-in