How Adyen managed to convince investors and the price skyrocketed: payment is not a commodity

Because all payments are made in the Rijksmuseum via Adyen, from the museum shop to the tickets, the payment company can also provide customer data on which the museum can tailor its policy.

Ordered a ticket for the Rijksmuseum at home or did you want to stand in line at the physical counter? Would you like a cup of coffee and something tasty during your visit? Would you like to put a poster on your wall at home in the museum shop afterwards? Probably without the visitors knowing it, they all pay for their tickets, coffee and gifts via Adyen.

This payment company, which may seem simple to the layman, increased in value by almost 34 percent on the Amsterdam stock exchange this week. In one week from a market value of just under 20 billion to a market cap of almost 30 billion euros. On Thursday morning in the Netherlands it took more than half an hour before there was a race at all. On Friday, the share closed the week at 936 euros.

The reason for the steep climb was an almost three-hour presentation by the company in San Francisco to investors and analysts on Wednesday evening Dutch time. The company promised attendees and online listeners that it will grow faster than the entire payment company market.

But: Adyen has been promising that for years. The Amsterdam payment company, founded in 2006, has a long-term goal of revenue growth of a quarter to 35 percent per year. For comparison: French competitor Worldline achieved a turnover growth of just under 11 percent in 2022, while the unlisted American counterpart Stripe processed 26 percent more transactions.

in statement about AdyenRijksmuseum Visitors from Beijing feel just as comfortable with a payment as those from Rotterdam

However, this summer, during the presentation of the half-year results, Adyen shocked the financial markets. The company then announced that sales had increased by ‘only’ 21 percent in the first six months. Adyen lost almost 40 percent or 19 billion euros of its value that day, and there was no recovery after that. In fact, when Wordline issued a turnover warning at the end of October, causing the price to more than halve on the stock exchange, Adyen was also pulled down 7 percent again.

The fear among investors and analysts was that the sector in which Adyen is active, the payment sector, would no longer produce such high growth figures as in recent years. And so neither does Adyen.

Not yet at the old level, but on the way up

The sector had benefited enormously from the online shopping boom during the coronavirus pandemic, when countries imposed lockdowns. After all: every additional online transaction generates income for the companies that process those payments for the retailer. And since cash payments are still the mainstay in many countries, investors saw enormous growth potential in Adyen, Worldline and Stripe, even during economic downturns. After all, the trend from cash to digital payments would be separate from this.

However, the figures from Adyen for the first half of the year and Worldline for the third quarter showed market researchers that payment companies are not immune to economic headwinds. During the half-year results, Adyen warned of price pressure on the large American market. Worldline warned of lower sales, especially in Germany, which is why the company, which is mainly active in Europe, does not expect 8 to 10 percent growth this year, but 6 to 7 percent.

Some analysts have even said in recent weeks that the payment sector is sometimes a so-called commodity could become: a product or service that cannot be innovated as much, so that competitors all offer more or less the same thing, so that people are no longer willing to pay very much. Think: the telecom sector or electricity providers. Or the banking sector.

On Wednesday, Adyen managed – given the enormous price jump afterwards – to convince investors that its product is not commodity is becoming.

Unlike competitors, Adyen works with a self-built IT platform that has grown with the company

Also Alipay and WeChat

What does Adyen do more than just be a simple payment company? Back to the Rijksmuseum, which has been an Adyen customer since 2015. What the payment company does for the museum could make the point Adyen repeatedly tried to make on Wednesday a little clearer.

Adyen not only arranges for the 600,000 Dutch visitors to ‘simply’ pay with their bank card or with Apple or Google Pay. The 1.1 million visitors to the Rijksmuseum from other countries can also use their own payment method: Chinese with Alipay or WeChat, for example, Americans with their credit card. “A visitor from Beijing feels just as comfortable making a payment as a visitor from Rotterdam,” the museum writes in a customer testimonial on the Adyen site.

In addition to offering as many payment options as possible for visitors, the Rijksmuseum also receives information from Adyen about what exactly visitors do. When during their visit will they stop for coffee? Are there any special characteristics to be discovered by visitors who also purchase something in the museum shop?

Data about paying customers

“If we see an increase in Japanese visitors, for example, then we can look at all the products we offer and perhaps the languages ​​we need to add,” head of digital marketing at the Rijksmuseum Marijke Smallegang is quoted in a 2020 article on the website from Adyen. When asked, Smallegang leaves NRC continue to be “satisfied with the support and services that Adyen provides.”

Due to this extensive service in addition to payments, Adyen believes it can maintain somewhat higher prices than the rest of the market, the company said on Wednesday. However, Adyen did not just tell flashy stories that should reflect well on the company itself. The company also made the point that payment is still a long way off commodity where price is the most important sales factor.

Trevor Nies, the US head of Adyen’s online-only retail division, said: “Payments are not a solved problem. In the United States, 15 percent of payments that are initiated fail.” This is partly because the correct payment method is not offered or contact cannot be made with the credit card company. This offers opportunities for Adyen, but also for competitors if they manage to solve these payment problems.

Yet the Adyen staffers who presented on Wednesday also said they saw ‘unique’ opportunities in this. Why? Because unlike many competitors, Adyen works with a self-built IT platform that has grown along with the growth of the company itself. The Amsterdam payment company has never made an acquisition. Competitor Worldline is a merger product of regional payment companies from Europe, such as Online Payments Platform and Interpay (later Equens) in the Netherlands, as well as the French Ingenico active in the Netherlands. This also applies to many other payment companies.

According to market experts, this generally makes it more difficult for many payment companies to expand across borders or to serve larger customers in multiple countries. Adyen succeeds in this: the company mainly serves large customers that operate worldwide, such as Uber, Dunkin’ Donuts and Easyjet. Levi’s and Swarosvki.

Was it the explanation of what the company can do that convinced investors that they consider the company worth a third more than a week ago? Partly perhaps. But Wednesday was also the first time that the company had analysts ask questions in such detail and also provided an update on the results of the past quarter. Until now, Adyen thought it was enough to provide an update once every six months.

Forced by the share price fall this summer, the company decided to provide more information to investors and to say more about its short-term goals. It expects to grow 20 to 30 percent in turnover through 2026. That is somewhat lower than previously promised, but has been very positively received by analysts. Because those are not growth figures for one commodity.