Adyen: The Payments King
An Investment Deep-Dive & Research Guide
$ADYEN Valuation on Publish Date
Price Per Share (Close): €1,835
Market Cap: €56.5 Billion
Enterprise Value: €53.6 BillionTable of Contents
Executive Overview
What does Adyen do?
History
Operating Segments
Digital
Unified Commerce
Platforms
The Right to Win: A Growing Durable Competitive Advantage
Toll Booth Moat
Global Infrastructure & Licensing
Distribution Capabilities
An Expansive Global Data Network
Switching Costs
Single Global Platform
Significant Total Cost of Ownership Savings
Data & Customer Analytics
Authorization & Local Acquiring Advantages
Embedded Payments
Engineering Firepower
Porter’s Five Forces Analysis
Threat of Competition Leading to Buyers Choosing an Alternative Solution
Low Effort to Switch Payment Processors
Commoditization, Fierce Competition, and Technological Disruption
Bargaining Power of Buyers
Bargaining Power of Suppliers
Management’s Long Term Disposition
Looking at the Future
Executive Overview
Adyen, a Dutch global payments processor and merchant acquirer for large enterprises, offers a unique value proposition as a one-stop shop facilitating the entire payment lifecycle through a single integration. This simplicity may appear straightforward, but it is far from trivial for a competitor to deliver. No competitor combines Adyen's scale with its unified payment platform, underscoring its differentiation in a market often dismissed as commoditized. While perceptions linger that payments can be easily routed between providers, Adyen's consolidation of gateway, processing, risk management, issuing, and acquiring services into one platform gives it a durable advantage. The business has a substantial runway for growth despite already processing over €1.2 trillion in payment volume. The total addressable market (TAM) for payments continues to expand into tens of trillions of dollars, driven by increasing digitalization and the shift to cashless transactions. Adyen's growth is further fueled by capturing greater wallet share with existing customers, securing new deals, and building complimentary high-margin revenue streams, such as micro-lending to Small And Midsize Businesses (SMBs) through embedded finance (or embedded payments).
Although Adyen may initially appear expensive with an unadjusted EV/EBIT multiple of 62x1, its true earnings potential is obscured by growth investments, legacy accounting practices that fail to account for significant platform infrastructure investments, and finally the interest generated from its growing customer cash pile that should be treated as operating earnings. The company has tremendous operating leverage potential. Despite operating a high fixed-cost business model, its fixed costs are relatively lower than those of peers in the physical economy. Once the infrastructure is established, incremental revenue from additional transaction volumes delivers exceptionally high profitability, with a significant portion flowing directly to the bottom line. These dynamics position Adyen as a long-term compounder with many years of profitable growth ahead, making it a far better value than its current valuation suggests.
What does Adyen do?
Historically, large enterprises depended on a handful of specialized providers for each stage of the payments value chain to accept payments for its goods and services, resulting in increased complexity and higher costs. Achieving true global coverage required partnering with multiple providers. Adyen has eliminated this need by significantly simplifying both digital and physical payments for large enterprises through its comprehensive, all-in-one payments platform. This full-service solution manages the entire payments lifecycle, including gateway services, risk management, processing, issuing, acquiring, settlement, and even micro-loans for SMBs within platform marketplaces. Businesses rely on Adyen to accept payments both online and in-store, support diverse payment methods and navigate the complexities of compliance and regional differences in markets across the world. Its unified platform consolidates all payment channels, providing seamless integration, robust fraud prevention, and real-time data insights to optimize authorization rates and reduce payment costs. Adyen charges customers using a transparent Interchange++ model, where merchants incur a variable settlement fee and a fixed processing charge in addition to the interchange (charged by the issuing bank) and scheme fees (charged by the card networks) for each transaction.
By securing its own banking licenses and integrating directly with card networks and financial systems, Adyen eliminates reliance on intermediaries. This direct control enhances reliability, improves transaction efficiency, and simplifies reconciliation and reporting—allowing businesses to scale globally with greater flexibility and cost savings.
Dive Deeper: Payments & the Payments Industry
Understanding the payments ecosystem and the unit economics of a transaction are critical for understanding the company. For more on how the Basic Transaction Flow works, please reference the following resources:
Adyen: The “Navy SEAL” Team of Payments by MBI Deep Dives
Payments Systems in the U.S.: A Guide for the Payments Professional by Carol Coye Benson, Scott Loftesness, and Russ Jones
The complete guide to credit card processing by Adyen Knowledge Hub
Adyen: A First Principles Payment Platform by Business Breakdowns (Colossus)
Why We Like Adyen Stock by Chit Chat Stocks
Adyen ($ADYEN) Investment Write-up by Aeternus Capital
History
Adyen was founded in 2006 in Amsterdam by current co-CEO Pieter van der Does and Arnout Schuijff with a bold vision: to revolutionize the world of payments. Frustrated by the fragmented and inefficient systems businesses relied on, they sought to create a unified platform that would simplify and optimize payment processing on a worldwide scale. The name "Adyen," meaning "start again" in Surinamese, symbolized their ambition to build a fresh, scalable solution from the ground up.
In its early years, it operated as a traditional payment gateway, relying heavily on intermediaries to process transactions. However, as merchants demanded greater control, faster settlements, and higher authorization rates, management recognized the inefficiencies of this model. To meet these needs, the business transitioned into a full-stack payment processor by obtaining acquiring licenses and integrating directly with card networks like Visa and Mastercard.
The journey began to accelerate in 2009 when Adyen signed its first enterprise merchant, Groupon. Just two years later, the company achieved profitability and processed its first billion euros in transaction volume. In 2012, it expanded into physical retail by introducing point-of-sale (POS) capabilities, setting the stage for unified commerce solutions.
In 2017, Adyen secured a European banking license, enabling it to act as an acquiring bank. This momentum carried the company to its IPO in 2018 on the Euronext Amsterdam stock exchange, with an initial valuation exceeding $8 billion, making it one of Europe’s most valuable fintech firms. That same year, Adyen landed eBay as its largest Platforms client, marking another major milestone.
By 2021, net revenue surpassed €1 billion. Today, the company processes over €1.2 trillion in annual payment volume and is nearing €2 billion in net revenues. Its roster of marquee clients includes multinational giants such as Uber, Airbnb, Netflix, McDonald’s, Spotify, LVMH, and Booking.com, cementing its reputation as a trusted partner for enterprises across industries.
Dive Deeper: Adyen’s History
For more on Adyen’s rich business history, reference the following resources:
Our Story by Adyen
A Brief History of Adyen by Canvas Business Model
Adyen: The “Navy SEAL” Team of Payments by MBI Deep Dives
Operating Segments
Digital
Adyen’s Digital segment serves businesses where over 99.5% of transactions occur online, processing approximately €783 billion in payment volumes in 2024. It caters to digital-first companies, including e-commerce platforms, subscription services, and content providers, offering a seamless, scalable payment infrastructure tailored to their needs. Leading companies such as Spotify, Netflix, and Microsoft trust the platform to make it easier to expand globally and reduce payment processing costs.
Leveraging a single-platform approach, Adyen delivers superior authorization rates, advanced fraud prevention, and aggregates global and localized payment methods. Its developer-friendly APIs and sophisticated tools—such as recurring payment optimization, real-time data insights, and intelligent payment routing for cost-efficient debit network transactions—enable digital-first businesses to focus on their own product to scale and innovate rapidly.
Additionally, automated systems for chargebacks and 3D Secure authentication ensure minimal disruptions while maintaining high security. Adyen’s infrastructure is designed for exceptional scalability and reliability for customers, effortlessly managing peak traffic during Cyber Five, other major sales events, and high-profile product launches.
Operating Trends
Starting in 2022, the Federal Reserve increased the federal funds rate from near zero, eventually peaking at approximately 5.3% in mid-2023, to curb rapid inflation. Many other central banks followed suit. Consequently, Adyen’s growth in the digital segment decelerated sharply from 54% in the first half of 2022 to 22% in the first half of 2023. Higher interest rates and inflation prompted customers, especially in North America, to prioritize cost-cutting measures. In this environment, Adyen's premium-priced offerings became less attractive to companies seeking to reduce expenses. Additionally, digital customers often have more flexibility than physical retailers to switch payment suppliers. There was likely also a pull-forward growth effect, as consumers, flush with cash and time during the COVID-19 pandemic, made purchases sooner than they otherwise would have. In response to the rapid slowdown in growth, Adyen's stock more than halved, dropping ~60% to €620.
During this challenging period, instead of pursuing growth by cutting costs to compete with rivals lowering their prices to attract cost-conscious customers, Adyen’s long-term-oriented management focused on reinforcing its premium value in the marketplace. This strategy emphasized the company’s ability to reduce the total cost of ownership (TCO), an advantage further enhanced by intelligent debit routing, and improve authorization rates—factors that management believed were more impactful than the cost savings achieved by switching to a payment processor with a lower take rate. This approach proved successful, as processed volume growth reaccelerated to ~50% in H1 2024. Supporting this tailwind were the stabilization of interest rates in mid-2023 and a decline in inflation, which likely shifted the market's focus back toward a growth mindset. Large volume increases from a single large customer in H2 2023 was also beneficial.
However, H2 2024 saw digital segment volume growth decelerate to 13% YoY, which was primarily due to an 8 point drag due to a customer churning who is widely believed to be Block’s Cash App. Excluding this impact, digital volume growth would have been 21% YoY. While this is a fairly big drop from H1 2024 it is still a remarkable, compared to competitors like Braintree who saw only 11% and 2% growth in Q3 and Q4, respectively.
In H2 2024, digital segment volume growth decelerated to 13% YoY—mainly due to an 8 percentage point drag from the churn of a major customer, widely believed to be Block’s Cash App. Excluding that impact, growth would have reached 21% YoY. While this slowdown is notable compared to H1 2024, it's still pretty impressive and represents continued market share gains when you consider that competitors like Braintree struggled, with growth dropping to 11% in Q3 and just 2% in Q4.
Unified Commerce
Trusted by major international brands like McDonald’s, Prada, and LVMH, Adyen's Unified Commerce segment, serving businesses where at least 0.5% of transactions occur via POS, processed €335 billion in volumes in 2024. This segment enables merchants to effectively integrate online, in-store, and mobile payment channels through a single, end-to-end platform, ensuring consistent and frictionless customer experiences across industries like retail, hospitality, and large-format commerce.
A key differentiator is the recently launched SFO1 POS terminal, which extends beyond basic payment processing to enhance customer engagement and reinforce brand loyalty. Integrated with Adyen's unified commerce platform, the SFO1 offers deep customization, enabling merchants to tailor the interface to align with their brand identity. It also supports advanced features such as loyalty program integration, real-time promotions, and inventory management, making it a multifunctional solution that drives both customer satisfaction and operational improvements.
At the core of Adyen’s platform is network tokenization, which replaces sensitive card details with secure digital tokens. This ensures enhanced security and enables consistent transactions across all channels—online, in-store, and mobile. Complementing this is Adyen’s Payment Account Reference (PAR) system, which assigns a unique identifier to each customer’s payment account. PAR simplifies reconciliation by linking transactions across channels to a single source, making it easier for businesses to manage refunds, chargebacks, and customer profiles. Additionally, card aliasing provides a user-friendly identifier to simplify payment initiation for customers, while secure tokenization handles recurring transactions behind the scenes. Together, these technologies create a unified payment experience, allowing businesses to deliver seamless, secure, and consistent transactions—whether online, in-store, or through any other channel.
Operating Trends
In 2021, Adyen’s Unified Commerce segment was grew at an impressive 86% clip. However, as the business matured, sustaining such rapid expansion became increasingly difficult, especially compared to the more developed Digital segment.
Several factors contributed to the segment’s steep deceleration. First, Unified Commerce started from a much lower base—€22.50 billion in H2 2020 compared to €102.10 billion for Digital. While early growth rates were high, sustaining such growth is mathematically more challenging as the base scales. Additionally, the segment was disproportionately affected by rising interest rates and macroeconomic uncertainty. Compared to their digitally-focused counterparts, businesses with significant brick-and-mortar footprints often face higher operating and financial leverage due to fixed costs and capital requirements, making them more vulnerable during economic downturns.
Consumer behavior shifts post-pandemic also played a role. The lingering effects of COVID-19, combined with inflationary pressures, led to reduced discretionary spending in physical retail. While digital channels benefited from sustained momentum in online shopping habits, Unified Commerce faced headwinds as consumers became more price-sensitive.
The nature of Unified Commerce solutions further compounds these challenges. Unlike digital offerings, they require higher upfront investments and longer implementation timelines due to physical installations of point-of-sale terminals and hardware. Additionally, sales cycles often take 12-18 months, which delays revenue realization. Meanwhile, Adyen’s “land-and-expand” strategy, though effective in fostering long-term relationships, means initial wallet share from physical merchants starts small and grows more gradually, requiring more time for new wins to materialize into significant gains.
An inflection point emerged in H2 2023 as Adyen’s strategic investments began to bear fruit. The company enhanced its product offerings with ongoing AI-driven payment optimizations and merchant-focused improvements, which increased wallet share among key retailers. At the same time, its deliberate expansion into new verticals—most notably hospitality and food & beverage—diversified revenue streams and reduced reliance on traditional retail. As competitors scaled back unsustainable pricing strategies, the inherent strengths of Adyen’s Unified Commerce solution became increasingly apparent. These factors collectively spurred a robust recovery, driving Unified Commerce growth from 24.2% YoY in H2 2023 to 34.7% in H2 2024.
Platforms
Platforms represent the smallest yet fastest-growing segment, processing €168 billion in volume. Leading marketplace platforms like eBay, Etsy, and Olo benefit from Adyen’s capabilities, including automated sub-merchant onboarding and payouts, while extending nearly all of the enterprise-grade innovations—such as intelligent debit routing, advanced data tools, and tokenization—to their vendors. By integrating gateway, processing, acquiring, issuing, compliance, and embedded finance services into a single solution, Adyen streamlines operations and supports scalable growth for gig economy platforms and online marketplaces.
This marks a strategic shift from pre-2021 efforts to directly target SMBs and compete with Stripe—an approach that proved unsustainable due to high capital requirements, complex onboarding processes to support thousands of small merchants, and misalignment with its core enterprise-focused strengths. In contrast, the company now partners with other platforms to effectively reach the long tail of the market, leveraging the ecosystems and investments of its partners to generate higher returns on capital. With a single integration, Adyen supports online, in-person, and mobile payments for SMBs, delivering a unified commerce experience to a traditionally underserved market.
The embedded financial products suite, which is an enormous incremental opportunity, enables platforms to offer their merchants business bank accounts, expense cards, and credit lines. For its partners, this capability not only deepens merchant relationships but also unlocks new revenue streams. To mitigate the inherent risks of the product, Adyen creates sophisticated risk profiles for each vendor by utilizing its advanced data analytics, streamlining processes by eliminating redundant compliance checks for payouts or micro-loans.
Operating Trends
From H1 2020 to H2 2022, the Platforms segment experienced explosive growth, expanding at an annual rate of 166%, from €4.50 billion to €51.80 billion in processed volume. However, this rapid ascent came to an abrupt halt in H1 2023, when growth slowed dramatically before rebounding with 18.73% and 59.15% growth in the subsequent two quarters. The sharp deceleration was largely due to eBay, which had transitioned to Adyen as its primary payment processor in 2018, following its spinoff from PayPal in 2015.
By H2 2021, according to an investigation by Wintergems, the migration of eBay’s payment volumes was nearly complete, leading to a massive surge in volumes within Adyen’s relatively nascent Platforms segment. As a result, eBay accounted for an estimated ~80% of Adyen’s Platform segment volumes during that period. However, by H1 2023, eBay began diversifying its payment processing, shifting ~20% of its volumes to another provider, which significantly impacted growth. Compounding this issue, eBay's Gross Merchandise Volume (GMV) declined by 15.4% in 2022, further exacerbating the slowdown.
Adyen’s underlying business demonstrated resilience despite challenges. In H1 2023, while overall Platforms growth slowed to 3.33% YoY and declined sequentially by 4%, overall Platforms volumes excluding eBay surged by 82%, reducing its reliance on this single customer. By H2 2023, Platforms processed €61.5 billion, representing 11.3% of Adyen's total volume. The number of Platform customers processing over €1 billion increased from 10 to 18 YoY, driven by the ramp-up of substantial prior wins like Block’s Cash App through its land-and-expand strategy and new partnerships with major marketplaces such as Shopify.
While eBay’s reduced contribution presented a significant headwind, much of the impact is likely already in the rear-view mirror. Based on eBay’s press release designating Adyen as its 'primary payments processing partner,' it can be inferred—though not confirmed—that contractual obligations may limit how much payment volume eBay can shift to other processors. Meanwhile, Adyen has successfully diversified its customer base, with accelerating growth from non-eBay customers.
In my view, Platform's rapid growth is still in its early stages with its estimated share of wallet among existing customers remaining below 20 percent as of late 2023. Furthermore, the company anticipates that a significantly larger proportion of SMB merchants, more than double the current levels, will adopt its payments offering in the future, driving substantial long term expansion.
The Right to Win: A Growing Durable Competitive Advantage
Adyen is building an infrastructure that is extraordinarily challenging for both incumbents and new entrants to replicate. The business offers a clear and compelling value proposition: the fees customers pay to Adyen make up less than 10% of their overall payment costs, including interchange fees, while Adyen is able to lower costs for the remaining 90%. Simultaneously, the platform drives revenue growth through enhanced authorization rates—where even a small percentage uplift can meaningfully boost profitability for large enterprises—and new revenue stream opportunities from embedded payments.
These entrenched advantages have enabled Adyen to achieve materially higher margins compared to the industry. While direct competitors, such as Stripe and Checkout.com, remain private and are not included in the Finchat chart above, publicly available data indicate a clear disparity. In 2023, Stripe reported operating margins of 15%2, while Checkout.com had gross margins of 26.7% but posted an operating loss of $8 million.
Meanwhile, Adyen’s returns on capital are exceptional, solidifying its position as an extraordinarily capital-efficient payment processor. In 2024, the business achieved a Return on Tangible Capital (ROTC)3 of ~72%, generating €1.24 billion in normalized operating earnings4 from €1.72 billion in invested tangible capital5. This impressive ROTC includes the estimated capitalized cost of its infrastructure—a real off-balance sheet item that would require years of significant investment for any new entrant to reproduce.
Now, let’s delve deeper into the durable competitive advantages that underpin these exceptional profits, as well as the key drivers that continue to reinforce them.
Toll Booth Moat
Buyers and suppliers must partner with Adyen, which acts as a 'toll collector,' to compete successfully in their respective industries.
In today’s rapidly developing world of tech, large enterprises demand payment solutions that are not only highly efficient and reliable but also meticulously aligned with a complex and constantly shifting framework of worldwide regulations. Adyen has established itself as a leader in this space, leveraging its unique strengths to build a formidable competitive moat often described as a 'toll bridge.' This moat enables it to serve as a critical gateway for customers navigating the complexities of payment systems and regulatory requirements. Through its unified platform, regulatory expertise, and big data-driven innovations, the company has built a product that many of the world’s largest businesses depend on. In this section, we examine the key elements of this toll bridge moat and how it fortifies the company’s role as an indispensable partner for enterprises worldwide.
Global Infrastructure & Licensing
A critical pillar of this toll bridge moat lies in a proprietary infrastructure, carefully engineered and integrated organically without relying on M&A. This deliberate strategy to avoid acquisitions reflects a deeply philosophical and intentional approach by management, standing in stark contrast to an industry dominated by incumbents often pieced together through a patchwork of acquisitions. Such fragmented systems frequently undermine operational performance, scalability, and the quality of the end user experience within the checkout and payment flow.
Banking licenses are the foundation of this infrastructure—secured through years of effort and a strong reputation. Unlike many of its peers, Adyen has taken full ownership of the payments value chain in numerous countries, eliminating the need for reliance on BIN sponsors, who act as middle-man toll collectors. This enables the company to offer payment processing internationally and control the entire payment flow, from processing to issuing, ensuring a smooth and predictable customer experience while lowering merchant costs. Direct integrations with card networks and financial institutions facilitates efficient processing of cross-border transactions. Merchants benefit from worldwide coverage, faster transaction times, higher authorization rates, and reduced dependency on intermediaries. By packaging these capabilities into a single, unified platform, Adyen delivers consistency and reliability for customers—an achievement that competitors, reliant on external sponsors and bolt-on acquisitions, struggle to replicate.
Moreover, management’s proactive approach to regulatory compliance strengthens its market position by transforming adherence to global and local regulations into a strategic advantage that sets it apart from competitors. Its in-house regulatory and localized compliance expertise simplifies complex requirements for merchants, protecting them from the substantial costs and risks associated with non-compliance. This commitment fosters deep trust with customers, as businesses can rely on Adyen to effectively navigate regulatory complexities on their behalf. The stakes are high. Severe financial and reputational consequences of compliance failures—illustrated by incidents such as Target’s 2013 data breach costing $292 million, Heartland Payment Systems’ $140 million penalties in 2008, and TJX’s $256 million expenses following a 2007 breach—demonstrate the criticality of airtight compliance frameworks.
Distribution Capabilities
Adyen’s extensive scale has made it a vital intermediary between payment method providers (suppliers) and merchants (buyers). This broad reach positions Adyen as a key player not only for merchants seeking to offer their customers a diverse range of payment options but also for payment method suppliers in a globally fragmented market who depend on its infrastructure to access the world’s largest merchants.
Consider PayPal's collaboration with Adyen on its Fastlane checkout button. Despite being direct competitors and among the world's largest payment providers, PayPal recognized the strategic value of partnering with Adyen to leverage its extensive global distribution network. This alliance grants PayPal access to a diverse portfolio of marquee merchants not found elsewhere. By serving as a bridge between payment providers and merchants, Adyen simplifies complex processes and expands market reach, creating mutual benefits for all stakeholders involved.
From the buyer’s perspective, Adyen’s capabilities allow international merchants to offer a diverse selection of payment methods—both traditional and alternative—across geographies with relatively minimal integration effort. For example, Adyen’s localized acquiring expertise allows businesses to seamlessly accept region-specific payment options such as iDEAL in the Netherlands or Pix in Brazil. This comprehensive payment method acceptance helps merchants to cater to diverse consumer preferences, improving conversion rates. According to Adyen's 2024 Retail Report, 55% of consumers will abandon a purchase if their preferred payment method is unavailable.
An Expansive Global Data Network
Adyen’s advanced data capabilities create a form of network effects that make each new merchant increasingly valuable to the ecosystem. With every transaction processed, the platform becomes smarter, leveraging big data and machine learning to optimize fraud prevention, authorization rates, and payment routing in real time. By analyzing patterns in historical transactions, the platform implements sophisticated risk checks and tailored authorization strategies that benefit merchants across industries. However, unlike traditional network effects seen at Meta or Visa, where the direct addition of users exponentially increases the value for all, this flavor of network effect is primarily data driven. Its value compounds through insights rather than connectivity between nodes, meaning the incremental benefit to each merchant comes from a smarter, more efficient platform rather than an expanding web of direct participants. While this type of network effect may not scale as dramatically, it remains a powerful advantage, enhancing Adyen’s ability to deliver increasingly effective solutions as it grows.
For example, Adyen’s recently launched AI-powered payment optimization suite, Adyen Uplift, demonstrates the platform’s capacity to enhance overall efficiency. Piloted by 60 enterprise businesses, including Patagonia and Nord Security, Uplift enables businesses to increase payment conversion rates by up to 6% and reduce payment processing costs by up to 5%. The AI leverages over a trillion dollars worth of transaction data to optimize payment routing and minimize fraud. This collaborative data network ensures that each customer benefits from the collective insights of the ecosystem, driving value for both new and existing merchants.
This data-driven advantage is difficult for competitors to replicate, as they lack the single platform, engineering capabilities, scale, and cumulative transaction volume that fuel the ecosystem. The result is a virtuous cycle: as the platform grows, its value multiplies, deepening its network effects and strengthening its moat.
Switching Costs
Once customers are on the platform, it is practically challenging to switch to an alternative, whether a direct competitor or a substitute offering.
Adyen’s switching cost moat is built on large barriers to entry that discourage merchants from transitioning to other payment processors. While the technical integration for moving from one payment processor to another is relatively quick—for instance it takes 1–2 weeks for a merchant to deeply integrate with Adyen—the reality of switching is far more complex. The process entails significant operational disruptions, complex data migration, re-configuring multiple systems, and extensive staff training. Additionally, maintaining business continuity, ensuring compliance, and replicating Adyen’s unified platform features require substantial time and resources. These intertwined challenges create high switching costs, making it difficult for merchants to switch despite the ease of technical integration.
These switching costs are reflected in Adyen’s consistently low volume churn of less than 1%6 with 80% of growth consistently derived from existing customers, indicating its ability to retain merchants and cultivate long-term relationships.
Single Global Platform
The single global platform provides merchants with a unified solution for payment processing, acquiring, risk management, and reporting across regions and channels. Unlike competitors that rely on patchwork systems built through mergers and acquisitions or have limited reach altogether, Adyen’s platform is developed entirely in-house. This gives merchants a reliable one-stop shop for managing payments. With a single integration, one contract, and a centralized view of all transactions, merchants avoid the hassle of juggling multiple providers. The simplicity of this setup not only streamlines operations but also improves authorization rates and makes reconciliation processes much smoother. Switching to another provider would mean giving up this level of integration and reliability, leading to significant costs, time investment, and operational challenges.
Significant Total Cost of Ownership Savings
The secret sauce for Adyen is that despite being a premium offering in the market, the company’s ability to lower its customers' TCO is idiosyncratic. As mentioned earlier, unlike competitors, the unified platform consolidates the entire payment lifecycle into a single integration, reducing the need for multiple vendors, streamlining operations and cutting costs significantly.
Adyen leverages critical technologies like AI through Uplift, intelligent payment routing, and network tokenization to drive cost savings and boost performance for merchants. The U.S. debit routing solution allows merchants to save up to 26% on transaction costs while increasing authorization rates by as much as 1.15%7. Additionally, Adyen’s local acquiring capabilities reduce cross-border fees by converting international transactions into domestic ones. For example, an American electronics retailer selling to Indian customers might struggle with low authorization rates and high fees if processing payments through a U.S. acquiring provider. By utilizing local acquiring in India, the retailer can increase approval rates significantly and minimize transaction costs. This optimization can lead to savings of up to 59% on interchange and scheme fees, which make up the majority—about 85%—of payment costs.
Additionally, fraud prevention tools and advanced data-driven insights further reduce costs. Innovations such as real-time PAN updates saved businesses over $1 billion in the past year, while RevenueProtect reduced chargebacks and fraud for customers like Fubo, which also improved authorization rates by 1.5%. Another client, exceeded its annual cost reduction target by 40%.
The bottom line is this: while Adyen’s average take rate of 0.163% represents an increasingly small fraction of total transaction costs, the company plays a pivotal role in reducing the far larger fees, such as interchange, which typically range from 1.5% to 2%. By leveraging features like intelligent routing and local acquiring, Adyen not only drives significant cost savings but also creates new revenue opportunities for merchants. These advantages allow customers to redirect resources toward core operations and reinvest savings into improving their business.
As its largest clients grow, Adyen’s tiered pricing strategy ensures they benefit from even lower rates, reinforcing its value proposition. This scaling effect, central to its land-and-expand strategy, naturally drives down take rates over time while deepening merchant relationships and expanding overall processed volume.
Data & Customer Analytics
The data and customer analytics capabilities add another layer to its switching cost moat by delivering actionable insights that merchants rely on to optimize their operations. Adyen links customer transactions across channels, stores, and time, creating a unified view of shopper behavior. Adyen’s analytics also enhance marketing efforts by providing pre and post-promotion insights and identifying trusted shoppers, improving fraud prevention, and authorization rates. For example, if a customer purchases in-store and later shops online with another Adyen merchant, the platform can recognize the shopper as a known entity, reducing friction in the transaction. These capabilities, powered by Adyen’s centralized big data engine and intelligent decision-making, are difficult to find elsewhere. Merchants that switch providers risk losing access.
Authorization & Local Acquiring Advantages
Adyen’s ability to optimize authorization rates through local acquiring and its extensive licensing portfolio forms a critical pillar of its switching cost moat. By processing transactions through local banks in the cardholder’s home country, Adyen boosts approval rates to 80–85%, compared to just 30–40% with foreign acquirers, while reducing fraud flags and improving the customer experience. This localized approach ensures compliance with regional regulations and full compatibility with issuing banks’ systems, driving the higher transaction success rates. Adyen’s global license portfolio enables local acquiring services worldwide, allowing merchants to operate across markets without complex third-party integrations, delivering region-specific solutions, lowering costs, and ensuring compliance with local card scheme rules. Additionally, Adyen’s control over its licenses allows for innovations such as real-time payouts, which traditional systems cannot easily match. By eliminating reliance on third-party settlement banks, the company provides faster and more reliable cash flow payout timelines. For merchants, switching to another provider would risk losing this advantage, leading to lower authorization rates and a direct hit to revenue.
Embedded Payments
The embedded payments offering represents a nascent but growing contributor to Adyen’s switching costs. By embedding financial services directly into platforms and marketplaces, Adyen enables these businesses to offer micro-lending capabilities to their end users, unlocking new revenue streams without the burden of extensive licensing, custom technology builds, or complex integrations.
“We do this all from our one single platform. One single platform means to have one single onboarding flow and one single risk profile over the seller. The platform can use that for any of the other services that it wants to offer to that seller. That means that once the seller is onboarded, it does not need to go through a similar flow where it wants to take out capital or bank; it only needs to do that once. How we are also different is that we do that in the background; we are not visible. We allow the platforms to continue to have the full relationship with the seller. We would not interfere with that, and we will allow the platform to maintain full control over that. Finally, we do this all on our own licensing framework.”
Mariëtte Swart, Chief Risk & Compliance Officer, Adyen (2022 Capital Markets Day)
Once integrated, a Platforms customer seeking to switch would face the daunting task of sourcing multiple disparate suppliers to replicate a degraded version of this functionality—a risky and inefficient endeavor that could jeopardize the stickiness of the feature for its customers along with any incremental revenues gained.
Engineering Firepower
The company’s software engineering prowess along with rapid release cycles is an overlooked asset that give its customers an edge. Unlike legacy incumbents and older banks, which often have long development and release cycles, Adyen pushes updates weekly—a remarkable pace in an industry where changes can take months. This agility allows merchants to quickly adopt new features, integrate seamlessly into new markets, and adapt to shifting consumer preferences. Legacy players struggle to keep up, making Adyen’s engineering-first approach a key differentiator that helps to lock merchants into the platform.
Porter’s Five Forces Analysis
Let’s use the Michael Porter’s Five Forces framework to evaluate the numerous threats of the business.
Threat of Competition Leading to Buyers Choosing an Alternative Solution
The ability to durably fend off threats from new entrants, rivalry among existing firms, or substitute offerings significantly impacts an enterprise’s pricing power, customer retention, growth rates, and predictability.
Low Effort to Switch Payment Processors
Risk
Adyen faces an important risk stemming from the relatively low effort required for merchants to switch payment processors. Management mentioned that migrating to the Adyen platform, even for a deep integration, can take as little as 1–2 weeks. Thus, it can be reasonably inferred that the actual engineering effort could directionally take around a similar amount of time to switch away to a competitor.
Payment orchestration layers (POLs), offered by 3rd party suppliers like GR4VY, IXOPAY, or built in-house by merchants, simplify the process further by centralizing connections to banks, acquirers, and payment processors. A POL layer enables merchants to dynamically route transactions based on costs, performance, or other criteria, reducing vendor lock-in and allowing seamless switching between payment processors. While this flexibility helps merchants, it increases the risk of Adyen being abstracted away, potentially commoditizing its role in the payments ecosystem and weakening its direct relationships with merchants.
Mitigants
Adyen mitigates these risks through differentiated, value-added services that competitors find difficult to replicate, diminishing the appeal of load balancing traffic across multiple platforms. The business simplifies operations by consolidating complexity, as seen in its work with Burberry, where it drastically reduced merchant contracts and automated time-consuming reconciliation processes. Additionally, the holistic approach to payment lifecycle management coupled with the direct access to local payment networks made possible by its banking licenses and regulatory compliance expertise, addresses much of the complexity that POLs aim to simplify. Adyen’s superior authorization rates alone provide significant revenue benefits, making its solution indispensable to merchants who would risk losing incremental revenue by diverting traffic to less effective providers. Furthermore, the integrated unified commerce approach to online, offline, and cross-border payments produces deeper operational dependencies for many customers that render switching far more disruptive than a simple software technical migration might initially suggest. These factors ensure that merchants face significant trade-offs in operational deconsolidation, increased costs, and inefficiency if they choose to switch away.
Commoditization, Fierce Competition, and Technological Disruption
Risk
The payment processing industry faces the risk of payment services becoming interchangeable due to commoditization, intense competition, and the rapid evolution of payment technology. If payment processing becomes undifferentiated, merchants may prioritize cost over advanced features. This dynamic could exert downward pressure on margins, particularly in segments where basic functionality suffices for merchant needs. This essentially leads to a "race to zero" as incumbents compete on price and better functionality which erode margins. Meanwhile, technological advancements can reduce barriers to entry, enabling an influx of competitors offering lower-cost, higher-performance solutions in areas that may fall outside Adyen’s core competencies.
In the North American market, where payment methods are relatively more uniform, competition is especially fierce. The business competes with established digital players like Braintree, which in 2022 and early 2023 aggressively undercut pricing to maintain market share. According to
, this trend coincided with a decline in Braintree's transaction margins, reflecting the heightened price sensitivity among customers focused on profitability and cost optimization in the post-ZIRP8 era. Banks like JP Morgan Chase, with a US card adoption rate of ~20%, leverage their integrated infrastructure across issuing, acquiring, and gateway services to drive higher rates of efficient “On-Us” transactions, delivering authorization rates that are tough to beat. They can also bundle other services with acquiring to make the product sticky.Adyen’s vulnerabilities are further exacerbated by the rapid growth of fintech startups and alternative payment methods (APMs). The global fintech landscape has expanded dramatically, with over 30,000 startups vying for market share at the end of 2024 compared to just 12,000 in 2019. Many of these newcomers target SMBs, a market segment that Adyen does not directly serve. Many of these new startups may capitalize on payment innovations that already have scale such as cryptocurrencies ($2.5 trillion market size including 562 million crypto holders in 2024), digital wallets (projected to reach $7.9 trillion by 2030), and account-to-account (A2A) payments where Adyen does not have a core competency.
The rising adoption of cryptocurrencies and blockchain-based solutions introduces a new wave of disruption to the payments landscape. With the cryptocurrency market projected to more than double to $6.3 trillion by 2033, these technologies offer decentralized, cost-efficient transaction methods. Innovations like the Bitcoin Layer 2 Lightning Network further enhance transaction speed and scalability, potentially bypassing traditional payment processors focused on fiat-based methods. As these developments gain traction, they present a growing challenge to incumbents, raising questions about the long-term role of intermediaries in the traditional payment value chain.
Mitigant
Adyen mitigates these risks through economies of scale, vertical integration, payment method agnosticism, regulatory licenses, and rapid innovation. Its unified platform handles massive transaction volumes, reducing unit costs below those of competitors and enabling competitive pricing while preserving strong margins. This efficiency is driven by the fixed costs invested in building its infrastructure, which provides operational and cost advantages. Furthermore, its direct access to card networks and local payment systems, secured through its extensive portfolio of licenses in key regions like Europe, the US, and APAC, creates formidable barriers to entry. New sub-scale competitors face significant upfront investments in technology, regulatory compliance, and global operations to match Adyen’s scale and achieve a similar footprint. As payment processing is a highly regulated industry, Adyen’s ability to comply with strict financial, data protection, “Know Your Customer” (KYC), and anti-money laundering (AML) laws reinforces its position as a trusted partner for merchants.
Adyen’s cost advantage is further supported by its heavy presence in the Netherlands, which has lower talent costs compared to other Western tech hubs, particularly the US. However, this edge may become less pronounced as the company expands its workforce into higher-cost regions.
Vertical integration improves the company’s control over the payments ecosystem by minimizing reliance on third parties. Its homegrown technology enables rapid adoption of cutting-edge advancements in AI while providing the flexibility to integrate new payment methods. The unified platform offers a cohesive, reliable experience for merchants, a significant advantage over competitors with fragmented or narrowly scoped systems. These operational efficiencies, combined with Adyen’s extensive regulatory compliance and banking licenses, create significant hurdles for potential challengers, making market entry increasingly difficult.
Adyen also leverages network effects to maintain its competitive edge that makes it difficult for new technology on its own to overcome. As more merchants join its platform, the company gathers valuable data to optimize services for all customers, creating a virtuous cycle that strengthens its appeal. Even if competitors replicate the technology, they lack access to Adyen’s rich transaction data, making it difficult to match the depth of insights and optimizations that make a meaningful difference for merchants.
Adyen sees the rise of APMs as an opportunity to integrate and provide customers a better payment processing experience rather than a threat to its business model. The platform already supports hundreds of local payment methods and digital wallets, including Apple Pay, Google Pay, and regional options like DANA and GoPay. Partnerships with Buy Now Pay Later (BNPL) providers like Klarna and Affirm, as well as open banking solutions such as Tink for A2A payments, showcase this adaptability. Adyen integrates emerging payment trends into its platform that are valuable to its customers without having to compromise its core value proposition.
“We look to solve problems for our customers. If there is an unmet need, then we would be open to it and think of it that way. But currently, we think from a payment standpoint, crypto is not necessarily what we're hearing a lot of urgent demand for from our customers.”
Kamran Zaki, Chief Operating Officer, Adyen (2022 Capital Markets Day)
Cryptocurrency presents a different challenge. Adyen takes a measured, customer-first approach, prioritizing proven payment methods with strong purchasing demand and stability over chasing trends. Rather than rushing into crypto, management ensures that every solution it offers is both practical and reliable. If cryptocurrency adoption evolves in a way that aligns with customer needs and business objectives, Adyen is well-positioned to adapt while maintaining its core principles. However, success in this space is not guaranteed. Competing with crypto-native firms may require more than simply integrating a new payment method, potentially making it difficult for Adyen to gain a strong foothold.
Finally, Adyen’s brand trust, reliability, and proven track record set it apart in an industry where near-100% uptime, robust security, and strict regulatory compliance are non-negotiable.
This has all culminated in Adyen outperforming competitors who themselves have become commoditized. While Braintree gained ground in 2023 through aggressive pricing, its reliance on discounting proved unsustainable as margin pressures mounted. In response, Braintree pivoted toward profitability in 2024, leading to a steep decline in growth—from 30% in 2023 to just 2% by Q4 2024. Meanwhile, Adyen’s strategy of prioritizing long-term value over short-term volume gains paid off. By maintaining premium pricing and demonstrating how its platform lowers the TCO for merchants, Adyen not only preserved margins but also accelerated its processed volume growth to 33% in 2024.
Risk
Adyen has a limited presence and processing capabilities in some markets. In regions like the Asia-Pacific and the Middle East, Adyen's lack of local processing leads to higher fees, lower acceptance rates, and compliance issues, pushing some merchants toward alternative providers such as Checkout.com, CyberSource, and HyperPay.
Compounding this vulnerability is Adyen’s standardized approach, guided by “The Adyen Formula,” which broadly avoids merchant-specific customizations. This may limit the company’s appeal to enterprises and markets that demand ultra-tailored solutions that a vendor such as Checkout.com provides.
Mitigant
Despite gaps in certain regions, the company remains the most scalable payment processor globally, operating in the majority of markets essential to large enterprise clients. I expect these gaps to be bridged over time as the company actively expands its local processing capabilities and secures more licenses. Steady progress is being made; for example, the company was recently authorized as an Online Payment Aggregator in India and established a technology hub in Bengaluru, enabling it to offer local payment processing in one of the world’s fastest-growing markets. Additionally, the company opened an office in Dubai in 2020 to support local payment methods in the UAE, Saudi Arabia, Kuwait, Oman, Bahrain, Qatar, and Egypt.
Adyen has deliberately chosen to limit customizations, a strategic trade off recognizing that accommodating every individual customer request would make scaling immensely difficult while introducing significant complexity and expense. However, the company still offers flexibility in key areas that matter to a large swath of customers, such as configurable checkout interfaces, and develops industry-specific solutions that cater to broad customer segments, including embedded finance for platforms and customizable terminals for customers with physical stores.
Bargaining Power of Buyers
The ability of buyers to negotiate lower prices, demand higher quality, or push for better service terms directly influences an enterprise’s pricing power, profit margins, and customer retention.
Risk
A large part of the company’s business model is predicated upon serving large multinational corporations. While its focus on high-volume clients has allowed it to achieve impressive revenue growth, it also exposes the company to partners that hold a great deal of market power. Large enterprise clients, due to their scale and strategic importance to its revenue base, may have a disproportionate influence in negotiating terms, potentially squeezing the company’s margins.
Adyen’s reliance on top merchants is evident from the revenue contribution of its largest customers. At the end of 2023, the top 10 merchants represented 15% of net revenue. The loss of major client—or a significant reduction in transaction volume such as in H2 2024—could materially affect profitability. Large buyers often leverage their position to negotiate lower fees, demand extended payment terms, and dictate contractual conditions that favor their own operations. This pressure is compounded by the competitive payment processing landscape especially in North America, where there are many alternatives such as PayPal (Braintree), Stripe, and Checkout.com. The relatively high operational costs associated with payment processing for merchants, particularly those with substantial transaction volumes and lower margins, further drive their sensitivity to pricing, incentivizing them to explore cost-saving measures.
Adding to the challenge is the threat of backward integration. Major retailers, such as Amazon and Alibaba (through Ant Group/Alipay), own proprietary payment systems to minimize reliance on external providers, while others are exploring POLs to abstract underlying providers. This threat may grant capable enterprise buyers additional leverage during contract negotiations.
Mitigant
Adyen has mitigated these risks by diversifying its customer base, expanding its suite of value-added services, and lowering merchants' overall payment processing costs. Over time, customer concentration has declined significantly. The top 10 merchants now contribute just 15% of net revenue—down from 20% in 2020 and 31% in 2018—demonstrating a meaningful reduction in reliance on a handful of large clients. Notably, no single customer accounts for more than 10% of total revenue. Furthermore, Adyen’s ability to generate over 80% of its growth from existing customers while keeping volume churn below 1%, with the exception of 2024, underscores its exceptional retention, deepening client relationships, and sustained expansion within a highly competitive and price-sensitive market.
Adyen has bolstered its value proposition by focusing on TCO, transforming its payment processing solution from a perceived commodity into a strategic asset. Representing just 5-10% of the overall payment fee structure, Adyen’s fees are a small fraction of the broader costs, which typically range from 1.5% to 2.0% per transaction for large enterprises. Let me illustrate the magnitude of this structural advantage. For example, for businesses operating with a 10% profit margin, payment processing fees can consume 20% of their income compared to a mere 2% for Adyen’s cut. The company’s platform is indispensable, as even a 10% improvement in total payment costs can nearly offset the entirety of the fees customers pay Adyen before accounting for revenue increases driven by the platform.
Backward integration into payment processing is not a legitimate threat for most of Adyen's customers. The primary reason is the substantial upfront investment required for technology infrastructure, regulatory compliance, security, and ongoing maintenance, which often outweighs the potential benefits of eliminating a third-party processor. Moreover, payment processing is not a core competency for these businesses, meaning that even if they were willing to make the investment, they may lack the expertise to build out a proprietary payment network effectively.
“Originally, we thought that it's something that the largest merchants might do themselves. If you see how the payment market develops, it becomes less and less attractive to do that because the resources and merchants need to commit the size that you need to have as a merchant to do that. Then, you could say, 'Yes, Amazon, U.S. Domestic—probably yes.' But then even for a company like that to do it in other regions, probably not. And if you are a size below that, it doesn't make much sense if you see how much investments you need to do in payments to have that run properly, how much you pay for it to outsource it. So what are the actual benefits to the company of doing it themselves? We don't see that as a threat. We don't see that at our large merchants. It's unattractive also to split out the payment method yourself because suddenly, your data is in multiple places and the overhead assigned to that is huge. We've seen examples of merchants handling payments on their own, only to eventually abandon that approach. It's a strategy that's increasingly proven to be invalid—especially when our large merchants are moving over to us, essentially saying, 'This is ridiculous. We have 150 people working in our payments department. It just doesn't make sense.'”
Pieter van der Does, CEO, Adyen (Investor Day 2019)
Moreover, the ongoing management of in-house payment processing adds significant complexity, diverting resources from broader business priorities. Beyond the initial build-out, companies must continuously optimize conversion rates, prevent fraud, and control costs. As discussed in the competitive dynamics section, Adyen’s value proposition—featuring best-in-class authorization rates, AI-driven fraud detection, real-time analytics, and continuous platform improvements—creates a competitive advantage that is difficult to reproduce, making a DIY approach both risky and ineffective.
Bargaining Power of Suppliers
The ability of suppliers to raise prices, limit supply, or reduce the quality of inputs directly impacts an enterprise’s cost structure, profit margins, pricing flexibility, and overall competitiveness.
Risks
Adyen faces significant risks related to the bargaining power of its suppliers—chief among them the dominant card networks Visa and Mastercard, which together account for about 90% of the global card payments market. These networks exert considerable influence by setting stringent certification requirements and operating standards that processors like Adyen must follow religiously. Although losing network certification or access remains unlikely, such an event would cause immediate and severe disruption, as merchants rely heavily on card acceptance for their payment flows. Adyen does generate a meaningful estimated share of revenue for Visa and Mastercard—an estimated 2.7–3.5% of Visa’s revenue and 2.55–3.3% of Mastercard’s9. Meanwhile, at least 60% of Adyen’s Total Payment Volume (TPV) is likely routed through these two networks, which means that they hold far greater leverage in the relationship. Furthermore, the threat of forward integration by these networks adds another dimension to this risk, as they may explore ways to bypass payment processors altogether leveraging its existing financial institutional relationships to take hold of a larger piece of the payments value pie.
The company operates within a highly concentrated banking ecosystem, particularly in markets like the U.S., where the top 10 banks control over half10 of the country’s banking assets. These partnerships grant access to essential financial networks and local payment schemes in regions where it lacks a banking license, enabling critical settlement and payout infrastructure. Establishing and maintaining such relationships is complex, strengthening the bargaining power of banking suppliers. In regions where Adyen does not hold a banking license, such as India, the dependency becomes more pronounced. A handful of dominant banks11 effectively control access to critical payment infrastructure, including schemes like the Unified Payments Interface (UPI). This dependency can limit negotiating power, often necessitating acceptance of terms dictated by these institutions, such as higher transaction fees, extended settlement times, or stricter compliance requirements. The lack of viable alternatives in tightly regulated markets further restricts cost optimization and service flexibility, directly influencing pricing strategies, operational efficiency, and overall competitiveness.
Lastly, Adyen's focus on maintaining a highly skilled, culturally aligned workforce may increase labor bargaining power, particularly in competitive markets like North America. Since 2021, its presence in the region has grown significantly, with headcount in San Francisco rising from 199 to 294 and in New York from 72 to 207. Globally, the workforce has expanded to 4,345 Full-Time Equivalents (FTEs), up from 2,180 at the end of 2021. This rapid growth has intensified labor cost pressures, especially in high-demand tech hubs such as San Francisco, New York, and Chicago, where competition for top talent remains fierce and compensation expectations climb. Furthermore, Adyen’s strategy centered on building smaller, high-performing teams and investing in long-term career development further narrows the available talent pool, increasing the cost of attracting and retaining skilled employees. The confluence of these factors have collectively driven a substantial 40% increase in Cost per Employee since 2021.
Mitigants
The risks posed by Visa and Mastercard’s supplier power are mitigated by structural and strategic factors that reduce the likelihood they would use their leverage to harm Adyen. Despite their strong market position, card networks that would attempt to compete as a full-stack payment processor must replicate several non-core capabilities—direct merchant onboarding, chargeback and fraud management, unified commerce technology stacks, local acquiring infrastructure, and maintaining regulatory licensing globally. These competencies lie outside their traditional network-focused operations, making such a move both strategically and operationally challenging. Additionally, entering full-fledged payment processing would heighten regulatory and antitrust scrutiny—especially given Visa’s ongoing DOJ lawsuit—while disrupting its contractual framework with issuers and acquirers. Acting as both a rule maker (via Visa Core Rules) and a direct competitor, Visa would risk accusations of self-dealing or leveraging its network rules to gain an unfair advantage over competing acquirers. This conflict of interest could violate its own risk and governance standards, straining critical partnerships and undermining trust from regulators and investors.
As for the risk of squeezing Adyen directly or indirectly through pricing or certification standards, Adyen’s position as a non-material contributor to Visa and Mastercard’s revenue ensures that the networks recognize its importance as a beneficial partner. While this percentage is not large enough to grant Adyen commanding negotiating leverage, it is meaningful enough to incentivize the networks to maintain a collaborative relationship. Furthermore, the fees that merchants pay to Visa and Mastercard represent only a small fraction of the total merchant discount rate that is mostly comprised of interchange. As a result, while higher take rates impact Adyen and its merchants, they are not disruptive enough to threaten its business model, which can absorb small adjustments. For example, Visa’s take rate has steadily risen over time without causing material pervasive issues the broader ecosystem and especially for Adyen. Additionally, diversification into alternative payment methods, including BNPL, digital wallets and bank transfers, reduces its dependency on card networks. These innovations not only provide the company with flexibility but also create competitive pressures for the networks to remain cooperative. Ultimately, Adyen’s growth in payment volumes is not a zero-sum game as it increases the TPV for the entire value chain. This mutual interdependence tempers the likelihood of adverse actions, ensuring a balanced relational dynamic.
Adyen mitigates the risks posed by banking suppliers through a combination of direct licensing, scale advantages, and diversification. By obtaining its own banking and acquiring licenses in key regions, Adyen reduces dependency on third-party banks, gaining direct control over settlement and payout infrastructure while bypassing intermediary costs and constraints. Its ability to integrate directly with banking and card networks further strengthens its independence and operational efficiency. Additionally, Adyen’s significant transaction volume, which makes it a valuable partner to banks, provides leverage in negotiating more favorable terms. The company’s strategy of engaging multiple banking partners in each region ensures that no single institution wields excessive influence, minimizing the impact of any one supplier’s terms.
Adyen's rising labor costs and increased talent bargaining power are mitigated by the company’s disciplined hiring approach and extraordinarily profitable incremental gross margins. Management’s disciplined capital allocation enabled it to avoid overpaying during the 2020-2021 tech hiring surge when the labor market was tight and capitalize when talent was abundant during the 2022-2023 layoffs, securing skilled employees at lower costs than peers. Since then, the company’s hiring pace has dropped precipitously to only 3.5% growth YoY, down from a H2 2022 peak of 53% as the period of heavy investment in hiring has come to an end with the company only hiring 149 employees in 2024.
With the hiring slowdown, Adyen’s operating leverage is beginning to materialize, with net revenue growth (22% YoY) now outpacing total employee expense growth (14.8%) and EBITDA margins expanding to 53% in H2 2024 from 43% in 2023. The company is also becoming more efficient with its workforce, as net revenue per employee grew 14.94%, outpacing the 8.12% increase in cost per employee. However, the true driver of Adyen’s long-term margin expansion is not merely a slowdown in headcount growth but rather the extraordinary profitability of its incremental revenue.
“So the marginal cost of a transaction is basically 0. And therefore, we think that we have a lot of operating leverage in the business.”
Ingo Uytdehaage, Co-CEO, Adyen (H1 2021 Earnings Call)
Each additional dollar of payment volume from an existing customer incurs negligible incremental costs, as the company’s full-stack payment infrastructure is designed to scale seamlessly without a proportional increase in headcount. This operational efficiency, combined with a fixed-cost base that can be spread across a growing customer base, creates powerful economies of scale. As transaction volumes rise, Adyen can absorb localized wage pressures in key tech hubs without compromising profitability and earnings power.
Management’s Long Term Disposition
Adyen embodies what it means to have a truly long-term-oriented management team that “walks the walk”. The company’s leadership has consistently demonstrated a commitment to deepening its entrenched market position, generating high and increasing returns on capital, sustainable growth, and integrity—qualities that support widening the moat and expanding its runway.
Adyen’s leadership team has built an exceptional track record, transforming the company from a capital-efficient startup into a global payments powerhouse while maintaining remarkable profitability. Their disciplined execution has driven returns on capital exceeding 50% and EBITDA margins consistently above 45%, while prioritizing long-term health with a debt-free balance sheet. Their commitment to excellence is deeply ingrained in Adyen’s culture—every board member personally interviews new hires to ensure alignment with the company’s values. By adhering to the "Adyen Formula," they have cultivated a culture of collaboration, integrity, and operational rigor that reinforces their competitive moat. This long-term focus is not just a corporate mantra but a fundamental driver of Adyen’s sustained dominance—an ethos that is easy to profess but exceptionally difficult to execute at scale.
“We, as a management team, are long term committed to this company, and we want to grow the business like that. That's why we also haven't changed the guidance, although 2018 was a very successful year. We believe that fundamentally nothing has really changed through the company. We can continue the business in the next years in this space. And we want to avoid a short term focus. So of course, we get the question, why don't you guide on 2019? Well, in payments, it's relatively easy to make your guidance for a certain year, but we really want to make sure as a company that we do the right things for the long term because that's how we like to build the company. We have a unique position in the market, but it takes time to get there. We have the time.”
Ingo Uytdehaage, Co-CEO, Adyen (Investor Day 2019)
This outright refusal to provide short-term financial guidance highlights the dedication to the bigger picture—an essential trait I look for in management teams. By prioritizing long-term value creation over appeasing quarterly market expectations, leadership retains the flexibility to make strategic investments in growth areas without being constrained by short-sighted pressures. A prime example of this philosophy was evident during the COVID-19 pandemic when, instead of cutting costs and downsizing like many competitors, Adyen doubled down on hiring. Despite the near-term impact on EBITDA margins, the company expanded its workforce by 140% from 2020 through 2023. This bold, countercyclical strategy defied conventional wisdom but ultimately positioned Adyen to capitalize on future growth opportunities as market conditions rebound.
The prudent approach to cash management is another testament to its long-term orientation. The company generates substantial free cash flow from operations (€860 million vs €2 billion net revenue in 2024) and maintains a healthy balance sheet with €3.17 billion in cash12 with zero interest-bearing debt financing. Furthermore, the business does not allocate capital to M&A, buybacks, nor dividends at this current time. This disciplined approach to capital allocation paves the way for the company to channel its resources entirely into driving organic growth, advancing market-leading product innovation, and fortifying its resilience to withstand even the most challenging macroeconomic conditions.
Compensation at Adyen is designed to genuinely align with long-term objectives rather than short-term metrics and myopic thinking. Key executives hold significant equity stakes in the company, making them shareholders with skin in the game. For instance, the Co-CEOs, Pieter van der Does and Ingo Uytdehaage, collectively own 3.54%, while Chief Commercial Officer Roelant Prins owns 0.91%. Interestingly, these three have not received share-based compensation (SBC) in years, further emphasizing their focus on generating value for all shareholders over using the company as a personal piggy bank to extract excessive value for themselves.
For board members with a smaller ownership stake in the company, Adyen incorporates a fixed equity-based component into their compensation, subject to a five-year holding period. This structure avoids the common pitfall seen in many companies where management appears aligned with shareholders through heavy equity compensation, only to sell their shares immediately after options vest—effectively negating the entire purpose of SBC for shareholders and reducing it to little more than deferred cash compensation (see Etsy). This approach ensures long-term alignment between leadership and shareholder interests.
“So we started the business focusing on enterprises and we continued that way for several different years. And so our tech stack and our processes and workflows and even our commercial force, like I said, it's all been like wired for enterprises, hard wired for enterprises. There was a time and Adyen when we were like, all right, well, what if we could go down market, right? What if we could go direct to small businesses and maybe there's a way we can service them really well in full transparency. We tried that. We failed miserably. Luckily, we failed fast and we learned a lesson. And so we adjusted the strategy to focus on platforms.”
Davi Strazza, President North America, Adyen (Wharton Fintech Podcast)
Accountability and adaptability is fundamental to a management team’s ability to build a company that will sustain competitive advantages and win over the long run. Adyen’s leadership demonstrates accountability by admitting mistakes and course-correcting quickly when strategies fall short. A notable example is their strategic pivot away from directly serving and onboarding the long tail of low-volume SMBs, recognizing early on that this approach was inefficient and misaligned with their core strength—catering to large enterprises. Rather than chasing short-term wins or lower-quality revenue streams, they doubled-down on their strengths by supporting these businesses indirectly through large platform marketplaces.
A company's true character is revealed in times of adversity, when leadership’s decisions under pressure become the ultimate test of their integrity and commitment to their vision. During challenging periods like H1 2023 when disappointing results sent the stock tumbling. Rather than reacting to market noise or shifting focus to appease investors, management remained resolutely committed to its long-term strategy. On the earnings call I noticed that they clearly refused to be distracted by the short-term volatility, instead emphasizing the company’s core strengths and articulating a clear vision for the future. This unwavering focus in difficult moments is what separates exceptional management teams from the rest—an approach that ensures Adyen’s continued leadership and success for years to come.
Looking at the Future
On the surface, Adyen appears expensive with a 62x EBIT multiple based on an IFRS EBIT of €887.84 million and an Enterprise Value of €53.6 billion13. However, this accounting figure significantly understates the company’s true earnings power. Relying on this number at face value would mean overlooking critical adjustments that obscure its real profitability.
“An analyst needs to understand where investments show up on the financial statements in order to know how much a company invests. Investors and economists who suggest that investment is limited to capital expenditures and changes in working capital are missing the boat by grossly understating the magnitude of investment.”
— Michael J. Mauboussin and Dan Callahan, CFA, "One Job: Expectations and the Role of Intangible Investments," Counterpoint Global Insights, Morgan Stanley
The first key adjustment relates to the nature of accounting for software companies, particularly those that invest heavily in infrastructure. Michael Mauboussin, in 'One Job', argues that because a substantial portion of software and infrastructure-related spending including R&D creates long-lived intangible assets, standard accounting practices fail to capture the true economics of these businesses. Reclassifying and capitalizing these expenses—rather than expensing them immediately—provides a more accurate reflection of earnings power when applied correctly.
Applying this to Adyen, the company records much of its platform development spending (e.g., writing new code, creating product roadmaps) as operating expenses, even though these efforts yield benefits over multiple years. Recognizing such outlays as capital investments and depreciating them over their useful life provides a clearer picture of Adyen’s underlying profitability and its true return on invested capital.
From my research on hiring trends, it is reasonable to assume that at least 60% of employee expenses are dedicated to supporting or building out the infrastructure in various capacities. While it is challenging to arrive at a truly accurate number here, we do know that between 2022-2024 where half of all current employees were hired, the majority of new hires were in tech roles according to company filings. In my assessment, the vast majority of which are related to supporting the single platform infrastructure. Additionally, by and large the tech and product roles on average are large higher paying than other functions such as support & professional services.
Although software evolves quickly, a five-year horizon seems reasonable for Adyen’s core technology enhancements—like Uplift and Network Tokenization—because they are long-lived, foundational projects. This timeline also aligns with Adyen’s application of IAS 38 of IFRS, which allows a narrowly defined scope of software-related expenses (e.g., Adyen’s €8.5 million in 2024) to be capitalized over five years rather than fully expensed in the year incurred.
Adjusting for this, in 2024 alone, this shifts €421 million to capital expenditures from operating expenses, with an offsetting depreciation expense of €252 million, effectively increasing EBIT by €169 million14 to €1.06 billion (53% net-revenue EBIT margin). Given that management targets 60% net-revenue EBIT margins15 at a steady-state level of investment, this adjustment is not only justified but aligns more closely with the expectations of management when capital expenditures match depreciation. However, recognizing this adjustment also means acknowledging that invested capital is understated under IFRS standards. Incorporating this newly recognized capital investment (~€671 million in additional invested capital) leads to a closer understanding the value of capital Adyen has invested into the platform.
The second adjustment is related to Adyen’s €341.84 million in finance interest for 2024. Of this total, roughly 31.79% stems from Adyen’s own cash. The remaining amount is generated from holding customer funds for daily settlement and other uses, which would remain in the business even if an acquirer stripped out the company’s excess cash. A rational owner would continue to earn interest on these balances, effectively treating them like float for an insurance enterprise. After adjusting the finance interest income to a normalized interest rate of 3% or €274 million, the total amount of interest that may be allocated to operating earnings is €186 million. As such, reclassifying that portion of interest into EBIT more accurately captures Adyen’s recurring, operational earnings potential rather than treating it merely as peripheral financial income.
Without these adjustments, ROTC appears artificially high at ~85% (€888m / €1,050m). However, incorporating the platform infrastructure capitalization and adjusted operating income recalibrates to 72% (€1,244m / €1,720m)—still an extremely impressive number.
From a valuation perspective, these adjustments significantly alter the investment case. Instead of paying 62x EBIT, the multiple compresses to ~44x. While this is still not cheap on the surface, it is a compelling valuation for a company that I believe has many years of 20%+ growth ahead since the long-term runway for Adyen remains enormous.
For instance, as of 2022, cash and check still accounted for nearly 40% of C2B payments, while digital payments continue to grow at 10%+ annually. Adyen holds only a mid-single-digit market share in this expanding industry yet operates the most complete and scalable payments platform on the market. This also does not include the call option-like upside from ancillary revenue streams such as embedded payments, which present an enormous untapped opportunity, or future innovations that Adyen’s scale and deep system integration with merchants will unlock. With these factors in mind, adjusting Adyen’s financials to reflect its true economics not only justifies its valuation but makes me excited about the long-term opportunity ahead.
EV/EBIT = €53.6 billion EV / €888 million EBIT
EV = €56.5 billion (Market Capitalization) - €2.9 billion (Net Cash)
EBIT = €992 million EBITDA − €104 million D&A
Estimates had Stripe at 20% Operating Margins for 2024 at the time of the article
ROTC = Normalized EBIT (see note 5) / Total Tangible Assets
Note: In my view, focusing on tangible assets—including off-balance sheet items like infrastructure investments—provides value investors with a more accurate and reliable measure of true capital efficiency.
This figure includes €671 million in off-balance sheet capitalized costs associated with the development of Adyen’s infrastructure. The calculation assumes a five-year useful life for the infrastructure and 60% of “Wages & Salary Costs” + “Social Securities and Pension Costs” are dedicated to supporting and growing the infrastructure.
The discrepancy between Normalized EBIT and IFRS EBIT stems from adjustments related to capital expenditures invested in Adyen’s long-lived core infrastructure. Due to antiquated accounting rules, these expenditures are primarily expensed rather than capitalized. Based on my analysis, I assumed a 5-year useful life and capitalized 60% of total employee expenses, which I estimated are allocated toward building the infrastructure.
For enterprising investors evaluating a software company with a significant competitive moat, this adjustment reveals that reported earnings are understated. By recognizing these capitalized expenses, we gain a clearer and more accurate view of Adyen’s true profitability, reflecting the long-term investments that underpin its market strength and sustainable growth.
Calculations:
Normalized EBIT = Normalized EBITDA (€1.6 billion) - Normalized D&A (€356 million)
Normalized EBITDA = IFRS EBITDA (€992.3 million) + Wages Allocated to Infrastructure Build-Out (€420.7 million) + Interest Associated with Customer Cash (€233 million)
Normalized D&A = D&A (€104.5 million) + Amortized Expense for Capitalized Infrastructure (€251.6 million)
This held true until 2024. The 2024 H1 and H2 reports, along with their accompanying conference calls, were the first to subtly omit the usual proud mention of achieving less than 1% churn. This omission is likely due to the departure of a single high-volume customer. While I expect the trend to resume in 2025, this remains a development worth monitoring.
A 1.15% improvement doesn’t seem like much, but even a small increase in authorization rates can result in millions of dollars of incremental revenue. For a hypothetical $10 billion in processed volume, a 1.15% improvement means $115 million in additional approved transactions.
Zero Interest Rate Policy
Visa and Mastercard's non-cash payments transaction volumes are $13.2 trillion and $7.8 trillion, respectively, as of September 2024, and they collectively control approximately 90% of the global card payment market (outside China). Adyen’s TPV of $1.2 trillion is assumed to be 70–80% card-based, a reasonable estimate given that cards remain the dominant payment method globally, though Adyen also processes significant volumes through alternative methods like Buy Now Pay Later, digital wallets, and bank transfers.
Assuming 85–90% of Adyen's card-based volume flows through Visa and Mastercard, this implies $672–864 billion in TPV is processed on their networks. Splitting this by their respective shares (Visa: 63%, Mastercard: 37%) gives Visa $423–544 billion and Mastercard $248–319 billion. Applying the network take rates (Visa: 0.23%, Mastercard: 0.28%) results in $973 million–$1.25 billion in revenue for Visa and $694 million–$893 million for Mastercard. Relative to their total revenues (Visa: $35.9 billion, Mastercard: $27.2 billion), Adyen contributes approximately 2.7–3.5% to Visa and 2.55–3.3% to Mastercard.
The top 10 U.S. banks by total assets control approximately $12.65 trillion in combined assets. The banking industry's total assets amount to approximately $24.0 trillion as of Q1 2024.
The top two banks in India control almost 40% of the market
€9.96 billion Cash and Cash Equivalents - €6.68 billion Merchant Payables - €112.64 million Restricted Cash
€56.5 billion market cap - €2.9 billion Adjusted Net Cash
Adjusted Net Cash = €3.1 billion in excess company cash + €105 million in DTAs + €9.5 million in Visa Equity - €228 million in lease liabilities - €111 million outstanding employee options value - €0.8 million in DTLs
Sensitivity Analysis: For every 10 percentage point change in the infrastructure allocation, EBIT adjusts by approximately €30 million (a 2.3% delta).
65% EBITDA from net revenue minus 5% capex
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