In the US, shoppers love credit cards. Everything goes on credit – even the most modest purchase.
By contrast, Germans reserve credit cards for ‘just in case’ emergencies.
Meanwhile in Brazil people make e-commerce purchases with cash. How? By printing out a barcode and settling up in a shop or bank registered with the merchant.
They even do the same in the ‘advanced’ economy of Japan using a service called Kombini.
And in the Netherlands, you’d better support the digital banking service iDeal or you won’t sell much of anything.
What does this tell us? That local populations have quirky ways of making payments. But so what? Does it matter?
Well, maybe not so much if you’re a local merchant. You can probably find any number of processors to link you up to the payment channels local people prefer.
But in the e-commerce age, digital retailers are not content with their own back yard. They want to go all over the world.
And they want to offer a homogenous payment processing experience on mobile as well as PC. They want to support click and collect. Maybe even throw in a physical store of their own too.
Executing this is a nightmare, which involves dozens of deals with local partners all with their own payment processing systems.
Nine years ago, Dutch entrepreneurs Pieter van der Does and Arnout Schuijff decided to do something about it.
They each had first hand experience of the problem, having run a payment processing firm called Bibit. They were used to being blamed for problems like double billing, which were actually caused by the banks’ systems.
They could see a change coming – the rise of global digital-first merchants – that would require a new approach.
So Adyen was born. The idea was to do more than layer a nice payment processing interface on to other companies’ systems.
Instead, Adyen would build its own technology to work regardless of merchant type, payment type or geography. The same backend for online, mobile and physical transactions.
It’s fair to say, things have gone well.
The firm processed $25 billion in payments in 2014, with revenue nearly doubling to $185 million. It has 3,500 merchants on board and accepts over 250 payment types in 187 countries. Customers include Facebook, Evernote, Superdry, Spotify and Dropbox.
In December 2014, Adyen raised $250 million from General Atlantic, Singapore sovereign wealth fund Temasek, Felicis Ventures and Index Ventures.
The deal valued Adyen at $1.5 billion. A bona fide European unicorn.
Felicis Ventures Founding Partner Aydin Senkut summarised why Adyen is so rated. He said: “These are the people selling the tools in the gold rush for Internet companies to expand globally. It’s one of the few meta-plays.”
This is the key point. Global ways of shopping are changing, and Adyen believes it can help retailers capitalise on this – quickly and affordably.
Of course, Adyen is not the only new market entrant looking to shake up the payment processing game.
The US duo of Stripe and PayPal-owned Braintree have led the way for app-initiated payments. Essentially, they turn the nightmare of payment processing into a few lines of code that developers can drop in to their products.
In so doing, they have played a major role in the growth of sharing economy products like AirBnB.
Adyen claims it has the agility to compete with these companies, while also possessing the scale to match up to more established payment processing firms.
Myles Dawson, UK country manager at Adyen, says: “We have two groups of competitors: the new agile companies like Stripe and Braintree, and the big payment processing incumbents like WorldPay with a global business and huge enterprise customers. We’re between the two. We’re agile, but have the operations and the tech to offer international reach for very big enterprises.”
Aden makes money with a small rev share on transactions. Obviously, it has to demonstrate value in order to justify its cut. Dawson says it does this by reducing transaction errors, connecting quickly to local channels and improving the accuracy of approved and declined payments.
A case in point is clothing brand O’Neill, which says its authorisations improved by 20 per cent after Adyen took over its payment processing.
Dawson believes the changing nature of retail also plays into Adyen’s hands. Specifically the move towards ‘omnichannel’ retailing, in which a merchant offers online and physical transaction, mobile apps, click and collect and more.
Omnichannel is a nice idea. But in reality, it’s a bloody nightmare.
How can you know whether the woman paying with a card to a legacy POS system in store is the same shopper as the one checking out from a native app?
Dawson says this is where Adyen’s ‘built from the ground up’ payment processing system really comes into its own.
“We love having these conversations with retailers. It’s just perfect for us. We can process the in-store POS payment as if it were an e-commerce transaction.
“That means we can give retailers a single view of the customer. Traditionally, they would know about their online customers but not about in-store visitors – unless they had a loyalty card or were prepared to give an email address.
“With our system, we can recognise a customer from their payment card. Then we can build loyalty around it. Naturally, retailers are getting really excited about that.”
With a $250m war chest, Adyen is driving hard into new regions. It is confident it has the payment processing platform to win huge contacts. Now, it’s focused on scale and credibility.
Dawson says: “We’re on a strong growth trajectory in the US, adding 30 more people in the last year. We also have a growing team in Asia. It’s a tricky region because of the number of banks and systems, but it’s important for your credibility with global customers to have operations there.”
Though it’s a Dutch unicorn, Adyen knows how important it is to be visible and active in the Valley too. Not least because the next rocket ship is so likely to come from there.
Dawson says: “You can work with a small startup and within a year be processing 20m transactions for them. That’s the way this industry goes sometimes, so we need to be there.”