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Even niche activities have their superstars. Bruce Mouat is a big deal in competitive curling and banjo players still idolise Earl Scruggs. Adyen’s status as one of the world’s groovier payments companies is under threat, however.
The shares soared more than fivefold in the years following its 2018 initial public offering. A profit miss at half-year results on Thursday followed margin wobbles in February. Shares fell more than 30 per cent on the day and wiped €12bn from Adyen’s market value.
Growing competition in North American markets is to blame. Netherlands-based Adyen offers customers tech-based payments with a focus on larger multinationals. It has a strong record of growth, siphoning merchants away from legacy payment systems.
But Adyen is not the only one doing this. And as competition for stretched consumer dollars heats up, rivals are grabbing share with their aggressive pricing strategies.
Volume growth in the online-only digital division fell to 23 per cent, less than half the figure in the first six months of 2022. The business is up against well-financed competition such as Stripe, Worldpay and Fiserv. Large merchants typically rely on primary and secondary providers for payments and readily switch volumes between the two.
Growth slowed in the group’s two other divisions: unified payments, which includes merchants using physical payments, and platforms, which serves the likes of eBay and Shopify.
Adyen is doing a decent job of defending its market share. The cost of doing so helps explain why ebitda was 15 per cent lower than analysts had expected. Ebitda margins slipped to 43 per cent, down 15 percentage points in two years. The group has hired 500 new staff, a sensible investment that rattled short-termists.
The biggest hurdle to lifting profit growth is funding. Adyen has barely raised any new capital. Stripe completed its latest multibillion-dollar private fundraising earlier this year. The war chest will help the US-Irish start-up price aggressively and take market share. The land grab is continuing in payments, even though sectoral valuation has dropped amid the tech rout. Financial stamina is required.
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