Payment processing systems had been under the grip of big banks, credit card issuers and a few IT service providers for years, creating hegemony of sorts in the key support business for financial transactions. Among the entities aiming to break this power structure and enhance the transaction success rate is Adyen, an Amsterdam-based global payments company.
Founded in 2006, Adyen, which is Surinamese for “new beginning”, is a single payments platform globally to accept payments and grow revenue online, on mobile, and at the point of sale. It works as a one-size-fits-all transaction management system, supporting all credit and debit card payments, including Visa, Mastercard, American Express, and others, while also accepting Apple Pay, Android Pay, and other mobile payment methods.
“Think about it, in the legacy [payment] world, where you had a gateway, and a processor, and a bank, information passes through all the different players, and all the different platforms, before it reaches Visa and Mastercard,” said Warren Hayashi, President of Asia Pacific at Adyen.
“When the information flows from multiple players, inevitably there is latency, there is an information loss, and all the things could go wrong.”
According to Adyen, as many as one in six transactions fail online and on mobile payment devices, and merchants have difficulty in finding out the reason.
“Why don’t we create what we call the full-stack [payments services], and connect with Visa and Mastercard? So that is kind of the genesis of Adyen.”
To change the scene of the mess of platforms and intermediaries, Adyen puts the functions of dealing with payment gateway, payment processing systems, payment risk assessment, and others, under one roof. It handles for its clients every step of a credit card payment, from the checkout counter or website, taking customers’ orders to the bank authorizing the payment.
Invisible in the customer checkout process, Adyen serves as a middleman for Microsoft, Booking.com, Uber, LinkedIn, Spotify, Evernote, Tiffany & Co and Gap, among other big, international heavyweights, brands and sector giants.
“By connecting directly into the credit card scheme, and having the control of the entire [payments] stack, we can see more data of the transactions, and we can see more reasons of declined wires and transactions.”
Many payment processors have to use one or more third-party intermediary to request approval from payments from card issuers, or handle fraud detection. Being the partner of Visa and Mastercard, Adyen enjoys the Acquirers access to these card networks. Meanwhile, it is able to see the entire payment flow with greater control across the entire payment process.
Hayashi explained: “In many cases, payment companies are working with multiple parties, the payment data gets consolidated along the way, before it reaches Visa and Mastercard, and ultimately the issuing bank (which decides to authorize or decline the transaction). And because of that, the issuing bank may take a blunt approach and just decline the transaction.”
In contrast, as Adyen provides all the payment data directly to Visa and Mastercard, and it can offer higher visibility into the payment data, such as the reasons why transactions get declined, it can help reduce failed payments to its clients, said Hayashi, meaning a higher authorization rate of transactions.
“If you are doing a billion dollars in revenue, getting one and a half percent increase in your authorization rate, i.e. fifty million dollars in revenue, is a big, big deal,” he said.
Payments technology has become a fierce battlefield that has attracted attention from a wide range of players including banks, telecoms, tech firms, and fintech startups. Traditional payment processors like Chase Paymentech, Vantiv and First Data, which are strongest in large retail chains, will not give up ground easily, while new players such as Stripe are also muscling in on the payments market.
Asked about competition between Adyen and the emerging rival Stripe, which targets the startup and app developer community, Hayashi pointed out that his firm mainly caters to big, international operations.
“We focus on the enterprise space,” said Hayashi. “If you’re a startup, worrying about when you get your money, getting the right reporting item-by-item, that’s probably not your biggest concern. As you get bigger, you want visibility into your cost, transaction by transaction, you want the full reporting for your finance team, that’s where we focus on.”
“We have probably the best enterprise-grade payment platform, especially for companies that are looking to grow beyond their home countries, or regional, or multi-channel unified commerce,” he said.
As commerce is going global nowadays, and consumers are expecting the same payment experience everywhere in the world, what distinguishes Adyen from other payment gateways, according to Hayashi, is its unified commerce solution, which allows businesses to enjoy centralized reporting across stores, markets and channels.
The company’s omnichannel solution aims to allow merchants to plug into one single global platform, for purchases on mobile, desktop, and physical stores, in multiple currencies, using 250 payment methods, from credit cards, mobile payment apps and online banking transfers to vouchers.
“If you’re a mainland Chinese shopper, whether you are online or offline shopping at a website, or a store based in Europe or the United States, you’ll be able to pay through Adyen, using UnionPay, Alipay or WeChat Pay,” explained Hayashi.
To merchants and retailers, Adyen’s unified commerce solution aims to address their demands to offer cross-channel shopping experiences to customers. Its retail Point of Sale (POS) checkout terminals and hardware integrate with smartphone, allowing salespeople to take payments throughout a store. The approach also makes merchants easier to deter fraud and offer loyalty points and real-time discounts to customers at checkout.
In the interview, Hayashi also highlighted how Adyen is seizing a golden opportunity in the payments space in China, the global shopping power. It has teamed up with China’s three largest payment providers — Tencent’s WeChat Pay, Alibaba’s Alipay and China UnionPay (UPI).
“We bring these primary Chinese payment methods to our foreign brands and merchants, focusing on Chinese consumers shopping overseas,” said Hayashi.
According to the executive, the escalating trade tensions between China and the US are having no impact on Ayden’s business in China.
“Adyen is really about helping Chinese brands that want expanding and going to different parts of the world.” For now, the company does not have a presence in China’s domestic payment market.
While Adyen listens closely to clients to continue creating and building new products, it insists it doesn’t participate in the direct-to-consumer business, and only provides services to merchants and corporates.
“We are not trying to become the next wallet and go directly to consumers. We are focusing on merchants-to-merchants only,” Hayashi said.
“If there is a payment method out there, then we may offer it to our merchants if they ask for it. But we are not going to become the payment method.”
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