What's your business model?

110799

How does Adyen make money?

Adyen, which recently signed as primary payments partner for eBay, makes money from transaction fees

Innovation series by Steven Loeb
June 8, 2018
Short URL: http://vator.tv/n/4ba5

If you haven't yet heard of Adyen, you almost certainly will soon.

Earlier this year, it was announced that the Amsterdam-based global payments company had signed a deal with eBay "to become its primary payments processing partner," essentially replacing PayPal, following the break up of the two companies in 2015.

"eBay has signed an agreement with Adyen to be its primary partner for payments processing globally, including in North America. Adyen powers payment processing for a number of the world’s leading global marketplaces and brings to this partnership a broad global footprint with a flexible and scalable technology platform. Adyen’s wide geographic reach and experience at scale extends to more than 150 currencies and over 200 methods of payments," eBay said in a statement at the time. 

Then, on Monday of this week, Adyen announced its intention to go public. The company said it will be raising between €922 million and €947 million ($1 billion and $1.1 billion), which will value it at between €6.5 billion and €7.1 billion ($7.6 billion to $8.3 billion).

Founded in 2006, Adyen (which is Surinamese for "Start over again") is "a single payments platform to accept payments anywhere, on any device." That means it works with businesses, allowing them to accept payments on mobile, at point-of-sale and from marketplaces. That includes payment from credit cards, debit cards and bank transfer.

Businesses that use Adyen also get customer insights data, revenue optimization, as well as risk management to protect their business using data.

The company make its money based off of processing fees and payment method fees for every transaction. Those fees change based on the method of payment, and also the region in which the transaction takes place.

In North America, for example, there's a $0.12 processing fee, and a $0.25 payment free, for the use of a debit card. For using an American Express card, there's the same processing fee, but a 3.95 percent payment fee. For using Interac Online, the payment fee is CAD 0.60, +2.00% when no local entity.

Ayden uses what it calls its Interchange++ pricing model for credit card like Visa and Mastercard.

"Interchange++ is a pricing model which accurately tracks Interchange rates and scheme fees right down to a transaction level. This means we can calculate the cost of each payment even before it is completed. So as well as knowing how much you can charge your customers, you get total visibility into the process, and can see exactly what you’re being charged for each transaction," the company says.

While Ayden does not have amy monthly fees, setup fees, integration fees or closure fees, it does have a minimum invoice of €100 ($120 U.S.) per month, depending on transaction volume and region.

The company is growing quickly. In 2017, it saw $1.14 billion in annual revenue, an increase of over $400 million from 2016. It processed $122 billion in volume for merchants in 2017 , a 61 percent year-over-year increase in processed volume year-to-year.

In addition to eBay, Adyen's other customers include Microsoft, Samsung, Uber, Facebook, Spotify, LinkedIn, Twitter, Netflix, Sephora and Tory Burch.

The company has raised $266 million in funding, last raising a round from ICONIQ Capital in 2015 that valued it at $2.3 billion. Other investors include Index Ventures, Felicis Ventures, Temasek Holdings and General Atlantic.

(Image source: adyen.com)
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