Payments challenger Adyen post strong growth following June IPO

In its first earnings release since going public in June, payments firm Adyen is proving it can live up to the hype.

After pricing its shares at €240 each ahead of the launch, it opened for trading on June 13 on Amsterdam’s Euronext exchange at €400 a share. With such a leap, a lot would have been expected from the firm, and it certainly delivered.

For the first six months of 2018, Adyen generated €156 million in total revenue, up 67.3% year-on-year, processing more than €70 billion of transactions, and collecting €48.2 million in net income up 74.6% year-on-year. Investors will certainly be pleased with growth at the company which counts the likes of Uber, Spotify and Cathay Pacific as customers.

Europe is still the major earner for the company, accounting for more than half of the processed transactions and roughly 65% of net revenue, though growth in other regions was incredibly healthy. Asia Pacific was a significant boost for the business, 147.5%, though the North American region was also incredibly positive, 142.9%.

“In the first half of the year we saw a continuation of the transformation of commerce, leading to an increased merchant focus on accepting payments across channels and geographies,” the firm said in a letter to shareholders. “This trend, coupled with changing shopper behaviour, the rise of mobile payment methods, and the increasing pressure on retailers’ operations, highlighted the benefits of our single platform, and consequently driven significant growth in the first half of 2018.”

The success has been attributed not only to doing what it does traditionally very well, but also branching out into new verticals such as hospitality, restaurant chains and supermarkets. While these might be different environments, all are experiencing the same increase in demand for mobile payment from customers.

Another key aspect of growth here seems to be the single platform. Many businesses around the world will use different payment solutions dependent on the environment, some of which will be legacy systems. The complications come with marrying the data to customers across the different platforms when trying to generate some sort of business insight from the data. A single platform, encompassing both online and offline transactions, allows the formation of data sets which can be used to inform future business decisions.

“Through our single platform, we provide a holistic view of payments, regardless of sales channel, delivering unique shopper insights while combating fraud and improving payment authorization rates,” the firm states.

While it all looks positive right now, another statistic which will keep investors happy is the recruitment efforts. Over the first six months, staff head count went up almost 40%, with 47.3% of these recruits taking up tech roles. While bolstering the sales team is certainly a positive move, such a focus on continuing the development of the platform will certainly add to the generated momentum.

Is mobile payment going too far when cash has become unacceptable?

When mobile payment with smartphones has become the means of choice at retail outlets, the central bank of China needed to remind businesses they should not reject cash payment.

Once upon a time, people said “cash is king”. Not anymore.

In most retail outlets in China, mobile payment with smartphone apps WeChat Pay (of Tencent) and Alipay (of Alibaba) has become the de facto option. Customers with credit or debit cards only, including the cards on UnionPay (China’s clearing platform), are sometimes in bad luck. It turns out even cash payment may not go all the way, which prompted the central bank, People’s Bank of China, to issue a warning notice to the retailers that rejecting cash is against the law.

This fast and massive move towards mobile apps based payment dwarves the slow uptake of NFC based contactless payment championed by the technology companies. This is despite the tech heavy weights Apple and Google having been supporting NFC payment since 2014. The enthusiasm in which consumers and businesses embrace it, even with the clout of Apple and Google thrown behind it, has been underwhelming.

According to the research firm Berg Insight, the total number of NFC enabled POS terminals grew by almost 100% in 2017 to reach 54.5 million, most actively in North America and Western Europe. Only about 30 million of the terminals have been activated.

Apple has refused to disclose user numbers or transaction values related to Apple Pay, although different research has put the number of users who could pay with Apple Pay and who actually did it at about 3%. The uptake of Android Pay is no better. The comparable adoption rate is estimated at about 1%.

It is safe to say Apple CEO Tim Cook’s ambition to replace wallets with Apple Pay has not gone too smoothly. Mr. Cook himself was reported to have been rejected to pay for his coffee with Apple Pay by a barista, reported The Information.

In contrast, WeChat Pay and Alipay did not only handle over 90% of China’s $16 trillion mobile payment transactions in 2017, they are also actively expanding overseas. An agreement was signed last week with the Kenya based Equity Bank to bring the services to eastern Africa including Uganda, Tanzania, Democratic Republic of the Congo, South Sudan, and Rwanda, in addition to Kenya. With a smartphone penetration level much lower than in China, we do not believe retailers in Africa will rush to refuse cash payment though.