Adyen SWOT Analysis (2021)

adyen

In this article, we are going to do a SWOT Analysis of Adyen. Adyen is a Dutch payments services company, focusing on the end to end payments chain. With big names such as Uber, EBay, Facebook and Spotify in its client base, Adyen has made an incredible growth in recent years. The stock price has skyrocketed. That means it is about time we have a detailed look at this fascinating company. In this article, we will discuss Adyen’s Strengths, Weaknesses, Opportunities and Threats through a SWOT Analysis.

Adyen offers a backend infrastructure for authorizing payments across a merchants’ sales channels, as well as APIs. The payment platform provided by Adyen is connected to card networks such as Visa and Mastercard, as well as other payment methods. The way the company makes money is by charging a fee for the payments processing. The payments industry is a fragmented one with many different players that each have a different role in the chain. Adyen simplifies this process. The company’s platform integrates multiple roles into one platform.

Company Fact Sheet

Name: Adyen
CEO: Pieter van der Does
Year founded: 2006
Industry: Payments processing
Biggest Competitors: Paypal, Square, Stripe, Worldpay, Klarna
Headquarters: Amsterdam, The Netherlands
Number of employees: +/- 1650
Net revenues: €498 million (2019)
Price / Earnings (PE) ratio: +/- 300 (January 2021)

Adyen SWOT Analysis (2020) Infographic

In the Infographic below, you’ll see an overview of the strengths, weaknesses, opportunities and threats for Adyen.

Strengths

Technology & Innovation

One of Adyen’s Strengths is its high tech platform. Adyen does not see itself as a payments company. Instead, Adyen sees itself as technology company redefining payments. The firm was included in CNBC’s Disruptor 50 list (2018) of leading private companies that have created disruption in their industry by their (technological) innovations.

Adyen is fully based on open source software and all software develpment is done in-house. No third parties are involved. This gives the firm full control and flexibility over its technology development.

Innovation is a strong pillar for the future of Adyen. The firm keeps developing and expanding their services.

Examples of innovation

In its 2019 annual report, Adyen included a timeline that shows several innovations in recent years, such as:

Terminal API: a web-based terminal API for integrating payment terminals. Simply said, APIs are computer interfaces that facilitate communication between different software. Adyen’s terminal API integrates the payment terminal with a point of sale (POS) system. A POS system is a piece of software that supports shop/restaurant owners with their sales, inventory management, analysis & reporting.

Adyen issuing: an advanced API technology to generate and issue payment (credit) cards for their clients. Physical as well as virtual cards are possible, to give clients a great deal of flexibility. To issue payment cards, Adyen obtained a banking license in 2017.

Strong (entrepreneurial) culture

Adyen has a very strong and distinctive entrepreneurial culture. This culture is definitely a competitive advantage as it helps Adyen to grow, innovate and stay ahead of the competition. It has helped the  company to grow to where they are now.

The culture of Adyen is described in the Adyen formula. The Adyen Formula captures how people within the company aspire to work together:

Source: Adyen.com

Adyen’s culture seems to be rather informal. Judging from social media posts, employees can wear whatever they want. Jeans, sneakers, t-shirts, even shorts. It is a stretch, but perhaps this informal culture stimulates creativity. Either way, Adyen’s culture is distinctive and refreshing. It seems to be a start-up culture even though the firm outgrew the startup status years ago.

Agility

Adyen is a relatively young company that only exists since 2006. Although it has emerged as an established, leading player in the market, Adyen will not have the internal bureaucracy and legacy systems that older companies may have. This agility helps Adyen without a doubt to keep innovating at high speed.

Weaknesses

Dependency on large clients

Adyen focuses on the enterprise segment: large multinational companies. Most of its growth has come from the growth of their existing large clients. . When its clients grow, Adyen grows. The other side of that coin is that if these clients do not grow, or their business shrinks, this could be problematic for Adyen. Or what if a large client terminates or does not extend its contract with Adyen? Large businesses will have contracts with more than one payment services provider. They are always on the lookout for the best value for their money.

One of the challenges for Adyen will be to build their client base to become less dependent on these large clients. Currently, this dependency is one of the major weaknesses of Adyen.

Dependency on Access to card networks

Most of the transactions processed by Adyen’s payments platform use international card networks, such as Visa and Mastercard. Adyen needs licenses to be able to use these networks. There are differences in card networks across the world. This means that Adyen needs to comply with many different rules and regulations to be able to use all these networks. If Adyen fails to comply with these regulations, it will not be able to keep the licenses of these card networks.

Size

Adyen is a young company. They did not have decades to grow their business. Comparted to some of their competitors, Adyen is still a small business. While being small and young has its advantages, bigger companies may have opportunities of scale or more money to invest in innovation and/or expansion.

Opportunities

Digitization of the payment market

The payments market is innovating and digitizing rapidly. Adyen, being at the core of these activities, has many opportunities to grow. This could be done by diversifying its products. The more obvious opportunity is to attract new clients (merchants). Adyen already has several very big names in their client base. Being one of the leaders in this growing industry, Adyen can profit immensely from payments across the world becoming more digital.

Market share growth

Adyen has grown tremendously in the last decade, and this growth is expected continue. With the payments industry becoming more and more digital, there will be many more growth opportunities ahead.

Perhaps one of the growth opportunities for Adyen comes from the downfall of one of their competitors: Wirecard. Wirecard was a German payments company. Like Adyen, Wirecard served as the ‘middleman’ for (online) payments between consumers and companies. The German Fintech filed for insolvency on June 25th, 2020.

Threats

Competition

The payments industry is a highly competitive one. Big, established players such as PayPal, Worldpay and Square have been active for a relatively long time. There are also several Fintechs that more recently joined the market. Several of its competitors are larger than Adyen with a wider offering of products and a bigger resource base. Competition may also have more money available to invest. Big Tech companies such as Google and Apple are also active in the payments market. Although their services are very different at the moment, these companies are always in search of expanding their offerings. Increased competition could lead to Adyen’s growth slowing down, as well as decreased revenues.

While Adyen has a strong competitive advantage with their superior platform, competition is also developing fast. This is a threat Adyen should watch out for.

Fast growth leading to less efficiency

Adyen currently has 23 offices around the world and over 1.600 employees. This is a lot for a company that did not even exist 16 years ago. Fast growth is great, but it could be hard for a company to stay as efficient as it used to be. As businesses grow in size, they usually become more bureaucratic. Procedures become more complex and overhead costs increase. For Adyen, its start-up culture is something they stand out with. This should be maintained.

Payments market developments

The payments industry is changing and developing at a high pace. Companies active in this market always need to stay flexible and innovate their products and services. If they fail to do so, it is easy to fall behind and lose the competitive race.

Macro-economic developments

For many, if not all companies, macro-economic developments could be a threat. For example, COVID-19 has had an unforeseen impact on the global economy. Events like these are difficult to deal with. For Adyen, macro-economic issues could decrease the volume of transactions on the payment platform. This would lead to lower revenues.

Geo-political events (such as Brexit or presidential elections) could also impact global or regional economies.

Intellectual property

Adyen has a substantial amount of intellectual property. Most importantly its platforms, but also trademarks, copyrights, domain names, and trade dress. As competition in the payments industry is increasing, competitors may seek to contest Adyen’s intellectual property rights. It is important for the Dutch payments company to protect its intellectual property. If the company fails to do so, Adyen could lose a competitive advantage and lose the value of its intangible assets.

Fun Fact

Did you know Adyen means ‘start over again’ in ‘Surinamese”? I surely did not!

Interested in more strategic analysis? Take a look at other analyses here.

References

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