Adyen: Pricing & Competition

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We have two major questions. One is more of a math modeling quantitative question and the other is around the durability of competitive advantage. Firstly, regarding the math question, we are trying to figure out, when we forecast the next few years of Adyen’s growth, what the take rate might look like. Ingo always says that we don’t focus on take rate, as a company. But it is definitely an input you need to think about, to figure out net revenue for the company. It has, obviously, been falling from above 20 bps, a couple of years ago, now down to 17 bps, in the last year. The trajectory is downward and we are curious as to if you have a view on what that trajectory would look like over the next few years and whether there is a reasonable floor to think about?

The instore traffic, naturally, has a lower take rate, given the lower margins on instore transactions. I think those two trends, and seeing where Adyen is moving to with the unified commerce, I would say this kind of downward trend on the take rate might continue.

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Maybe we could take those pieces apart a little bit? Certainly, unified commerce and more instore traffic is a driver. How much lower would the take rate be on the instore business than it would be on the ecommerce business?

It’s really about volume there and tying those instore volumes together with the online volumes so that those take rates, instore, are really significantly lower. It is hard to put a number on it, but maybe 30% to 40% lower than what you can ask for for online transactions

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There are some sell side notes, out there, that are saying that Adyen’s take rate, over the next few years, would be unlikely to fall below something like the legacy players might have, such as the Fiservs of the world. Would you have an opinion on whether Adyen, if it continued to be successful with its large customers, would have any sort of floor that would be set, maybe by those legacy competitors or if Adyen could, potentially, keep going lower than that? I think 13 bps would be a reasonable floor.

I don’t think they would really fall below the floor of some of those legacy players that are out there. In the end, they still add a ton more of value – at least that’s what they tell every merchant they speak with – than what the Fiservs and other players in the space do. They are still pretty unique, given the fact that, in terms of innovation, their rate of innovation and speed to market will always outpace a lot of the competitors. That is value to the merchant, that they can still factor that into their pricing and that, ultimately, it should lead to a higher take rate than those competitors.

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