Adyen, the Amsterdam-based payments fintech, has recently announced it is expanding into Japan and the United Arab Emirates.
For Warren Hayashi, the company’s Singapore-based president for Asia Pacific, entering the Japanese market represents the first move into a populous market – and a bid to change Adyen’s growth potential.
Adyen was founded in 2006, and it has operated in Singapore, Hong Kong, Australia and New Zealand since 2017. It entered Malaysia in July 2020.
Revenues in Asia Pacific have been growing even faster, at 29 percent year-on-year, Hayashi says.
That masks the fact that for Adyen, Asia-Pacific business has not matched the region’s potential for greater growth. In 2016, Asia-Pac represented 10 percent of total revenues. In 2020, that figure was down to 9 percent.
The company is a global competitor to the likes of Stripe, Square, and Klarna (although business models vary) and is still growing fast: in 2020, it processed €303 billion worth of payments, with net revenues of €684 million – 28 percent more than the previous year.
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A big reason for the market expansions, Japan in particular, is to move into a populous nation that can support making the region a bigger player in Adyen’s business.
Adyen started out in the acquirer side of the payments world as a gateway, helping e-commerce merchants plug into banks and bank processors to accept payments. But just being a gateway involved little clout and a fight over the smallest slices of fees in a payment lifecycle.
Therefore the company pivoted to becoming a single platform, helping European enterprises go global by processing payments and managing risks throughout the lifecycle of a transaction.
Adyen’s global ambitions hit a milestone in 2018 when it secured a deal with eBay to become its primary payments processing partner, displacing PayPal. Microsoft is another global client.
Today Adyen supports 250 payment methods around the world, so its global merchant clients can engage with local providers, from credit cards to mobile wallets.
The company doesn’t try to plug into every single payment method in a given market, and nor does it customize these services – instead it tries to bring a package of payment methods that appeal to e-commerce and other international businesses.
These can be both online and offline, such as through certain point-of-sale devices. However, in Japan and the UAE, Adyen will not yet be doing offline channels – it will only service e-commerce companies.
This could yet prove a barrier to reaching the kind of volumes needed to help make Asia a bigger part of the business. But Hayashi says digital payments are on the rise in Japan. Today they account for about 20 percent of all payments, but the government wants to increase this to 40 percent by 2025.
Asia’s growth trends
Hayashi is optimistic about business in Asia, however, due to three trends, all of which have been accelerated by COVID-19.
First is what the company calls “unified commerce”, its way of broadening the industry idea of omnichannel distribution. This means helping enterprises be able to harmonize their data on a customer that might shop in their venues in multiple ways – in a store, at a kiosk, online, or via an app.
Helping consolidate shopper data via various payment methods is what enables the company to provide a premium service, Hayashi said – and to change the conversation with clients away from Merchant Discount Rates, the typical metric used by payment issuers. MDRs have been in decline as global interest rates have remained very low – which makes the economics of processing payments harder without massive volume.
“Issuer banks capture most of the MDR,” Hayashi said. “We operate an interchange model [in which merchants pay a fee to access a payment method, such as a credit card].” It’s part of his job to convince merchants to engage with payment processors on an interchange basis, not MDR, on the grounds that Adyen can provide transparency – and the analytics – across a merchant’s customer base.
“Understanding the data moves the conversation from being one with a CFO who wants to save on costs, to a conversation with a chief marketing officer who wants to grow their topline by creating consumer stickiness,” Hayashi said.
The second big trend in the region is the advance of contactless payments: not just contactless cards, but also QR codes and mobile wallets.
Third is the rise of buy-now, pay-later schemes. Adyen already partners with big BNPL fintechs such as AfterPay in Australia, Affirm in the U.S., and Klarna in Europe – but after these giants, there are dozens of BNPL companies in a given market, such as Australia.