Adyen Sees Growing Demand for Embedded Finance Offerings

Adyen’s first quarter announcement Wednesday (April 30) provided ample evidence of embedded finance’s momentum as platforms and marketplaces seek to build payments into their own business models.

Platforms net revenue reached €55.5 million, up 63% year over year, per the company’s financials, with significant demand in the software-as-a-service (SaaS) segment. Processed volumes were up 61% excluding the impact of eBay, to €314.8 billion.

The number of platform business customers, the company said, stood at 177,000, up from 96,000 in the same time frame last year. Adyen also said that it has 30 platform customers that process more than €1 billion annually, up from 19 a year ago. Issuing volumes have increased, though management added that this part of the business is relatively small and will take time to grow.

But management also noted that pressures may impact Adyen’s customers’ top line trajectories, which in turn would slow Adyen’s revenue growth.

In looking ahead, and with sales guidance in the low to high 20% range for the year, CFO Ethan Tandowsky noted that with “more uncertainty in the macroeconomic outlook, we wanted to share that acceleration” of Adyen’s own revenues “could become more challenging should their growth slow down. At the same time, it’s not what we see.”  The typical growth of the customer base has been in the high single digits to low double digits, he said.

Digital Pillar Growth

Within the digital pillar, net revenues surged 13% to €320.4 million, on the heels of demand in the content and subscriptions verticals.

“We’re seeing continued adoption of products like Adyen Uplift and intelligent payment routing for U.S. debit,” said Tandowsky.

Unified Commerce — comprised of Adyen’s operations that connect online and offline payments for client firms’ cross-channel efforts — saw revenue growth of 31% to €158.8 million, with growth in the retail and the food and beverage segments.  Processed volumes gained 37%, while 592 customers leveraged the Unified Commerce operations to process payments across multiple regions, up 77 customers year over year.

Asked on the call about the use of artificial intelligence (AI), the CFO said, “We’ve highlighted our focus on AI — which has been our Uplift product. What Uplift ultimately does is, it balances performance, cost and fraud [mitigation], but it also puts these tools in the hands of our merchants. So, they all have access to be able to test different settings on different transactions [to] see how they perform, what does it do to cost … authorization rates, and how does that influence fraud.”

Shares were 2% lower on the day.

The general landscape for embedded finance was detailed in recent PYMNTS Intelligence research, done in collaboration with Fiserv, that showed marketplaces offering two core types of features — payment acceptance and embedded finance features — are the most likely to report payment processing fees make up a greater share of (and diversifies) the revenues they generate.