Is Stripe a threat?
Adyen. Equity Research! Part 2/3
Welcome to Part 2 of this Adyen Deep Dive.
In Part 1, we explored Adyen’s business model and competitive advantages.
In today’s Part 2, we will look at Adyen’s competitors such as Stripe, Block, PayPal, and Dlocal.
Additionally, cybersecurity, regulatory, customer concentration, and take-rate compression risks are analysed.
Let’s jump in.
1. Competitors
2. Risks
3. Part 3
1. Competitors
Stripe
Stripe is Adyen’s largest and most formidable direct opponent.
Unfortunately, Stripe is not a publicly traded company, so we don’t have as much data to compare, but we have some key KPI’s
In 2024, Stripe processed $1.4T while Adyen processed €1.3T.
With today’s USD/EUR exchange rate of €0.8530, Stipe processed €1.19T, slightly below Adyen!
But, to be fair to Stripe, the rate was €0.9626 on 31.12.2024, before Trump crashed the USD, so Stripe volumes then were €1.35T, above Adyen.
In any case, these companies are essentially neck and neck in payment volumes, but in 2024, Stripe grew noticeably faster, +38% vs +33%. Adyen has noted that their performance in North America was affected by an “intensifying competitive environment”.
Stripe’s financials in the picture are estimates, and the company uses US GAAP, which has different rules for how to report revenue, so the comparison is not entirely valid, but it still gives some insights.
Firstly, Adyen is a significantly leaner and much more profitable enterprise!
Stripe has around 8,500 employees compared to 4,345 for Adyen, meaning that Stripe has double the employees, despite operating at a similar scale.
Stripe confirmed that they were profitable for the first time in 2024, while Adyen has been profitable for more than a decade and has posted 40%+ net income margins for 6 years.
From a regional perspective, Stripe is exceptionally strong in the US, while Adyen in the EU!
This gives Stripe a significant advantage because, as these US companies upgrade their payment infrastructure or expand internationally, they are more likely to use Stripe as their payment provider. And US companies are the strongest and fastest growing in the world, and that’s unlikely to change.
From a market positioning strategy, Stripe targets tech start-ups, SaaS companies, and small businesses, while Adyen targets large enterprises!
However, increasingly, both companies are getting in each other’s turf. Through its Platforms offering, Adyen is indirectly acquiring tens of thousands of small business customers. Meanwhile, Stripe is ramping up enterprise sales teams to go after the large companies.
Their different market strategies mean that Stripe has a higher take rate, as smaller companies have a weaker negotiating position to demand discounts. However, large enterprises that work with Adyen have a strong negotiating position, thus they receive considerable discounts.
Overall, the competition between the two will only intensify.
Card Networks
Visa, Mastercard, and Amex operate card networks that enable people to pay for purchases digitally, supporting transfers from their bank accounts.
On one side of the coin, Adyen is an important partner that empowers these companies to flourish.
On the other side of the coin, Adyen directly enables their competitors and erodes card network moats.
These card network companies generate absolutely enormous payment volumes, processing over $20T. As their business model involves charging a percentage fee of each transaction, all 3 of them are incentivized to grow their networks.
Adyen is a crucial partner that enables businesses to accept card payments, driving higher transaction volumes for Visa, Mastercard, and Amex!
In a large sense, the more transactions Adyen processes, the more fees these networks earn.
However, it is also to Adyen’s benefit to enable merchants to accept alternative payment methods that avoid the card networks. Governments, merchants, and politicians are complaining that the fees these networks charge are way too high.
Thus, various alternative payment methods have emerged, iDeal in the Netherlands, PIX in Brazil, UPI in India, and mobile wallets in Thailand, Mexico, the Philippines, Turkey, and many other countries.
Adyen enables merchants to accept these alternative payment methods, optimizing acceptance and fees, sometimes bypassing card networks altogether.
As these alternative payment methods become more prevalent, a rift between Adyen and card networks might emerge.
Acquiring Banks
In the EU, the US, and a few other countries, Adyen is an acquiring bank, so they are directly competing with traditional legacy banks for business.
10 years ago, the trillions in payment volumes that Adyen handles would all go through legacy acquiring banks!
While larger legacy banks still have sizable acquiring bank businesses, many other smaller banks can’t compete.
They lack the capital to invest in infrastructure and technology that improves conversions, reduces fraud, and saves costs. This leads to higher expenses and slower payment processing. Many smaller banks are losing market share and are exiting the acquiring industry or partnering up with ISOs or larger legacy banks.
Meanwhile, large banks such as JPM have acquiring bank volumes in the many trillions of dollars, processing multiples more than Adyen. The strength of these financial institutions lies in serving the biggest companies in the world, thanks to decades of corporate relationships.
For instance, just a few retailers, Walmart, Costco, Target, Kroger, and Home Depot, are responsible for more than $1T in US sales. The vast majority of these payment volumes go through the large, established legacy banks.
These customers are extremely sticky as the CEOs play golf together and have a working relationship that’s decades old. Additionally, retail giants prioritize scale, reliability, and pricing leverage, which gives legacy players an edge despite their older, less advanced technology.
However, the legacy banks have a weak presence with the smaller but faster-growing new-age digital companies!
Unlike the world’s largest retailers, these new-age companies place more value on speed, technological innovation, low cost, and superior customer experience.
As our economies transform from on-premises cash and credit card-based economies towards more digital, e-commerce, mobile, and alternative payment method-based economies, Adyen is set to benefit from having a superior product and a better user experience.
Dlocal
Dlocal is a payments processing company based in Uruguay that focuses on working with large companies that want to expand in emerging markets.
The company has a similar approach to payments as Adyen, thus, Dlocal has often been described as “mini-Adyen”.
Emerging markets are countries in Latin America, Africa, Asia, and Eastern Europe that are generally poorer, but have fast-growing economies and large and growing populations. Think of Brazil, Colombia, Nigeria, Turkey, Poland, India, and Vietnam.
Dlocal’s scale is an order of magnitude smaller than Adyen’s, but the company is growing much faster.
As we can see in the graph above, Dlocal processes $28.4B in payments, an increase of 22X in just 5 years!
Adyen has a really strong position in the developed markets such as the EU, US, Canada, and UK. However, growth in these markets is slowing down, thus Adyen has made its ambition to expand in Latin America and Asia known.
Recently, Adyen got licensed to begin acquiring operations in India, Mexico, and Brazil, some of Dlocal’s most important markets.
While Adyen is a full-stack complete payments processor, Dlocal is more of a payment aggregator, working with hundreds of local acquirers.
While Adyen’s approach works well in large developed markets, emerging markets are much more complex. Fragmented regulatory environments, strict capital controls, and stringent FX regulations. This makes it quite difficult to build a comprehensive offering in the same manner as Adyen is used to.
For this reason, I think Adyen’s approach in emerging markets is actually a disadvantage in certain smaller and more complex markets. Dlocal can enter new markets quicker, grow much faster, and offer especially tailored solutions by partnering with local companies.
However, Adyen will likely grow significantly in some of the larger emerging markets such as India, Mexico, and Brazil, as they are large enough to warrant an investment to develop a single platform like Adyen did in the developed markets.
Moreover, Adyen is uniquely positioned to grow in emerging markets, as its Unified Commerce and Platforms customers expand to emerging markets!
If customers such as Spendesk, Bill.com, and Lighstpeed decide to expand in Mexico, Brazil, or India, they will likely retain Adyen’s services.
Other
Apart from Stripe, the payments industry is ripe with competitors, it would take all day to discuss all of them, but there are 4 popular names I thought would be worth mentioning.
Block – Their Square product has been underperforming expectations for many years. Despite the significantly smaller scale than Adyen, processing only $227B, it grew just 8.6% in 2024. Such weak growth at such a small scale indicates a poor execution, and I no longer consider Block to be a meaningful competitor. It is clear that Dorsey’s focus is elsewhere. I think this is one of those situations where a CEO leaving would instantly send the stock up 10%.
PayPal – A significant competitor that operates both under the PayPal brand and Braintree. Paypal is a fintech giant responsible for $1.7T in payment volumes. However, this is not comparable to Adyen, as it includes peer-to-peer payments on PayPal and Venmo. This demonstrates their strategic difference in how they operate. Braintree focuses more on integrating into and supporting the growth of the PayPal ecosystem. They earn higher fees when merchants use PayPal’s branded checkout. Adyen doesn’t care what payment method a merchant uses, so there is more conflict of interest in PayPal’s offering. There is a lot of optimism among PayPal shareholders about the strategy of the new CEO. If PayPal improves execution and gets its act together, the company could be a formidable competitor to Adyen.
Checkout.com – A UK-based payments company focused on serving the digital payment needs of enterprise clients in the e-commerce and fintech niches. They are growing fast, but operate at a much smaller scale than Adyen. A digitally native company with competent leadership and thoughtful strategy. They could become a serious threat.
Worldpay and Fidelity National Information Services (FIS) – Worldpay is a legacy US-based payment processor with $2.3T in processed payment volumes. It is the world’s largest non-bank acquiring bank. While payment volumes are almost double the size of Adyen, the company is nowhere near as profitable (13% Net margin in Q3 2019), and is growing much slower. After a disastrous acquisition by FIS, it was split out just a few years later at a huge loss and is now majority-owned by a private equity firm. However, just a few weeks ago, it was again sold to another payment company. These expensive and value-destroying deals involving Worldpay and FIS indicate that the management lacks vision and doesn’t know how to compete with new and digitally native companies such as Stripe and Adyen. I am skeptical of FIS’s ability to change course, so I find it likely that both Stripe and Adyen will pass them in payment volumes.
2. Risks
Cybersecurity
As a financial institution that processes more than a trillion EUR in payment volumes for some of the world’s largest and most important companies, Adyen manages a lot of sensitive data.
Unscrupulous actors are always on the watch for any holes in the system that could be used for their own benefit.
A serious cybersecurity incident could cause billions in damages and permanently impair the trust in the company!
Trust is the world’s most important currency, and once it’s broken, it is very difficult and almost impossible to earn it back.
People want to know that when they are ordering pizza on Uber Eats, their payment information won’t be stolen. Even the tiniest doubts in the security of the payment infrastructure could cause a merchant to lose sales, thus they don’t give a second chance to a payment processor. Customers won’t care that it was Adyen’s fault and will blame Uber.
If clients lose trust in Adyen’s ability to effectively and securely process payments, they will drop the company.
Adyen’s cybersecurity skills were recently tested when they were attacked by hackers on 21. April 2025. The company claims that no customer data was stolen, and the attack caused only minor disruptions and was repelled in a few hours. Adyen issued a full incident report, demonstrating transparency and proactive communication.
Take-Rate Compression
In 2015, Adyen kept 0.31% of each EUR processed, but by 2024, the take-rate halved to 0.16%!
This take-rate compression is somewhat deliberate and a byproduct of their business model. Adyen focuses on large enterprises with huge volumes, and that comes with strong negotiating power and volume discounts.
Furthermore, the take-rate is likely to continue falling, as Adyen’s Platforms business becomes a bigger driver of processed payment volume growth.
Take-rate in the platforms business is 0.10%, lower than 0.17% in digital and 0.16% in unified commerce.
While some take-rate compression would not be catastrophic to Adyen’s business, and is to be expected, large and continuous decreases in the take-rate could slow revenue growth and reduce margins.
Take-rates could fall more than desired if competition gets more intense, customer concentration increases, or government regulations change.
Customer Concentration
Large enterprises are Adyen’s bread and butter, and while they come with large volumes, they also come with a customer concentration risk.
A single large merchant leaving or underperforming could have a meaningful impact on Adyen’s performance!
While Adyen doesn’t publicly disclose its largest client, judging by how frequently eBay is mentioned in earnings calls and press releases, it is probably it.
Adyen experienced that in the second half of 2023, when Platforms payment volumes grew 59% Y/Y, but excluding eBay, growth increased to 91% Y/Y.
Customer concentration could have negative consequences, such as:
Costly operating demands
Low take-rate
Revenue volatility
Underperformance risk
A merchant who knows that they are the most important client can demand costly operating concessions. Priority connectivity, custom integrations, and excessive support. Additionally, they might demand new products that are unique and tailor-made for their business, with little use for Adyen’s other customers, in a sense, making Adyen do their R&D for them. These additional operating costs could negate the scale advantages and significantly increase operating costs.
Furthermore, as already mentioned, large enterprise customers demand steep discounts, lowering the take-rate. In instances with high customer concentration, an unreasonably low price could be demanded.
Also, depending on a few customers for a large share of payment volumes could expose Adyen to revenue volatility, as the company could be affected by the clients’ revenue cycles.
Most importantly, if a client is having a tough time and is underperforming, that underperformance could negatively affect Adyen.
Overall, depending on a few large clients is not a smart long-term strategy, and Adyen is working to attract new customers and reduce its dependency on clients such as eBay.
Regulatory Risk
Adyen operates in a highly important and heavily regulated industry with constantly changing dynamics.
Not only does payment processing enable our global economies to flourish, but it is also a politically important industry with national security risks!
Thus, changing the regulatory environment could negatively affect Adyen by:
Lowering take rates
Increasing costs
Delaying or forbidding new services
Advantaging local players
New rules that limit interchange fees, tax cross-border transactions, or demand domestic routing could put downward pressure on take-rates. This is especially a risk in emerging markets.
Additionally, domestic routing requirements coupled with new, stringent FX, AML, KYC, or other regulatory burdens could lead to higher costs, thus reducing the benefits of scale.
Furthermore, regulators might take forever to review or approve licenses that would enable Adyen to expand the scope of their offering. Such action might be taken by regulators to increase the service quality. However, it is also likely that in certain countries, new regulatory measures could be taken to advantage local regional players. Local business organizations might lobby or simply bribe regulators to lower competition from abroad, thus keeping profits high.
While a single regulatory action is unlikely to have a material negative effect, a collection of them could reduce revenue growth and lead to higher operating complexity.
3. Part 3
In the next part, I will look at how Adyen plans to execute on new opportunities for growth, such as geographic expansion and lending.
Furthermore, Adyen Deep Dive will conclude with a full financial analysis and a valuation model.
Stay tuned!
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Has researching Adyen make you rethink dLocal's future growth prospects? Especially in light of toughening competition in key markets like Brazil and Mexico.
Thanks for this update, Ray! Really insightful. My view on the take-rate is a bit different: as the take rate decreases, it's actually a positive. Because at Adyen, the more volume you bring, the lower the take rate. So a merchant might bring 20% extra volume to the table, but gets a lower price so revenues 'only' increases 10%. This, in some way, reminds me of scale-economies shared, perhaps the most powerful competitive advantage out there.
One additional question: do you have any idea of the take-rate and customer base of DLocal?