Payments giant Adyen begins offering banking services, head-to-head with Stripe, Square and PayPal

Adyen, the Amsterdam-based payments giant, is starting to offer business checking accounts and small business loans through its own banking licenses in the United States and Europe — an approach that sets it apart from its fintech rivals.

But his strategy won’t make Adyen a household name in the United States. Instead, it intends to offer these banking services as a white label solution for other platforms – the Dutch company will provide the infrastructure behind the scenes, without its brand being visible for these. small business customers of other platforms. Potential customers for such an approach could include platforms like Lightspeed or Shopify, now a big customer of Stripe.

Adyen was founded in 2006 by Pieter Van der Does and Arnout Schuijiff, who both achieved billionaire status in 2018, after Adyen went public. Today, despite selling the fintech shares, Van der Does and Schuijiff are still worth $1.7 billion and $2.3 billion, respectively. Adyen’s shares trade on Euronext and its market capitalization is $40 billion, down from a peak of $100 billion in August last year.

In 2021, Adyen processed $516 billion in transactions through customers including Uber
Spotify, Levi’s and eBay, compared to $168 billion processed by Block (formerly Square), $640 billion by Stripe and PayPal
whopping $1.25 trillion.

As part of its new product, Adyen will use data collected during a company’s payment processing to underwrite short-term loans, which will typically be repaid over 6 months. Since borrowers will already be using Adyen for payment processing, the company will take a percentage of its client’s revenue each month until the loan is paid off.

Adyen’s new services will compete with similar products from Stripe, Block’s Square and PayPal. But the company’s banking licenses allow it to manage services without going through third-party banking partners, a setup that Adyen says will allow it to issue loans faster because it can assess and approve applicants internally.

“The biggest difference is that we still build it ourselves from start to finish,” says Pieter Van der Does, CEO of Adyen. “At the end of the day, there is competition, but the question is, is it smooth and efficient?”

In 2017, Adyen was granted a European regional banking license by the Dutch Central Bank on behalf of the European Central Bank. In 2019, the company began the process of applying for a Federal Foreign Branch license in the United States. Two years later, Adyen received the license from the Office of the Comptroller of the Currency and the Federal Reserve Board of Governors. Although the license means Adyen avoids the third-party costs of working with banking partners, it can increase expenses in other areas such as compliance.

“A lot of (fintechs) think it would be great to be a bank,” says Erin Fonte, partner in banking and fintech regulation at Hunton Andrews Kurth in Austin. “But when you talk to them about what it really means to be a bank in an environment where we have high interest rates, compliance and maintenance obligations, they realize that’s not what we want. that our mission and our main activities are.”

Additionally, holding loans on its own balance sheet exposes Adyen to default risks. Stripe and PayPal do not hold banking licenses and offer their accounts and loans through partner banks who hold regulatory responsibility and lending risk. Square Financial Services, a wholly owned subsidiary of Block, offers loans and savings accounts through an industry lending charter, but does not hold the loans on its own balance sheet. Square Checking Accounts are offered through a banking partner.

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