Adyen Plummets as Sales Miss Erases $20B of Market Value
finance.yahoo.com
finance.yahoo.com
https://www.macrotrends.net/stocks/charts/V/visa/profit-marg...
Visa is a network, with network effects that cannot be substituted, hence their enormous profit margins. Visa's competitors would be other networks like Mastercard, AmEx, Discover, JCB, China UnionPay, etc.
Or FedNow in the US. I've heard lots of payments folks shrug this off, but the evidence from PIX in Brazil and UPI in India is that it decimates credit card rail revenue.
If you can process a payment up to $100k, $500k, etc for ~5 cents a transaction, I'm definitely not going to eat 3-5% as a merchant. Margins will compress as system participants coalesce around a utility at utility pricing.
https://bfsi.economictimes.indiatimes.com/news/fintech/brazi...
If you want to hear the gods laugh, tell them your valuation and projections.
There are some merchants I'd absolutely want the fraud protection for, but most merchants I interact with I'm fine without and not paying a credit card fee pushed on to me to have. People drive miles to save a few cents on gas, so 3% savings is not trivial to a lot of folks. I admit it'll be an interesting natural experiment to see how volume shifts across systems, but UPI and PIX provide some evidence as to how it'll play out.
[1] https://news.ycombinator.com/item?id=36012866
> Walmart has observed a severe misalignment of incentives that has plagued the payments system in the United States for decades. Certain incumbents and large participants enjoy massive profits by stifling innovation in payments, ensuring that account access is limited to a small number of networks, and perpetuating barriers to entry for alternative solutions. Controlling this access allows the dominant players to extract rents from other payments system participants, ultimately resulting in higher costs for all consumers, particularly consumers who are unbanked or underbanked.
Also, of all the companies mentioned only Paypal actually competes with Visa.
Investors don’t comprehend that on timeframes that matter, data is the opposite of a moat.
It's not that a large merchant needs to support one payment type for one country: They need a collection of payment types that work on each country, without having to dedicate engineering to every single one. For companies that are marketplaces, like Amazon or Uber, you need to have payments, both ways, including onboarding. And for online companies, there's the shadow of fraud: Not just fraudulent purchases, or card testing, but, as a marketplace, fake merchants. And the larger your payment company is, the easier it is to do good fraud detection.
When you put it all together, the amount of engineering effort those companies are saving you vs 'use bitcoin LOL' is enormous. And instead of shrinking every year, it's growing. So, for instance, see how Amazon decided that maybe they wanted to do fewer payments in house, and have Stripe manage it for them. It's not as if Amazon lacks engineering capacity, or if they started without a payment system: It's that there's a bunch of value there, and they thought that it'd be more profitable to delegate more and more of the system to one of those not-so-commodity businesses.
But yes, if all you needed was the simplest payments, in a lone jurisdiction, it's a low margin business. The moat is elsewhere.
There’s plenty of room in the market but people are going to be competing head to head not safe behind a giant moat.
Fraud detection on the other hand I'd believe could be a very high margin business, the "moat" being proprietary techniques that perform better than the competition, better data (as you mentioned), etc. However I've never heard anybody sing the praises of any of these platforms' fraud detection products - is that really where they are making their money?
Think Stripe only targetting big customers.
TLDR if investors see this as a "party's over" signal and most of the big/easy growth is behind, they're going to flee.
They were fine and cheap until they didn't work at which we had a fallback
Thus the lifecycle of a digital payments service provider is completed.
Then you realize how much overhead it is to do a direct integration and your CFO wonders why it's payment cost is rising with all your support engineers on staff and then revert back to third party processor.
Can you elaborate on that?
1. They asked for a detailed walkthrough with screenshots of our payment process, which detailed the whole conversion process from the time of signup until the checkout/payment. Fair enough - they could have checked themselves, but I can still understand why they would insist on this. 2. It took six weeks to get a call back from them. During the call they said that they needed 80k EUR in reserve funds from us, but if we did not have the cash, then "no worries, we'll just capture the first 80k sales before making any payouts". Felt to me like they were only in search of much bigger fish with that much cash lying around.
So we went with Stripe instead. The whole process took 20 or so minutes, from signing up, entering company information and uploading company and shareholder documentation to the "you are ready to accept payments" screen. I couldn't believe that was all it took, but it worked, and we have been using them ever since.
Edit: Disambiguate which service I applied for that did not work out.