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

Ayden, the Amsterdam-based payments giant, is starting to offer business checking accounts and small business loans through its own banking licenses in the US and Europe – an approach that sets it apart from its fintech competitors.

But the strategy will not make Ayden 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 in the background, without the brand being visible to those other platforms’ small business customers. Potential customers for such an approach could include platforms such as Lightspeed or Shopify, now a major Stripe customer.

Adyen was founded in 2006 by Pieter Van der Does and Arnout Schuijiff, who both reached billionaire status in 2018, following Adyen’s initial public offering. Today, despite the sale of fintech stocks, the Van der Does and Schuijiff are still worth $1.7 billion and $2.3 billion, respectively. Adyen’s shares are traded on Euronext and the market value is 40 billion dollars, down from a peak of 100 billion dollars in August last year.

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

As part of the new product, Adyen will use the data it collects from processing a company’s payments to underwrite short-term loans, which will typically be repaid over 6 months. Since the borrowers will already use Adyen for payment processing, the company will take a percentage of the customer’s income each month until the loan is repaid.

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 its services without going through third-party banking partners, a setup that Adyen says will enable it to issue loans faster because it can internally review and approve applicants.

“The biggest difference is that we always build it ourselves end-to-end,” says Adyen CEO Pieter Van der Does. “At the end of the day, there is competition, but the question is how even and how effective is it?”

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 started 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 that Adyen avoids third-party costs that come from cooperation with bank 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, a banking and fintech regulatory partner at Hunton Andrews Kurth in Austin. “But when you talk to them about what being a bank really means in an environment where we have high interest rates, compliance and maintenance obligations, they realize that’s not what we want our core mission and business to be about.”

In addition, Adyen opens up for default risk by keeping loans on its own balance sheet. Stripe and PayPal do not have banking licenses and offer their accounts and loans through partner banks that own regulatory responsibilities and lending risk. Square Financial Services, a wholly owned Block subsidiary, offers loans and savings accounts through an industrial loan charter, but does not keep the loans on its own balance sheet. Square checking accounts are offered through a bank partner.