This is about Adyen, a payment company. The author says payments aren't a winner-take-all market. Over the next 5-10 years, legacy processors (like Worldpay) could see their 70% market share flip to 30%, while new players like Adyen rise. Adyen built its own full-stack platform, outsources nothing, and does no acquisitions, giving it a 64% EBITDA margin and 40%+ revenue growth. Key holdings: Adyen (bullish, 80% growth from existing merchants, only ~2,200 employees); Stripe (neutral, targets small businesses, still uses legacy partners); Worldpay (legacy, losing share, spent billions on a new platform with little success).
Adyen is a European payment company founded in Amsterdam in 2006 by a group of entrepreneurs who had previously successfully built and sold payment businesses. The core thesis of the report is that Adyen achieves profitable growth by replacing the fragmented legacy payment systems that merchants are
Michael Willar (Portfolio Manager at Stenham Asset Management) deconstructs European payment company Adyen. The core thesis of this episode: how Adyen, by building a fully integrated single platform in-house and rejecting outsourcing and M&A, achieves the rare combination of a 64% EBITDA margin and 40%+ revenue growth in a fragmented payments market. **The most impactful judgment in the entire episode: Michael Willar argues that the payments industry is not a winner-take-all market — "just under 70% of volumes globally is still being processed by the legacy guys who are struggling to compete and are losing share." Over the next 5-10 years, the landscape could completely flip from "70% legacy, 30% next-gen," meaning that direct competition between Stripe and Adyen is mathematically far less significant.
Michael Willar argues that Adyen's core differentiator is not the single platform itself, but the architectural choice to "build everything in-house from day one and outsource nothing," along with the cultural system that supports this choice.
Willar uses an analogy from Silverflow (a startup founded by former Adyen employees) to explain the predicament of legacy systems: "It's like gluing together different car parts from different manufacturers to make one car. You might get from point A to B, but you're bound to have a lot of issues and high maintenance costs." In other words, piecing together car parts from different manufacturers may get you from point A to B, but problems and high maintenance costs are inevitable.
Legacy platforms (such as Worldpay) are a patchwork of 18 to 20 different systems, built in the 1980s and 1990s when memory, processing power, and bandwidth were extremely expensive, so only the minimum amount of transaction data was transmitted. Today, data is "mission critical" for merchants—used to improve customer experience, enhance loyalty, and reduce fraud rates. Adyen built a single codebase from scratch, directly connecting to card networks and preserving the complete data stream.
Adyen is a "full-stack acquirer"—it has obtained local acquiring licenses in multiple countries globally and holds banking licenses in the EU and the US. This means:
In contrast, Stripe still relies on Wells Fargo and PNC as acquiring partners in the US and has not pursued the route of obtaining local acquiring licenses and banking licenses.
Willar emphasizes that Adyen's culture (which they call the "Adyen Formula") is its most significant competitive advantage, and the single platform is merely a "first derivative" of that culture. Specific manifestations include:
Michael Willar points out that Adyen's high margin stems from the structural characteristic that "80% of growth comes from existing merchants," enabling it to support massive transaction volumes with a minimal workforce.
| Metric | Adyen | Peer Comparison |
|---|---|---|
| Full-time Employees | ~2,200 | Worldline ~10x; Worldpay ~8,000-8,500; Stripe >6,000 |
| EBITDA Margin | 64% | Top 5% globally, just a few percentage points below Visa |
| Operating Expenses as % of Net Revenue | ~41% | Many high-growth payment/software companies >100% |
| Free Cash Flow Conversion Rate | 90% | — |
| Margin Improvement (4 Years) | +20 ppts | — |
Adyen's net revenue model:
80% of growth comes from existing merchants — including the merchants' own organic growth plus Adyen gaining more wallet share. This means no large sales team is required. CFO Ingo Uytdehaage repeatedly emphasizes: "I don't manage the business for take rates; I manage it for TPV and net revenue growth."
Willar believes Adyen's EBITDA margin "could be north of 70% in a few years," as operating leverage continues to be released.
Michael Willar believes Adyen has three key growth engines for the next 5-10 years, with omni-channel solutions being the most differentiated moat.
Adyen has transformed traditional POS terminals into smart devices, enabling merchants to sell across channels on a single platform:
The pandemic accelerated the blurring of channel boundaries, and Adyen's omni-channel solution became the decisive factor in winning RFPs from major clients such as Dick's, Subway, McDonald's, and Columbia Sportswear. Currently, offline accounts for approximately 14% of TPV, with growth exceeding 100%.
The US market was not easy for Adyen initially — early on, it mainly processed transactions for the international operations of US companies like Uber, without tapping into their domestic volumes. After personnel changes (with product background Brian Damier taking charge of US operations), the US business share rose from less than 10% in 2017 to 24% today.
Launched in 2019, the issuing product targets marketplace platforms and OTAs (online travel agencies), addressing the need to "pay sellers faster." Just Eat Takeaway and Visma are early clients. Willar believes the revenue impact will remain in the single-digit percentage range over the next 4-5 years, but it can serve as a further retention mechanism.
Michael Willar's core thesis: The payments industry will not see a single winner-take-all outcome because (1) a large number of domestically oriented small and medium-sized merchants will always choose the lowest-cost traditional providers; (2) merchants typically avoid using only one processor as a risk hedge.
| Dimension | Data |
|---|---|
| Global C2B digital payment volume | ~$38-40 trillion |
| Digital payment penetration (non-cash) | Currently ~60%, likely to rise to ~70% within 8 years |
| Adyen's global market share | <2% (overall); low double digits online |
| Legacy processors still account for global volume | ~70% (Top 3 in the US: JP Morgan Payment Tech ~$1.5T, FIS/Worldpay, Fiserv/First Data) |
| Adyen merchant churn rate | Historically <1% |
Willar uses Worldpay as an example: It invested £600-700 million from 2010 to 2015 to build a new platform, to no avail; it was later acquired twice. JP Morgan also poured substantial capital into the effort for years without making meaningful progress. Even if legacy players could develop a new platform, merchants would still need to re-integrate — at which point they might as well integrate directly with a modern provider like Adyen.
| Dimension | Adyen | Stripe |
|---|---|---|
| Target customers | Large enterprises (global from day one) | Startups/SMEs (Y Combinator roots, from day one) |
| Architecture | Full-stack acquirer with own banking license | Initially built on legacy infrastructure; still acquires through Wells Fargo/PNC in the US |
| Pricing | Enterprise-level (lower rates due to high volume) | Higher pricing for SMEs |
| Product scope | Payment purist, focused on solving the most complex problems | Beyond payments: Stripe Atlas, Stripe Press, etc. |
| Omnichannel capability | 10 years of accumulation, a differentiated advantage | Under construction |
| Data and authorization rates | Proprietary pipeline, higher authorization rates | Relies on partners, limited data |
Willar uses the "Messi vs. Ronaldo" analogy: Both coexist in the same era and push each other forward — Stripe Connect prompted Adyen to launch "Adyen for Platforms"; Stripe began building omnichannel capabilities due to Adyen's success in that area. But the key point is: 70% of volume remains with legacy systems. If that ratio flips to 30% legacy and 70% next-gen, competition among next-gen players becomes mathematically less significant.
Willar highlights the key metric investors should monitor: volume churn, historically <1%. If it starts to rise, the reasons must be investigated. Other risks: loss of key employees due to higher compensation (Adyen's capped compensation culture may erode); sufficient capital inflows compressing margins through competition.
| Position | Guest Stance | Key Data |
|---|---|---|
| Adyen | Bullish | TPV €516 billion (2021); Net revenue >€1 billion; 64% EBITDA margin; ~2,200 employees; 80% growth from existing merchants; Historical churn rate <1% |
| Stripe | Neutral (not a direct competitor) | >6,000 employees; Enterprise segment is the fastest-growing; Still acquiring via Wells Fargo/PNC; Has switched from First Data to direct card network connections |
| Worldpay (FIS) | Legacy system, losing share | ~8,000-8,500 employees; Patchwork of 18-20 platforms; Invested £600-700 million in a new platform from 2010-2015 without success |
| First Data (Fiserv) | Legacy system | One of the top three U.S. acquirers |
| JP Morgan Payment Tech | Legacy system | Largest U.S. acquirer, ~$1.5T in processing volume; Invested heavily in a new platform without success |
| Checkout.com | Competitive watch | Has raised significant capital; Mainly copies Adyen, but has not replicated the omnichannel solution |
| Silverflow | Not explicitly stated (startup) | Founded by former Adyen employees |
| Worldline | Legacy system | Employee count roughly 10x that of Adyen |
| eBay | Case study (switched to Adyen) | Abandoned PayPal in 2018, exclusively using Adyen |
| Spotify | Case study | Previously processed 74% of revenue through Adyen |
| Nike | Case study | Won the business in 2014/15: Adyen assigned developers to build a custom offline solution with Nike |
| Groupon | Case study (key turning point) | Won in 2009, put Adyen "on the map" |
| Microsoft | Client | — |
| McDonald's | Client | Omnichannel solution was the deciding factor in the RFP |
| Uber | Client | Handled European transactions for Uber in the early days |
1. "Payments is not a winner-takes-all market" — Michael Willar
Rationale: Domestic-oriented small and medium merchants will always choose the lowest-cost traditional providers; merchants typically use more than one processor for risk hedging (usually 75-80% to the primary processor, with the remainder as backup). Even if Adyen succeeds, it is unlikely to exceed 50-60% of the addressable market share.
2. "Adyen's culture is its most significant competitive advantage; the single platform is merely the first derivative of that culture" — Michael Willar
Rationale: The Adyen Formula drives a one-week release cycle (industry norm is 3-6 months), decentralized decision-making, zero M&A, a 1/171 acceptance rate, and a CEO salary of only €600,000. This culture has enabled Adyen to maintain architectural consistency over 16 years, which is the hardest thing for competitors to replicate.
3. "Legacy systems are like assembling a car from parts made by different manufacturers — it runs, but problems keep cropping up" — Michael Willar (citing Silverflow's analogy)
Rationale: Worldpay is a patchwork of 18-20 platforms, built in the 1980s and 1990s when data was expensive, so only minimal data was transmitted; today, data is mission-critical for merchants. Adyen built a single codebase from scratch, preserving the complete data flow.
4. "70% of volume is still in the hands of legacy systems. If that ratio flips to 30% legacy and 70% next-generation, competition among next-generation players becomes mathematically less important" — Michael Willar
Rationale: The top three legacy acquirers in the US (JP Morgan, FIS, Fiserv) still process nearly $4T; Adyen's overall share is <2%. The possibility of a landscape shift over the next 5-10 years makes direct competition between Stripe and Adyen relatively secondary.
5. "Adyen can simultaneously achieve 40%+ growth and a 64% EBITDA margin because 80% of its growth comes from existing merchants" — Michael Willar
Rationale: It does not require heavy sales and marketing investment; ~2,200 employees support over €500 billion in TPV; operating expenses account for only 41% of net revenue (many high-growth companies exceed 100%); margins have improved by 20 percentage points over 4 years.
6. "Adyen's CEO Peter van der Duis is a 'round two founder' — he helped create the legacy processor Worldpay, then built the company that eats Worldpay's lunch" — Michael Willar
Rationale: Adyen means "to start over" in Surinamese; the founding team came from Bibbit, which they previously founded and sold (later becoming part of Worldpay); Peter knows the vulnerabilities of legacy systems better than anyone.
7. "The falsification signal for Adyen is volume churn — if it starts to rise, the reasons need to be investigated" — Michael Willar
Rationale: Historical churn rate is <1%; other risks include key employees leaving for higher compensation (Adyen's capped compensation culture may erode), and sufficient capital inflows compressing margins through competition.
8. "Adyen and Stripe are like Messi and Ronaldo — coexisting in the same era and pushing each other forward" — Michael Willar
Rationale: Stripe Connect prompted Adyen to launch Adyen for Platforms; Stripe began building omnichannel capabilities because of Adyen's success in that area. Both have become better because of the other.