Adyen: The Growing Importance of a Payments Strategy (Colin Neil, SVP and Paul Simms, VP)
Adyen: The Growing Importance of a Payments Strategy and What Does The Future Hold for Payments? (Colin Neil, SVP and Paul Simms, VP)
In this episode of the Storesome podcast, I’m joined by not one, but two guests from Adyen, the payments platform of choice for many of the world’s leading companies — Colin Neil, SVP of Business Development and Paul Simms, VP of Business Development.
While we covered a lot of ground in this episode, the topic was guided around the growing importance of having a robust payment strategy from a business standpoint, with a view into the future and the trends that are breaking over the payments horizon. As Adyen is one of the biggest payment platforms in the world, their insight is gold for businesses trying to succeed in the online space.
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Graham: So hello and welcome to today’s Storesome podcast, the show focusing on the marketplace platform revolution. I’m your host Graham Broughton, co-founder and Managing Director of Storesome, a SAAS marketplace platform technology part of the We Are Pentagon Group. As many of you know, this season’s focus is on the FinTech world and how they’re operating the marketplace environment.
Today I’m joined by not one, but two guests from the Dutch payments company Adyen, and we have Paul Simms and Collin Neil with us today. Hi guys!
So, Paul is the VP for Adyen for platforms and Colin is SVP for business development. Now, I’ve already had a few conversations with these guys before today’s podcast, and I’m really looking forward to this discussion. So it’d be great to hear from you first Paul, in terms of your background and how you ended up at Adyen.
Paul: I’ve been with Adyen now for five years. The last 12 months I’ve spent focusing entirely on our platform’s offer, which is fantastically exciting. Before Adyen, my background was in fraud prevention. So I had my own business – The 3rd Man – we provided services to a whole stack of digital retailers. So I’ve been payments/fraud for the last 20 years.
Graham: Fantastic. And Colin, how about yourself?
Colin: Yeah. So my background isn’t payments to be fair. So I joined Adyen three years ago, and I currently look after the commercial side of the UK. Prior to that, I’ve always been in retail; the last role I had was the Director of Retail for the Burberry group and that’s where I met the team at Adyen. It must be dating back to around 2014 now, and we implemented Adyen across our global retail and e-commerce estate.
Graham: Awesome, it’s good to hear about your background. So you’ve got years in fraud prevention and years in retail and you can see how the platform revolution is mashing those together at the moment. It’d be good to understand, from possibly you Paul, in terms of the story of Adyen and where it’s come from, where its origins are, what kind of products and services do Adyen offer and where do you sit in terms of best practice and market leading in the sector?
Paul: Well, to answer that last question first, we like to think top, but we don’t want to get complacent.
Graham: Well, the thing about being at the top is there’s always someone chasing you, that’s the thing!
Paul: Yes that’s right. So Adyen was founded in 2006, our services first hit the market in about 2008. And essentially we led the charge in terms of offering a single stack solution. So we would connect to the merchants, we would provide all of what you would regard as the payment gateway services, but then connect on to banks. We’ve now become an acquiring bank ourselves, so we support direct local acquiring as well as gateway in about 15 regions around the world.
On top of that, we add direct connections to about 250 local payment methods. So the full stack solution where we can interface directly with merchants and then provide all of their payment needs, give them a single focus, a single technology stack to integrate with, that’s gone from strength to strength. Geographically, we’ve expanded in new regions, but also been acquiring new customers in our established regions, so we’re particularly strong throughout the whole of Europe. The UK is a really big country for us, the US is becoming absolutely enormous and then far East in terms of Singapore, Hong Kong and Australia. So we’ve got a really good offer that is expanding not just as products evolve, but expanding geographically as well, so two growth streams. So yeah, I’m sure people are aware of our results, becoming a really significant player in global acquiring and payment processing. So, yeah. Colin, do you want to add anything to that?
Colin: Yeah, I think the thing that I’ve observed myself that’s becoming really interesting is just how payments are coming more to the forefront in terms of the decision-making processes that businesses make. When they look to grow or they look to simplify the business model or even respond to things like the current pandemic we’ve got with COVID-19, I think payments just play an evergreen role in people’s decision-making processes.
I guess we’d like to think in part, some of that is to do with the way that we set out deliberately to disrupt the role that payments played for organizations and how we could kind of use payments as one vehicle or one tool in a business’ armoury to kind of go off and take market and simplifying growth. So no, I agree with everything you said, Paul.
Paul: And it’s probably just worth adding, Graham, that Adyen differs from the traditional payment processor/acquirer in so much as we don’t see ourselves as a bank, we see ourselves as a technology provider. And that’s a key differentiator. So we’re using technology to actually leverage improved customer journeys.
Graham: So I really appreciate the background of Adyen there. Is that your main USP, because you’re coming at a slightly different angle? So your technology stack, the kind of the functionalities that you offer, whereas if you look at a normal bank, they’re looking at it from how banking works, whereas you’re looking at, as you said, as a technology first business. Is that why you’ve been so successful?
Paul: Yeah, I think that’s one thing. I don’t think nowadays you can’t have one USP, you have to be good at everything. But it’s probably fair to say that historically, payment processing and acquiring suffered from a lack of investment, a lack of technology investment in particular, to actually improve the journey. We still see it today, some journeys are absolutely shocking. On our internal WhatsApp team channel, hardly a day goes past without someone having a really poor shopping experience. And obviously we regard those people as prospective customers.
So yeah, I think it’s multiple USPs. I think the tech is important, but equally it’s the breadth of payments services, the breadth of shopper journeys, different channels. We talk about omni-channel, they’re all important as well. And actually as merchants have expanded geographically as well, they often don’t want different payment partners in different geographies. They more and more want a single global payment partnership.
Colin: And just to add to that, Graham, I think when we talk about banking, what’s really what’s really important to think about is we expand and we grow, but ultimately our primary function here is to be the world’s best at how we process and settle for our end merchants and ultimately their customers. So banking for us is about yes, it should give our end customers more comfort around just how tightly regulated and controlled that we are. But it also allows us to solve problems further down the value chain, so for us it’s not just about how easy it is to integrate to you. It’s not just about how effective your authorization rates are. It’s also about things like how quickly and easily can we settle and how transparent can we be in that settlement process? And what different options do we have to settle to end consumers?
So banking and issuing and acquiring, they’re all part of that single solution. Paul quite rightly says that by bringing all of that together, that single value proposition gives you lots of USPs, but ultimately we come at it from a view that this is really about helping merchants grow. Because to have a transparent model and a simple way of pricing and a simple way of approaching the market that is all around our organic growth and our consumer organic growth, says that what we deliver is we deliver overall growth to the platform as well.
Graham: Understood. So in terms of a large brand or enterprise coming to speak to someone at Adyen, it sounds as though yes, you have the technology, but you’ve also got a phenomenal amount of knowledge there. What’s the normal process? Because we’ll talk a little bit about legislation, PSD 2 and how the market is changing and what rules and regulations are in place. A large brand or retailer reaching out to Adyen right now, what does the normal process look like? Is it very consultative? Is it that we have a technology and this is the menu that we will work through? Do you have clients who already know what they want?
Colin: Internally, I guess the most important thing we recognize is that payments are fundamentally important to a business, but we’re one piece of a complicated technical infrastructure for any retailer. So fundamentally, that means that the decision to change payment providers is quite a big decision, there’s quite an overhaul of their systems. Yes, we can make it easier, but the net of all that is somebody doesn’t wake up one morning and just decide to change payments. As good as we like to think we are, with all of the different USPs that we have, for any payment provider, there’s got to be an acknowledgement there that there’s got to be a reason for somebody to want to have that conversation with you in the first place.
You’ve touched on that there can be legal requirements; there can be changes in directives etc. But the conversation always needs to really start from the merchant themselves. So why is it they want to change? What is it they’re looking that they want to achieve? And then it’s about how that conversation progresses and how you do consultant and talk and listen. There isn’t one suite, it’s wrong to say that there is. What there is, is the capability for us to listen, to understand the direction they want to take. Maybe that’s a retailer wanting to go into a new country, maybe that’s a retailer wanting to respond to things like PSD 2. Maybe they want to explore different channels; maybe they’ve got a burning issue.
COVID 19 is a really good example where lots of retailers were caught. They were caught because maybe they weren’t quite ready to do something. Maybe something was on their roadmap, but it was further down the roadmap, and all of a sudden it comes to the top and they realize that their incumbent provider can’t do something with regard to payments.
So fundamentally for us, it’s about listening and making sure we really understand what the merchant wants and what is it that’s bringing them to market. And Paul, I don’t know if you’ve got anything to add?
Paul: Yeah, it’s a really interesting one because we will get approached by enterprise retailers who may have a very clear view on what they want, and we then have to – very politely – go through a process to perhaps suggest that what they want is not the optimum, in our view. So we do set ourselves as consultative as well. And, you know, looking at a project from the art of the possible and also, one of the big difficulties is the legacy technology that retailers often have to contend with.
They’re not able to do a lot of the things they would like to do. So we’ve done a lot of work with our technology partnerships and platform partnerships to actually make some of these things possible. And so we always like to take the view with the retailer of what customer journeys do they want to support in an optimal fashion? What is their end goal? They may not be able to get there day one, but they can certainly get that with a bit of thought and planning.
Colin: I think there’s a really good example, as well. I think one of the things that’s really interesting, which Paul talks there about, is us being very straight. Internally at Adyen, we really do pride ourselves on what we call the Adyen formula. And the Adyen formula is all about how we behave as a culture, how we behave as a business. That formula is really important to us because it ensures the integrity of our business, it underpins the way that we behave as an organization and it also underpins the way that we think we should approach opportunities or prospects and merchants.
So, Paul quite rightly said, we have to be true to ourselves and quite often we will talk to merchants and say “your thinking is wrong, we don’t actually agree with the way that you’re approaching something.” And now that ultimately can mean that actually, that prospect chooses not to work with ourselves. We hope not, but there’s lots of really good recent examples of that. I think one that really illustrates the point is in the UK there’s never really been a challenge to the card network for quite a while. And the thing that we see starting to come to the fore a little is the opportunity for open banking. And I think what happens is a lot of providers and a lot of customers latch on to open banking as being a really solid, viable alternative to traditional card schemes and card payments that you see.
I think longer term it will be, but I think quite often, it’s a really important conversation to be upfront with merchants to say that it’s an evolving, new to market product. Yes, it was driven on the back of PSD 2. Yes, it will take traction, but it’s not just there yet and it’s not quite the consumer experience that you want it to be. I think the difficulty is that sometimes you face challenges where maybe that’s not the way that it’s been brought to market by other providers, or it’s not the way that it’s been talked about. So really, I guess Paul’s point is that quite often, a lot of the conversation with merchants is about moving thought processes, changing the way that the consumer thinks.
I think Paul makes a really good point that actually a lot of what is happening is the payment space is still an evolution, it’s still developing and it will continue to develop. And elements of it will develop at a faster pace than other things. So the key really is about making sure that actually what you get is a partnership. You get a partnership as technology evolves and it is ready and it comes to market, that you’re always on the leading edge of that technology that just gives you that ability to be agile, and not have to reintegrate and not have to change the way that you work. It’s just about moving as the technology moves itself. That’s the way that we try to move and engage consumers in the conversation.
Graham: So we touched on COVID-19 digital adoption, we’ve already spoken about this, there’s a lot in the press, there’s a lot out there in terms of content about this digital acceleration and adoption in the past six months. In the second lock down at the moment, we’re seeing marketplace sales absolutely exploding because everyone’s rushing for Christmas. What’s your perspective on what’s happened in the market this year, in terms of the last six months then also what does the next six months look like? You talk about people with legacy systems, it sounds as though you’ve got a very agile, functional-driven solution there. What should you see? What have you seen in the past six months, and what do you see in the next six months in terms of people engaging with you guys?
Paul: To begin with, one thing we have to call out straight away is the change in behaviour in food and beverage: in pubs, in restaurants, looking at the order apps with the huge number and variety of order apps that are springing up. I know a lot of these businesses – we’ve been working with some – have been established for three, four, five, six years or more, looking to deliver a different consumer shopper experience within a restaurant environment.
So that’s been a really big growth area potentially, and maybe that will change behaviour going forward. So that’s one. I think a lot of merchants have also taken the opportunity that COVID has presented – it’s been a disaster for most of them – but a lot of them have taken the opportunity to review what they’re doing strategically to make sure they’re in a position to support all of the sales channels that they need to. Click and collect has been a great success for some over the last five or six years, and that’s really important. We can’t ignore the dominance that Amazon is enjoying over the last six months, I think their results speak for themselves. And a lot of merchants have the opportunity to actually enjoy that growth, you were saying Graham, the shift in e-commerce transactions has been marked. Marketplaces are a great opportunity for brands to sell their products through different channels; they’re a great opportunity for merchants to market products in a different way. I think that perhaps COVID has helped accelerate the thought process in how we actually address shoppers’ needs.
Colin: Yeah, I think Paul’s right, Graham. I think my take away in all of this is that, what COVID I think didn’t do, is it didn’t come out and say we’ve got this all wrong, or the way that we interact with consumers is wrong. I actually think what it did is, it changed the focus for businesses; it moved priorities up the table, if you will. So I don’t think there were a lot of things that came on the back of this that actually we weren’t expecting these things to happen. You know, that there was no demand for it. We’ve talked for an awful long time about how it’s really important for us, and I guess our merchants, to have agile technology to be able to unify the channels so that they can pivot more readily when certain things arise.
I think what we’ve generally seen is that merchants (depending on where they were in that process) have been able to respond faster than others. So for example, we have many merchants who suffered at the effective store closure, but only to the degree that they had to move everything to deliver from store to store. Whereas we’ve seen others that weren’t quite as well developed in the process and actually what they’re now doing is moving things up the table so that they can utilize inventory and retail sitting on the back of a single payment platform.
And what I’m definitely not doing here, is over-egging the importance of the payment platform. There are many other things that those merchants have had to do to make that work, but we know that payment plays a part. So I don’t think it’s necessarily changed plans. What I think it’s done quite readily, is it’s accelerated those plans and a lot of those plans have continued down that track of it’s important that what you do is you unify your offering. How do you become more mobile? How do you utilize customer devices in order to allow the customers to pay on their own device? So I think it gets really interesting to watch how the retailer curates their own customer journey in their own retail store in such a way.
For us it’s always exciting to watch and see the rise of kiosk, Android devices, there are all kinds of things that are emerging in the market. And yes, they’re underpinned on the payment platform, but how they actually cue it into a customer journey is quite exciting to watch.
Graham: That’s a really nice overview. And again, in terms of experience, I keep myself on the pulse in terms of what’s happening not just on the payment side of it, but the logistics and operations side of it. So earlier this year there was a documentary about how a leading supermarket was trying to force adoption of their app, where you would walk around the store, you’d scan the barcodes of those products and then you’d pay on checkout.
So at the start of the year, so January/February, the adoption for that application was non-existent. People would prefer to stand in a line and actually just check out as normal. There was a supermarket store in Holborn, which is one of the busiest ones in London and the adoption was just not there. You flip that now when you can’t go into a supermarket without people saying would you like to have contactless payment? Would you like to be using your own Android phone or your Apple phone to go and then scan and pay? So that adoption has been, well we talk about acceleration, but it’s here to stay.
Similarly with logistics in terms of bricks and mortar as well, utilizing the stock and inventory from people’s actual physical stores, at the moment we’re currently in complete lockdown. So if you’re a retailer selling non-essential items, then your stock is potentially just stuck in there. Where actually what people are looking at doing now, is enabling that through operational logistics. So PSPs and the facilities that you operate, is enablement part of that? And we’ve seen that shift already.
So in terms of bricks and mortar and bricks and mortar commerce, obviously you deal with a large proportion of those retailers. How have you seen that? Have you seen a change in their forethoughts in terms of what to do and how to operate, during what’s happened? Are they really engaging more in this, or are they in kind of a fight or flight mode at the moment?
Paul: Yeah, so I think Colin’s got it. I think they’re not necessarily coming up with new projects to address this, they’re perhaps taking a view of let’s accelerate. With bricks and mortar, most merchants had an e-commerce offering and the click and collect offering. So with the stores being shut, the shopper has different options to transact. The big one for me, again, is hospitality. It’s really, really taking a big hit. And hospitality companies had to actually adapt or go out of business. And sadly, some of them have gone out of business. Others, we hope, desperately hold on, both from a perspective of them being customers and also me being a user, it’s a massive, massive industry.
Some of the sorts of developments we’ve seen from the pay at table where six months ago, you went in, you had to put a website address or download an app into your phone, wait for that to load, then if you could get a signal, you could perhaps use that. We’ve now got visibility of providers who are using QR codes to identify your table. It will then automatically download a menu. There are others that use table tappers, a network device that you tap your phone on and it would download the menu. It recognizes which table you’re at; there are others where the app will dynamically change to the brand of the restaurant you’re in, this sort of stuff.
When we get out of lockdown and it is adopted by the wider retail sector, I think it will be fantastic for more self-service commerce where you transact and then pay on your own device. I think that could be a real, big leap forward and something hopefully good to come out of the pandemic.
Graham: Yeah, I’d agree with that, Paul. So we’ve talked a lot about what you’re enabling, what the background of Adyen is. It’d be good to talk a little bit about the PSD 2, and any kind of legislation and regulations that are in place. So, first of all Paul, could you just give us a very high level (for people who don’t know what PSD 2 is) to give us a bit of an explanation about it?
Paul: Yeah. So it’s the second payment directive from the European Union. It’s really designed to open up a number of things; opportunities for more visibility and making consumer banks open up APIs to enable payments and visibility of cash balances with permission. But specifically in the payments environment, there are two things that are absolutely key.
One is the requirement for cardholder authentication. So that is mandated. Yes, there are a few exceptions, but the essence is that every merchant has to expect to have to authenticate every single digital transaction. And so the technology to do that has improved remarkably. So that’s one area and obviously that’s all supported. The other thing specifically on marketplaces is to ensure much greater visibility of who the shopper is transacting with. So in a marketplace environment, essentially there are two types of marketplace. There’ll be a marketplace that provides a portal for a retailer to sell something to a shopper. So that retailer is selling something to the shopper and using the marketplace effectively to facilitate that. That’s one model.
The other model is where you’re buying a product from the marketplace, but the product is being provided to the marketplace by a third party. An example of that would be something like eBay. You’re paying eBay for that, eBay is managing the supply of that product through their sellers. So there needs to be a lot more transparency and with the marketplace, the PSD 2 requires that to be transparent, but also the flow of funds to match that commercial relationship. So if I’m buying from a brand that is being facilitated to me via a marketplace, then those funds are owned by that brand.
And although the marketplace can be in control of the flow of funds, they can’t be in control of the funds. So that’s an important service that companies like us give marketplaces control over the funds, visibility over the payment flow, but no requirement for a license and that’s really key. So some traditional marketplaces will either evolve their offering, or they will be required to have financial or payments licenses.
Graham: Excellent. Yeah I think that was great. And in terms of what Adyen provides them, do you offer a turnkey solution for all of those components?
Paul: Yes, we do. Yeah, so it’s turnkey. So we’re not only a payments institute, we’re actually a registered bank in the whole of Europe. So that gives us the license to actually manage the financial flow. And obviously with our payments and acquiring services, we can manage the payment flow so we can offer complete flexibility for marketplaces to offer the entire Adyen payment suite to their merchants to sell their products with, but then on the back of that, we offer complete control using the technology that we’ve created to support the banking function, to enable the pay-outs to those merchants directly without the marketplace actually being in control of the funds.
So it’s not a big deal, it’s a regulatory requirement and so it’s good from a whole pile of perspectives. And most importantly, the shoppers’ perspective of transparency, who are they transacting with?
Graham: Yes. One hundred percent. So I think we’ve kind of touched on the legislation piece and how you guys kind of facilitate and enable that, what’s your view on the current state of marketplaces and what the opportunities represent? So we know that over 50% of all online transactions happen on a marketplace. I think traditionally people don’t understand or classify marketplaces and platforms as the same thing. So we talked about things like eBay and Amazon, but Just Eat or Uber Eats the transactional processes that happen through those are technically marketplace or platform driven. What do you think about the opportunities in the future? What’s your take on where they’re going and what’s happening with marketplaces? Do you think it’s still going to be driving or do you think we’re kind of plateauing at the moment in terms of the opportunities there?
Paul: No, I think it’s growing exponentially. I think that it’s a huge opportunity for retailers to remodel how they actually approach the digital commerce area. And you know, is it a marketplace? Is it a platform? You know, we had quite a lot of thought about this. Some merchants don’t like their site being referred to as a marketplace. It’s a commerce site; it’s a digital shop for want of a better description. But hence we call it platforms now, and marketplaces are platforms as are some software providers, they’re platforms. So we’re seeing huge demand for software platforms that provide software services to a growing number of others who have a need to take payment.
So that could be someone providing tools, software, car parts selection, hairdressing bookings, beauty salon bookings, veterinary appointments. The variety is absolutely enormous, and almost a day doesn’t go past without me being surprised at the innovation that is actually happening in this area. I’m sure a lot of companies – a lot of software platforms – might want to leverage their position to add an earnings stream. But if they’re offering a net benefit, then that’s got to be good for the end merchant and the end shopper, as well as good for us. So we’re really keen to support as many and as wide a variety of software platforms as we can, that want to offer payment as part of their overall platform solution.
I think traditionally, one of the big barriers to that has been the perceived difficulty of on boarding. So in order to have a payment relationship with us, we’re required to take that merchant through an onboarding flow. But particularly in the pandemic, it necessitated us really streamlining the on boarding process, automating huge swathes of what was historically quite a difficult process to go through, and now it’s a pretty simple matter. We have one option that we can offer where a marketplace or a platform can actually apply for accounts for their submergence as we call them, who can be live and transacting immediately, so that’s a real bit of progress.
Graham: Great. Thank you Colin and Paul so much for your time. It just leaves me to kind of wrap up the podcast session. So it was great to hear more about Adyen and its background, some of the services and solutions that it’s offering, to hear from Paul and Colin in terms of what they’re currently seeing as part of the digital transformation that’s been accelerated over the past six months and what the future looks like. Understanding and learning more about the PSD 2, the regulations and legislations that are happening with marketplaces and how the Adyen solution combats that. And really gauging an insight into some of the clients and the retailers and the areas in terms of hospitality that Paul spoke about, how they’re having to digitally embrace digitalization a lot quicker.
So thank you so much Paul, for your time. Thank you so much for your time as well, Colin. It has been great for our listeners to hear about Adyen in further detail. And all it leads me to say is Paul, what’s the best way for a customer or a potential client to find out more about Adyen? Is it just to go straight to your website?
Paul: Yeah, the website’s good; they can contact you. I’m sure that Graham, you’ll pass on our details. Go to our website, contact us, we’re really happy to talk about the art of the possible, what merchants are thinking, what they’d like to do. We didn’t mention it on the podcast, but one of the most important things to us is what do the merchants want? Where are they going? What’s their strategy? It’s a two way street.
Graham: One hundred percent. So it’s bye for now, and if you’d like to get in touch with Adyen, as Paul says, please go directly to their website. They’re more than happy to learn and understand what you’re wanting to go through and discuss that. And if you’d like to learn more about the platform revolution, then please go directly to the Storesome website.
Paul: Thanks Graham!
Graham: Cheers, Paul!
I hope you enjoyed this piece and many thanks to Paul and Colin for contributing their insight.
If you’d like to learn more about Adyen, you can learn more on their website https://www.adyen.com.
If you’d like to learn more about the future of retail marketplaces and trends within the industry, we’d be glad to help you. Get in touch today and book your free 90-minute discovery session.