Adyen announced a seemingly traditional payments product during its first half earnings report, and the move could increase pressure on banks to enhance their own transaction processing.
The Amsterdam-based fintech on Thursday gave details for a pair of point-of-sale hardware products. The move comes just a few weeks after Adyen signed on as an early adopter of
"It positions us to offer unified commerce, both in-store and online," said Ingo Uytdehaage, head of finance for Adyen, in an interview following the company's earnings report on Thursday. "It's part of our strategy to have terminals for each use case."
Adyen's NYC1 terminal allows businesses to offer a customizable payment flow in their own point-of-sale app and is targeted at businesses that have already invested in smartphones or tablets to run operations. NYC1, which is designed for smaller businesses, has launched in North America and will launch in other markets later this year. Another terminal aimed at larger merchants, AMS1, which will be available in Europe and North American later this year, supports payment acceptance, cash management, inventory and other business functions through the same hardware.
"We wanted to be able to support a store clerk's ability to meet customers away from their desk, while helping with certain other customer journeys that are tied to the point of sale," said Ethan Tandowsky, head of group financing for Adyen, during the earnings call.
Adyen designed the terminals, which are being manufactured by Castles and Datex. Adyen did not disclose what is charging for the hardware.
The payment processor is an early user of Apple's smartphone payments capability, which provides a DIY option for retail workers, but doesn't necessarily cover all merchants in all use cases.
"Adyen is now graduating from e-commerce to the larger market for payment and enterprise resource planning services," said Richrd Crone, a payments consultant and retail market researcher.
There are a couple of trends Adyen can address by combining its digital expertise with point-of-sale hardware.
As order-ahead and contactless payments combined in a single platform expanded during the pandemic and beyond,
Despite the fast expansion of e-commerce and contactless payments, point-of-sale terminals are still vital. Global terminal sales totaled $73 billion in 2020 and are on pace to reach $117 billion by 2026, a compound annual growth rate of 8.3%, according to
"Hardware support buys time until autonomous checkout takes hold and eliminates checkout altogether," Crone said, adding restaurant digital technology provider Toast's recent
Apple's Tap to Pay, which turns iPhones into contactless card readers, is not a one-size-fits-all approach to payments, according to Adyen.
"Contactless developments with Apple are promising, but there are still some payment gaps in the market," Adyen's Uytehaage said, adding the combination of Tap to Pay and point-of-sale hardware would position Adyen to expand its financial services relationships with merchants.
"We believe that small to mid-sized businesses are underserved by traditional financial institutions, so we see this as an opportunity to provide other financial products, such as merchant capital," Uytdehaage said.
Apple's Tap to Pay does not include payment processing for now, so the technology giant is working with partners, including Stripe and Adyen.
"Adding Apple Tap to Pay to mobile banking apps would allow banks to recapture payment services to small businesses, micromerchants and sole proprietorships," Crone said, noting only JPMorgan Chase is listed in Apple's
FIS and Fiserv are listed as future users, and their support would open the technology to thousands of potential banks. "This is especially important for community banks and credit unions which don't typically offer merchant acquiring processing," Crone said.
For the first half of 2022, Adyen reported earnings of about $370 million, up from about $290 million in the first half of 2021. Analysts had projected about $388 million. Transaction volume was about $348 billion, up from about $208 billion the prior year. The European Commission and the U.K. allow companies to report earnings on a half-year basis to encourage executives to focus on longer-term goals, though some EU companies still report quarterly earnings. The U.S. requires quarterly reports.
The earnings miss, which caused Adyen's stock price to dip more than 10% on Thursday, was partly due to overhead costs associated with managing the surge in payments volume and a boost in the expense as the company's staff resumed business travel, Adyen reported. Adyen's headcount also grew by about 400 people and overall wage expenses increased to about $138 million, up from about $100 million in the first half of 2021.
About half of the new staff members are focused on developing new payment technology, and Adyen said it expected to add more staff in the future.
"It may take a couple of years before we see this investment in new staff [fully pay off]," Uytdehaage said. "It's a long-term focus."
