Adyen, the Amsterdam-based payments giant, began offering business checking accounts and small business loans through its own banking license in the United States and Europe – an approach that set it apart from its fintech rivals.
But the strategy will not make Adyen famous in the US Instead, it intends to offer this banking service as a white-label solution for other platforms–the Dutch company will provide the infrastructure in the background, without its brand being visible to them. small business customers of other platforms. Potential customers for such an approach could include platforms like Lightspeed or Shopify, now a big customer of Stripe.
Adyen was founded in 2006 by Pieter Van der Does and Arnout Schuijiff, who both achieved billionaire status in 2018, after Adyen’s initial public offering. Today, despite the fintech stock sale, Van der Does and Schuijiff are still worth $1.7 billion and $2.3 billion, respectively. Adyen’s shares are traded on Euronext and its market capitalization stands at $40 billion, down from a peak of $100 billion in August last year.
In 2021, Adyen processed $516 billion in transactions through customers including Uber
As part of its new product, Adyen will use the data it collects from processing business payments to underwrite short-term loans, which will typically be repaid within 6 months. Since borrowers already use Adyen for payment processing, the company will take a percentage of its customers’ income each month until the loan is repaid.
Adyen’s new service will compete with similar products from Stripe, Block’s Square and PayPal. But the company’s banking license allows it to manage services without going through third-party banking partners, a setup that Adyen says will allow it to issue loans more quickly because it can assess and approve applicants in-house.
“The biggest difference is that we’ve always built it ourselves end-to-end,” said Adyen CEO Pieter Van der Does. “Ultimately, there is competition, but the question is how smooth and 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 began the process of applying for a Federal Foreign Branch license in the United States. Two years later, Adyen received licenses from the Office of the Comptroller of the Currency and the Federal Reserve Board. While the license means Adyen avoids the third-party costs that come from working with banking partners, it may increase spending in other areas such as compliance.
“A lot of (fintechs) think it’s great to be a bank,” said Erin Fonte, banking and fintech regulatory partner at Hunton Andrews Kurth in Austin. “But when you talk to them about what it really means to be a bank 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.”
Additionally, holding loans on its own balance sheet opens Adyen to the risk of default. Stripe and PayPal do not hold banking licenses and offer their accounts and loans through partner banks that own regulatory liabilities and lending risks. Square Financial Services, a wholly owned subsidiary of Blok, offers loans and savings accounts through an industry lending charter, but does not hold loans on its own balance sheet. Square checking accounts are offered through banking partners.