Before exploring the competitive concerns that have sent shares cratering nearly 60%, it’s worth reflecting on what it is that got people excited about Adyen in the first place.
In a typical online transaction, a shopper’s credit card details are picked up and encrypted by a gateway before being routed to the appropriate merchant acquirer. The merchant acquirer, through a processor, sends that information to Visa, Mastercard, or some other card rail, who sends that information to the card issuing bank, who authorizes the merchant acquirer to accept payment. Merchant acquirers and payment processors are often seen as one in the same but they technically play different roles. Merchant acquirers are financial institutions. As members of card networks like Visa and Mastercard, they ensure the merchants they onboard are legitimate entities that comply with card network and regulatory requirements, bear responsibility for chargebacks and disputes and, assuming the transaction is approved, receive money from card issuing banks. Payment processors are software. They intermediate transaction details between the gateway and the acquiring bank and between the acquiring bank and the card networks.
The confusion between acquirers and processors is understandable as incumbent processors like First Data and Vantiv were owned by banks before being cleaved away as separate entities, creating a daisy chain of interactions where most steps in the payments flow were handled by different entities. A gateway like CyberSource or Braintree was distinct from a merchant acquiring bank like Wells Fargo, Bank of America, or Citigroup, which in turn was separate from a merchant acquirer processor like First Data or Worldpay. The fragmented, arms-length arrangements forced merchants to maintain a host of connections. A large multinational retailer might have relationships with dozens of different merchant acquirers and gateways across the globe.