PayPal tries again (and again)
Upcoming posts (in no particular order): Red Violet, IAC, Gartner, Verisk, Visa/Mastercard
MBI and I recorded an episode of Never Sell recently (Big Tech earnings, S&P and Moody’s, AI) (Spotify, YouTube, Apple)
In my last post, I made the case that Adyen wins by doing less:
These do not, on the surface, seem like much of a moat. Stripe, First Data, or any other processor could have made the same architectural and strategic choices early in their lives. I suspect one underappreciated reason they didn’t is that the payments industry is saturated with FOMO. There is always a plausible-sounding urgent narrative for why BNPL or crypto or digital wallets or some other new thing needs to be squeezed into your roadmap now. Whether due to a cautious European temperament or the personality quirks of its founders, Adyen stands apart in its restraint. As competitors acquired targets in a frenzied attempt to keep pace with the latest themes, Adyen dedicated itself to strengthening its two foundational pillars, recognizing that a unified tech stack and vertical integration would remain relevant regardless of what new payment fashions emerged.
But is Adyen’s path better or just different? Because Stripe seems to be kicking ass too with its more sprawling approach. Blockchain, stablecoins, agentic commerce, usage-based billing…Stripe is a leading exponent of most buzzy payments-related themes. It has made more than a dozen acquisitions since inception, covering everything from Nigerian payments to programmable crypto wallets to sales-tax automation. It was among the first PSPs to address marketplaces and software platforms, with Stripe Connect beating Adyen for Platforms to market by 4 years.
Stripe has long thought of itself as more than a payments processor. As early as 2017, it described its mission as “expanding the GDP of the internet”. In that spirit, Stripe offers a service, Atlas, to help founders incorporate their startups. It paid $1.1bn for Bridge – infrastructure for moving money via stablecoins – and this year acquired Metronome to support the usage-based billing needs of AI-first companies. In short, Adyen waits for a commercial need to solidify and gain traction, then offers an architecturally pure product to address it. Stripe, on the other hand, sets the tempo of innovation.
But while Adyen and Stripe differ in how they approach payments, each of their respective strategies is compatible with the clients they serve. As software was eating the word, Stripe won over developers by packaging payments into an easily consumable API and has now become the default PSP for venture-backed startups. Products like Atlas, Bridge, and Metronome would be off-kilter for the established enterprises that Adyen serves, but are purpose-built for innovative startups pioneering the frontier. When asked about stablecoins, Adyen’s management replied that it’s “not at the top of our customers’ priority list, and therefore, we haven’t prioritized it ourselves”. Stripe, meanwhile, is preparing “for a world of massive stablecoin adoption” and imagines a scenario in which a “a Y Combinator founder can now receive funding in stablecoins, hold them in a Stripe financial account, and use them to pay their first engineers, who could be anywhere in the world”.
Stripe’s reach extends beyond product and into the culture of tech itself. The Collison brothers are thought leaders in Silicon Valley, opining on the future of innovation broadly. Patrick built Stripe Press into a small but influential publishing house and helped launch the Progress Studies movement with Tyler Cowen. Both brothers are fixtures on the podcast circuit holding forth on innovation, science funding, and economic growth. One of them hosts a popular tech podcast. Adyen’s co-founders, by contrast, are barely known outside the payments industry.
The vibes at Stripe are incredibly strong. Maybe too strong. While public PSPs have all sold off considerably their 2021 highs – Adyen (~60%-65%), PayPal (~80%-90%), Block (~75%-80%) – Stripe recently surpassed its previous high-water mark. An employee share sale from February implies a valuation of $159bn, up from its prior 2021 peak of $95bn. Stripe processed roughly 20% more payment volume than Adyen last year, yet commands 5x the valuation. It’s growing faster (34% vs. 21%), but also carries more than double the headcount and certainly generates far lower margins once stock-based comp is factored in. No wonder Stripe is staying private. I shudder to think where public investors would value it.