It is really not a great time to be a bank, says Pieter van der Does, co-founder, CEO and president of Amsterdam-based payments company Adyen, at least not in the payments space.
“They do not have access to the best developers and all the pressure that is put on the bank means that they cannot get into the rapid development that the industry needs,” he says. “Merchants are asking for support for new payment methods which have new fraud patterns. Banks are not well set up for that.”
As a result, he says, “the likelihood that in the long run the banks will be an important part of this market is slim.”
Neglecting payments, says van der Does, a speaker at Dublin’s Web Summit, proved to be a strategic mistake. “Payments are very often the starting point of a relationship [with a merchant]. It is not very good for banks to lose that point of contact. How do you get your customers back?”
Valued At €2 Billion
Payments has turned out to be a very lucrative business. The company van der Does co-founded in 2006 is now worth €2 billion, and, he says, is set to make about €40 million profit this year.
Adyen has also caught the eye of Silicon Valley’s Iconiq Capital, a cross between a family office and venture fund that counts billionaires like Mark Zuckerberg and Jack Dorsey as clients. Adyen recently announced C round for an undisclosed amount from Iconiq, hot on the heels of its December 2014 $250 million B round, led by New York-based General Atlantic. Singapore sovereign wealth fund Temasek took part, as did existing investors Felicis Ventures and Index Ventures.
It all started back in 2006 because van der Does was bored. A decade earlier, after graduating with a degree in economics, van der Does toyed briefly with a career in banking, signing up to the executive program for Dutch bank ING. It didn’t last. He quit international finance to join Dutch academic publishers Elsevier in 1996 after only a few months at ING.
“Publishing was heavily under threat by the Internet,” he says. “That felt to be more interesting.”
But it wasn’t. Although he had postings in Oxford and New York with Elsevier, it wasn’t long before he was chafing at the bit yet again. Publishing was all a bit too staid.
“What I found difficult was the different speed of life,” he says. “If you compare it to the Silicon Valley life where they play hard work hard, scientific publishing is much more relaxed. I was jealous — I envied my friends who were working late and eating pizza in the office.”
So he quit, again, but this time to found a start-up, Bibit, a payments company. Finally, van der Does says, he had found the adrenaline rush he was seeking.
“It felt like an adventure. The team we had were people that I liked working with. It is nice to have a team of people around you that you feel you can learn from.”
The company was a success, so much so that in 2004 Bibit was snapped up by the then highly-expansionist Royal Bank of Scotland. After working his lock-in period and taking the almost-compulsory sabbatical, in 2006 van der Does was back looking for his next start-up.
Born in Amstelveen, Netherlands.
Went to the U.S. to study at Clark University for a year.
Studied for five years at the University of Amsterdam.
Completed studies in Paris.
Operational manager in the business division of ING Nederland.
Moved to publishing house Elsevier.
Part of founders team of payment company Bibit. The company was bought by Royal Bank of Scotland in 2004.
Adyen announced funding round of $250 million led by General Atlantic.
Adyen announced undisclosed investment from Iconiq, valuing company at €2 billion.
“I wanted another company. If you do it the second time around your drivers are different. You’re not looking for financial security. Your ambitions are other things. You can see how far you can take it this time and not go for an early exit. You really are trying to build the company of your dreams.”
‘We Have A Product That Is Just Plainly Better’
Although the Bibit team kicked other ideas around, they settled on payments. Regulatory changes, which allowed payment companies not only to connect directly to Visa and MasterCard, but also to send payment traffic over the Internet, opened up an opportunity for start-ups. Van der Does and co-founder Arnout Schuijff realized that payments was an area that banks had neglected.
“Traditionally the banks did not really care about payments because you could not make very much money there. Banks always thought it was a commodity. We took a wildly different approach. Rather than trying to do it at the lowest price possible, we thought of it as a value add.
“We could give merchants service levels that they could not get anywhere else. Of course our price is low, but even at the same price [as the banks], we would still have done it. We have a product that is just plainly better. It is better for the merchant and that means more insight, more conversions, more feedback and more data.”
Despite the benefits Adyen had over the traditional banks, it was slow going to build the platform. “Even though we were very experienced it was hard. However, if you do not underestimate something, you do not start. It was only in about 2010 … that we saw significant revenues on the platform.”
‘It Was Scary How Good We Were At Raising Money’
Theirs was not, admits, van der Does, the ideal way to build a company. “It is not advisable. It would be easier if you could find a large company and say, ‘why don’t I build a platform for you that you really need. I can develop it and get all your merchants on it.’ That will be a much easier start. But we were lucky, we could afford not to start that way.”
Fortunately, “we were extremely good at raising money because we had had a successful company before,” he says. “It was scary how good we were at raising money.”
Adyen now handles close to 190 currencies and serves some 3,500 businesses around the world.
Looking forward, van der Does is very bullish and doesn’t see much need to work with the banks. They do currently provide the technology for UK-based Barclays Bank’s Smartpay service, but he did the deal in the very early days of Adyen.
“To get that delegated trust early in life was really good for us. We were the supplier behind the bank. That helped us a great deal.” But he says, “It is not the strategic way we want to grow our company. In the longer run, it is better for Adyen to service our merchants directly, to have control over the service levels and also provide first-line customer support and account management.”
Untying Europe’s Financial Tangles
And unlike many European tech CEOs van der Does is not envious of the success of the Valley. In fact, he says, when it comes to international fintech, Europe is well placed to thrive because the Continent’s home markets are so complex.
“If you’re in the U.S. market and setting up an exchange company, that isn’t really going to work in the U.S.,” he says. “It is good to work in Europe.
“If you have a company that does transactions in the UK, Germany, and France you have three vastly different markets which ask for completely different payment methods even though two of them use the same currency.”
Companies such as Estonia’s TransferWise, Sweden’s Klarna and London’s WorldRemit would certainly seem to support his argument. So maybe for once Europe’s jumble of regulation and tangle of legislation is actually an opportunity. It certainly has been for Adyen.