As Adyen enters the increasingly competitive arena for offering bank accounts and working capital to North American businesses, it's avoiding going head-to-head with Square and other formidable competitors with user-facing platforms.
The Amsterdam-based fintech instead plans to initially offer its embedded financial services only on a white-label basis through third parties, which provide their own software and other marketing services to entrepreneurs. Adyen would not have its own direct interface to end users.
"Every small-business category — from barber shops to golf courses — has two or three key providers who offer industry-specific software and tools, and those are the agents who will deliver our embedded financial services including bank accounts and working capital," said Brian Dammeir, Adyen's president for North America.
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One example is Modernizing Medicine Retail Solutions' ModMed Pay, a customized software platform created by physicians to collect payments for specialty medical treatments via text, online, patient portals, kiosks, payment plans and autopay.
The Boca Raton, Florida-based firm has offered customers Adyen's payment-processing services for two years, and it has added the capability to extend loans and business accounts to medical-practice managers through its platform.
Using data gathered from processing payments for ModMed Pay users, Adyen will operate in the background as the white-label provider of loans which Adyen will underwrite and hold, sharing revenue with Modern Medicine, Dammeir said.
Adyen has entered arrangements with a handful of other platforms as it ramps up its new lending services in the U.S., U.K. and Europe. Another U.S. customer is Zenoti, a Bellevue, Washington-based provider of cloud-based spa-management software for bookings, business management, marketing and accepting payments via mobile devices within spa treatment rooms.
Adyen also works with Tessitura Network, a Dallas-based platform provider for museums and arts organizations. The software supports ticket sales, admissions, membership and marketing.
The three financial services areas where Adyen hopes to build volume through these platforms include cash advances for businesses, bank accounts for managing cash flow, and card issuing to expand payment options, Dammeir said.
The small-business market is highly competitive but ripe for growth, with less than 5% of small businesses currently accessing financial services through marketplaces and platforms, according to research Adyen conducted earlier this year with Boston Consulting.
Adyen's legacy as a business-to-business company suits its approach to embedded finance, said Marco Salazar, director of payments at Javelin.
"Adyen, being European, decided to focus on B2B offerings which put it more in line to compete with Stripe and traditional payments technology providers like FIS and Fiserv," Salazar said.
For Adyen, scaling its financial services through specific industries also streamlines the complexity of change for small businesses facing an increasingly digital ecosystem, according to Dammeir.
"Newer and older businesses are grappling with the need to make all their payment and financial systems channel-agnostic, and our APIs create a path to a fully digital operation, whether the company is currently running payments from mobile devices, a desktop or traditional brick-and-mortar checkout," he said.
These capabilities helped Adyen drive more than 300% growth globally within the small-business sector during the first half of 2022 compared with the same period a year earlier, the company said.
Marketing embedded finance solutions through third parties is not without challenges, and the market is becoming more competitive, Javelin's Salazar noted.
"Tackling the SMB sector (directly) poses challenges Adyen is still not prepared for on their own, and because of that it's much easier for Adyen to provide back-end capabilities to their partners within specific verticals. This could allow Adyen to eventually decide if they want to go direct to merchants within the SMB space," he said.
