How Adyen's using in-house issuing to counter bank and fintech rivals

Adyen has traditionally focused on streamlining card acceptance, processing and settlement for online payments, and now it wants control more of the merchant relationship by enabling merchants to issue virtual and physical payment cards.

Adyen Issuing, an API-based service the Amsterdam-based payments technology company announced today, will provide merchants with prepaid cards funded by the merchant that can be used by consumers or B2B partners for purchases online, in-app, in digital wallets and in stores.

The move echoes JPMorgan Chase & Co.’s ChaseNet, by combining issuing and acquiring on a unified platform, removing the time and cost involved in transferring funds between third parties including banks or legacy processors.

Pairing card issuance and acquiring allows Adyen to work two distinct angles, and it comes as the major payment acquisitions of 2019 start to develop new scaled bundles of payments and financial service technology.

One of the main goals of Fiserv's $22 billion deal to acquire First Data, FIS' $43 billion Worldpay deal, and the $21.5 billion TSYS/Global Payments deal is to counter the speed of fintechs which can offer streamlined acceptance for online merchants.

The fintechs have also been active, as Square recently sold Caviar to DoorDash as part of a strategy to widen its reach for both consumer and merchant-facing products.

Adyen's plan also counters fintech rivals like Stripe that are starting to issue credit cards, by creating what Adyen positions as a global end-to-end card issuing solution handled completely in-house.

Stripe in 2018 began offering APIs to enable clients to issue physical and virtual credit cards. That allowed Stripe to diversify business against competitors such as PayPal, which is investing about $3 billion annually to acquire technology to broaden its relationships with merchants. Adyen also competes with PayPal, luring eBay's payment processing business in 2018.

By adding virtual cards, Adyen hopes to remove at least one reason for merchants to look elsewhere.

“Merchants will be able to customize and brand cards as they need for a multitude of use cases, and Adyen will continue to stay in the background,” said Kamran Zaki, Adyen’s North American president and COO, via email.

Adyen said it developed the product to serve merchants’ expanding needs and create more secure and streamlined paths for B2B payments, including online travel agencies using virtual cards to make disbursements to airlines and hotels.

Adyen will lean on its European bank license to issue prepaid cards in Europe, and it’s looking for bank partners in other markets, including in North America, Zaki said.

“This is the next logical move for Adyen to compete with the new instant card issuers like Apple Card or the new offering from Google, enabling Adyen to equip merchants with a customizable card they can instantly populate within a wallet,” said Richard Crone, a principal with Crone Consulting LLC.