The institutionalization of digital transformation has shifted merchant priorities
Platforms increasingly omnipresent across regions
Proliferation of new payment methods and tools has led to democratization of access to digital economies
Full-stack volume1 was 81% for the second half and 82% for the full year.
On take rate – in line with previous periods we saw a decline in take rate, now at 18.6 bps for the second half of 2021 and 19.4 bps for the full year. The gradual decline in take rate illustrated below is a natural consequence of our business model and the execution of our strategy of onboarding profitable volume at scale – which has always predominantly come from enterprise merchants. A more minor but still relevant contributor to lower take rates is a rising average transaction value (ATV), as illustrated below. This is a result of an evolution in our merchant mix, and an increased exposure to retail.
1 Full-stack volume is volume for which we are in the money flow, and are therefore paying out to merchants.
Take rate evolution since H2 2020 (bps)
ATV evolution since H2 2020 (in EUR)
EBITDA margin displays an increase in profitability despite continued investment in the business (as illustrated by significant OpEx and CapEx during the period). This trend underscores the operating leverage inherent to our platform. EBITDA margin for the second half came in at 64%, compared to 62% for H2 2020, and 61% for H1 2021.
We have endeavoured in these letters and through other methods of investor outreach to provide you with the necessary context on what we mean when we say that our focus during the pandemic has been, as it was prior to the pandemic, on the day-to-day realities of our merchants around the world. Having shown over the past periods that the business is resilient despite volumes fluctuating between industries due to lockdown restrictions, we want to take the opportunity to deepen the context by providing a regional view of what the pandemic has meant for our merchants’ realities across the globe since its onset in Q1 2020. As much commentary has been provided by us from a global perspective, we’ve asked Adyen’s regional presidents for more granular insight below.
Net revenue per region (in EUR millions). Comparative figures have been updated to reflect the Net Revenue geographical breakdown as disclosed further in note 1.3 Non-IFRS financial measures, in the H2 2021 interim condensed consolidated financial statements.
APAC is perhaps the most fragmented region globally when it comes to market maturity and payment method mix, but we're now seeing signs of convergence through digitalization. This is happening everywhere. Payment cultures are turning digital, allowing us to help our merchants expand across the region quicker than ever before. As this trend has allowed merchants to look beyond their own borders more easily, we’ve become a very logical partner.
On the payment method front, we’ve seen an acceleration in the rise of non-card options. In an environment where online commerce spiked, these payment methods proved to be a good option in getting first-time online buyers and the underbanked online quickly. BNPL (buy now, pay later) options are springing up across the region, and easy-access payment methods are seeing huge local success – like GrabPay and GoPay.
We’re seeing an unprecedented transformation in commerce across the region. This is most apparent in the significant change to what stores and retail interactions look like today. Self-checkout has become ubiquitous and delivery is increasingly a daily interaction. These changes to retail seem permanent. The better shopper experience and the lower operational costs of self-checkout in an era of labor shortage make these very attractive for merchants.
This innovation in the space is not slowing down, and our quick time to market should allow us to be there at the forefront. There is permanence in changes to other industries too. In-app payments in airlines and contactless check-in and check-out processes in hotels. It’s hard to imagine these going away.
Select merchant wins from the region.
Initially, the impact of COVID on merchants was dramatic. However, it has since proven to be a chance for businesses to build more robust foundations. Changing market conditions have accelerated digitalization. This has resulted in businesses now planning for resilience. We’re also seeing that the companies we helped during the early stages of the pandemic – supporting them through difficult times – are now powering a significant portion of our growth in the region. These enduring partnerships are definitely paying off.
In many urban spaces we’re seeing the rise of ultra-fast delivery services, bringing smaller goods from local stores to consumers almost instantly. There is a boost for the fast and no or low-touch ways to pay, and with that contactless payments have surged across Europe. Moreover, autonomous store concepts are increasingly popping up – allowing for a checkout-free shopping experience. For all these different environments and scenarios, our speed to market and technology are key assets.
Over the past two years overall, we’ve seen digital and online commerce become more dominant, as well as a heavy decline in the use of cash – especially in traditionally cash-dominant markets like Germany. The landscape is further completed by the increasing relevance of unified commerce and the rise of the platforms at the forefront of these shifts in consumer preferences. This has widened our natural customer fit from digital native companies to a much larger group of business types and industries.
The rise of new payment methods like BNPL, changing shopper demands and movements in the regulatory landscape have further complicated an already complex landscape. As we’ve seen before with previous shifts – where industries change, we’re able to help.
Select merchant wins from the region.
COVID has definitely accelerated the shift toward online commerce that was already happening – we saw a lot of first-time online shoppers since the start of the pandemic. Debit cards, the point-of-entry for most consumers going online in Brazil, saw a big spike. Government credits, too, were made available on this payment method.
This digitalization has resulted in new payment methods rapidly gaining share. Pix, a bank-to-bank payment method created by the Central Bank of Brazil, is one example of a new option taking share from traditionally dominated payment methods like Boleto – and doing so extremely quickly. We were able to help our merchants through this shift by immediately implementing these new payment methods. Our speed here and continued investment in the region has resulted in us now increasingly being able to land local brands.
Alongside the shift to online traffic, we saw a substantial increase in contactless transactions. Industries were quickly disrupted due to the increased need for contactless shopper journeys and delivery options.
At a macro level, Mexico is seeing the same trend as the rest of the region, with millions of consumers buying online for the first time – this has made delivery a hugely popular option across verticals. We currently have a leading position in this shift – as we've partnered with the merchants at the vanguard of this change.
These trends across Latin America are permanent. Consumers won’t go back to the legacy payment methods and journeys. Like in any environment of disruption, our rapid rate of innovation helps position us as the logical partner for merchants and payment methods leading the way.
Select merchant wins from the region.
Initially when the pandemic hit, businesses whose existence was threatened were quickest to adapt and our focus was on helping them weather the storm. This was most true for businesses in retail and food and beverage. We saw delivery, contactless and online commerce, and curbside pickup spring up at scale across this group of merchants.
Now, as we exit the reaction phase of COVID, we’re seeing a second wave of innovation as merchants across other verticals – e.g. hospitality, large-format retail, leisure – are increasingly aware of the impact of consumer preference shifts. This has sparked a profound digital transformation across these industries as well as those first impacted by COVID. The mandate from boardrooms is clear – and we now see our customers structurally changing their businesses and technology stacks to embrace unified commerce and this newfound urgency for digital transformation. This shift was already happening, but has been accelerated drastically due to COVID. We're meeting the moment for these customers as financial technology is a core piece of any transformation strategy fit for this age. Our newly acquired federal branch license should help us be able to fully meet these merchants' needs.
It’s also worth touching on the increasing universality of SaaS platforms. These platforms tend to focus on a particular vertical, providing turnkey solutions and allowing smaller business owners to stay at the forefront of innovation. As transformation continues in the coming years we expect many more of these players to come into the market and have Adyen be their solution of choice. The end result is that we're powering transformation across all size segments – from enterprise directly to the smallest sellers via platforms.
Select merchant wins from the region.
H2 2021 FTE growth
All amounts in EUR thousands unless otherwise stated
The enterprise segment continues to drive the largest share of our growth. By building trusted partnerships with these merchants, we are consistently able to win additional volume through implementing new sales channels, geographies, and product lines with them. We see this as a result of our product development strategy — driven directly by merchant needs.
Enterprise volume in EUR billions.
As shopper preferences continue to shift towards a unified experience, a multi-channel strategy is becoming business critical for businesses globally. By integrating the online and offline channels in a single platform, we are at the forefront of the new era of commerce with our unified commerce solution.
POS volume evolution, including share of total processed volume in EUR billions.
In mid-market, we build to offer the full strength of the Adyen solution to merchants of all sizes via simplified integrations. Our value proposition to these merchants is grounded in our ability to future-proof their payments set-up through access to the single platform, which leaves space to focus on growing their business.
Mid-market volume in EUR billions. We define mid-market merchants as merchants processing up to €25 million annually on our platform. In H2 2021, 4,910 merchants met this definition.
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