Power of Payments Ep. 7: Adyen’s Brian Dammeir on how to keep up with the shifting payments landscape

Welcome back to Power of Payments. I’m your host Ismail Umar, and in today’s episode, I’m joined by Brian Dammeir, president of North America at Adyen.

Adyen is an Amsterdam-based firm that allows businesses to globally accept, process, and settle ecommerce, mobile, and point-of-sale payments.

It acts as a payment processor for some of the biggest brands across tech, retail, travel, restaurants, and more, including Spotify, Uber, Facebook, LinkedIn, McDonald’s, eBay, and L’Oréal.

Brian has been with Adyen for the past seven years, and prior to that, he held a variety of product roles at Google and Airbnb.

Brian and I discuss a number of topics, including his experiences at Adyen, how he’s seeing a shift in consumer culture and expectations across generations, the potential long-term effects of Covid on consumer behavior, and the role that Adyen wants to play in the future of payments.

If you’d like to access more of our coverage on payments, subscribe to our Payments Newsletter.

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The following excerpts were edited for clarity.

Experience at Adyen

My name is Brian Dammeir, and I’m the president of North America for Adyen. I’ve been with Adyen for seven years – first five years as head of product, and for the last two years, as general manager in North America. And because no one gets a degree in payments, I got into this space via fraud prevention, actually. So previously, I worked in fraud prevention at both Google and Airbnb.

When I joined Adyen, we were about 120 people, with maybe ten offices around the world. And now, we’re processing north of half a trillion dollars in payments, with 2300 employees around the world, and 25 offices. But I think the core of what we’ve been doing really remains the same, which is to have one global platform that meets the needs of companies all around the world. We really started in the digital space, with digitally native companies like Microsoft and Spotify, trying to help them go all over the world, and light up dozens and dozens of countries with their offerings. And that’s still a really big area of focus for us.

But along the way, what we realized was, there was a big change in consumer expectations around the unification of the experience across channels. We used to call that omnichannel, and now we call it unified commerce. And what happened is, whether it was retailers, the food and beverage space, or hospitality, these digital channels started becoming more and more relevant. So we started focusing on, ‘How can we offer an in-person payment solution that seamlessly also works with a digital solution and brings this all together?’

And then, of course, Covid happened and just catapulted the need for that across segments and verticals significantly. And then finally, in the last two years, we’ve got this really, really huge trend of platforms – verticalized SaaS platforms – realizing that one of the offerings they can provide is embedded payments and embedded financial services. So when I look back at the last six or seven years, it kind of breaks into those three big moments: digitally native, unified commerce, and platforms. And today, we find ourselves really meeting the moment of digital transformation across all three of those areas.

Adyen’s plans for international and US expansion

Let’s take a step back and look at how Adyen does things. We are an end-to-end financial technology solution, where we go from when you send us an API call, all the way to direct connections to the networks and payment methods in question, and we do them with our own licenses. So, whereas other providers might offer gateway services or just an API layer, we’re going super deep, and that lets us perform better, gives better authorization rates – lots of efficiencies in that. And today, we offer 250+ payment methods around the world. And we’re able to offer our end-to-end acquiring solution in Europe, US, Canada, Mexico, Brazil, Singapore, Hong Kong, Australia, New Zealand, Japan, Malaysia, and I’m sure I’m leaving one or two countries out.

But the question is, where are we going from here? And I would say, it is continued expansion across those geographies, with a specific emphasis on APAC and LATAM, where there continues to be proliferation of payment methods, and really large, growing economies that our customers are looking to go after.

But I’m glad that you also mentioned domestic US, because there’s a duality of where Adyen operates, in that we definitely want to bring the world to our customers, but we’re also a really serious domestic player in the US market. In fact, North America accounts for about a quarter of Adyen’s overall business, and we’re growing 70% year-over-year. And I think what we’re focusing on here is just the fact that the payments experience and the payments dynamic fundamentally changed in the last two or three years, especially in the US. I mean, if we were having this discussion maybe even five years ago, this would be a very easy discussion: it would be cards – primarily credit cards, but debit being relevant too – and maybe PayPal, and then we could kind of call it a day. But I think we’ve seen an explosion of payment methods and experiences, whether it’s Buy Now, Pay Later, peer-to-peer apps like Venmo and Cash App, as well as the relevancy of the debit networks as they enable digital payments over the last couple of years. And then, you can even get into open banking or account-to-account banking payments as well.

So I think what our customers are seeing is, a very simple market from a few years ago has suddenly become very, very complex. So what we’ve been focusing on is going very deep into all of those solutions, having our end-to-end solution for that, and really offering one API that can unlock this domestic market, if that makes sense.

How consumer expectations are evolving across generations

I think in discussions like this, we can get a little bit too myopic and talk about the trend of the moment. We could talk all day about Buy Now, Pay Later and what that means. But I think it’s probably more important to take a step back and note that a couple of fundamental things have happened with Millennials and Gen Z. First, there’s not an explicit trust link to banks. Payments, at the end of the day, is about trust. Do you trust Visa, Mastercard, Amex? Do you trust your bank and the brands associated with that? And I think with previous consumer cohorts like Baby Boomers, it was the case that trust only builds up with explicit bank institutions. But I think what we’re finding is that the new consumer is okay trusting a tech company, basically, and you could name half a dozen of them that have gotten to that trust level. So that’s a fundamental shift in how the consumer thinks.

And then next to that, there are changes in behavior around comfort with credit, credit products, the reliance on rewards programs to obtain consumers, and so on. I think it’s to be seen how Gen Z and late-stage Millennials evolve as their income goes up. And as they have access to more credit, will they remain credit-hesitant? Or will they continue to be more the kind of person that either uses a BNPL or a wallet or a debit card? So these two things are, I would say, the overarching themes, and then they manifest in a whole different cohort of entry players into the space that are taking market share. And some of them are BNPL, some of them are wallets, some of them are peer-to-peer platforms. And I’m generally not a very good predictor, but if you asked me, I would say that over time, they’ll all converge into offering the same types of services, in more of a super app capacity. But the important distinction here is that the consumer now trusts these brands that aren’t explicitly a bank, and therefore, we’re going to see more of a variety of payment method offerings going forward in North America, for example.

Are the pandemic-induced changes in consumer behavior permanent?

I think the longer the pandemic sticks around, we need to start looking at how much of this change is permanent, and how much of it was transitory behavior. And I think the numbers, at a macro level, show a slight pullback from the extreme growth of ecommerce during Covid, and more of an equalization across traditional in-person channels, as well as travel and these sorts of things. But that’s comparing, you know, that moment where basically everything shifted to digital. And then of course, everything needs to come down a little bit from there.

I think if we look at the actual cohort analysis, what that would show you is, Gen Z from the get-go was digital, and they’ve remained as such. Millennials were split, and I think they're going to stick around and be pretty explicitly digital going forward. And older generations like Baby Boomers – I think some will stick around, and others will go back to their previous behavior. But in the end, what this is going to create is more and more need around these digital experiences and channels, because all three of those cohorts have people that are sticking with it.

And what we noticed at the beginning of this year was, whereas in previous years, companies and management teams were sort of triaging and trying to stop the bleeding, at the beginning of this year, there was an explicit remit within every company that we talked to, to digitally transform. And that’s going to have big effects going forward. Any brand that touches consumers now realizes they need to have robust digital channels, because in the end, those channels are going to take the lion’s share of the consumer attention.

Adyen’s focus for the future

I might have used the phrase earlier in this discussion, but I like to say, ‘meeting the moment’, because we were created around 10 years ago with some fundamental principles. One is that we were channel-agnostic from the beginning. We were created in the post-dot com era, so we never had the challenge that a lot of our incumbent challengers and competitors had, which is multiple platforms underneath: one for in-person, one for in-app, one for digital, online, you name it. We were built channel-agnostic from the get-go. And the other is that we have one global platform around the world for our customers. And what’s happened since we were founded as a company is that the need to be more global has obviously manifested. But perhaps most importantly, because it’s also relevant for domestic customers, at this point, you can’t not have a unified commerce strategy. You need to be able to offer a consistent experience across all of these channels. And therefore, you need a channel-agnostic provider.

And I think the difference between what we were doing over the last couple of years and what our competitors were doing is, we already had the flows that our customers needed, and many of them already had those built out. But when things really hit the fan during Covid, and our customers had to, for example, light up touchless QR codes on terminals or contactless payments in general, or even just ramp up a digital channel that never existed for them before, we already had those capabilities. So going forward, I think the mission remains the same, because Covid establish the expectations of the consumer.

Next to that, I will say another area of focus for us is just the overall embedded finance and platform space. Just like we’re seeing that our customers are meeting that moment in terms of digital transformation, platforms are also doing that for their end merchants who are SMBs. We offer a product called Adyen for Platforms, which allows those platforms to offer digital and unified commerce payments to their end customers. I’ll just give you an example: Zenoti, which offers a verticalized SaaS solution for spas and salons, or a modernizing medicine that does the same for clinics — their customers in the end are small businesses, salons, and clinics and whatnot. But they're reacting to the same exact trends that enterprise companies are in terms of, ‘I need to offer a website, I need to offer contactless payments, digital payments, unified commerce’, all of that. So by offering up a platform solution, those SaaS offerings are able to effectively white label us and sort of meet the moment, just like we are on the enterprise side. So I would say, that’s the main area of focus for us for the coming years: power digital transformation for our enterprise clientele, and via our platform offering, do the same for SMBs during this moment of significant transformation.

Growing interest in embedded financial products

One area where I think we’re seeing more and more interest is, can SaaS platforms actually offer a wider set of financial services? For example, can you extend capital to small businesses, because as a payment processor, and as a platform, we would see the performance and seasonality of that business, and therefore have all the data necessary to be able to extend that capital to them. And if you want to extend capital, would you allow, for example, instantaneous settlement of those funds onto an issued card that’s branded with that platform? And you could think of other services, from bank accounts to FX, and so on. So I think an area to watch for anybody who’s interested in the overall area of fintech, next to digital transformation, verticalized SaaS offerings, and integrating payments is, those platforms now offering broader embedded financial services. And companies like Adyen are really sort of stepping up to the plate to offer API solutions for that.