Dissecting Adyen's Moat - A Case Study

Competitive advantages or moats are one of the more critical aspects of identifying a great business. Without them, the company likely won’t go far.

Learning to analyze them is a challenge.

I wanted to try an experiment using Perplexity AI, along with a company’s 10-K, Fiscal.ai, and Morningstar. This allows us to determine whether a company has a moat or not quickly.

Is it perfect? No, but it can give you a good head start. Especially if you are newer to this game.

I used Adyen as a test case as it is one of my biggest positions, and I’ve held the company for five years now.

Let me know what you think.

Key Moat Drivers

1. Single Global Platform & Unified Commerce

· Adyen’s core differentiation is its fully in-house developed platform that unifies payment processing, risk and fraud management, reporting, and financial services for enterprise merchants across online, in-store, and mobile touchpoints. This system is built organically, contrasting with the fragmented, acquisition-driven tech stacks typical of older rivals^[1][2][3].

· The result: clients benefit from a single contract, streamlined integration, global coverage, and visibility across channels—enabling operational efficiency, lower IT overhead, and simplified regulatory compliance. Customer case studies (e.g., ROLLER, Dunelm) highlight rising conversion rates, reduction in manual work, and enhancement of guest experiences by leveraging Adyen’s platform.

2. Licensing & Local Acquiring

· Adyen holds direct acquiring and processing licenses worldwide. Instead of relying on intermediaries (who typically introduce cost and risk), Adyen processes transactions as close to the issuer as possible, maximizing authorization rates and minimizing fees for merchants. This global reach and regulatory expertise are hard to replicate^[1][2].

· Local acquiring matters: approval rates for merchants using local acquirers can exceed 80-85%, vs 30–40% for cross-border acquirers. This is especially critical for global brands seeking to optimize revenues.

3. Data Network Effects & AI Optimization

· Every transaction enriches Adyen’s machine learning models, improving fraud detection, conversion optimization, payment routing, and cost savings for all clients. AI-powered tools like Uplift (boosting conversion rates by up to 6% and reducing costs by up to 5%) directly leverage years of accumulated and growing data scale, unavailable to smaller or less integrated platforms^[1][4][2].

· These analytics not only optimize payments, but also arm merchants with insights across countries and channels—ensuring global clients benefit from “network effect” economies of learning and continuous incremental improvements.

4. Deep Switching Costs

· Large Adyen clients build business-critical integrations touching core IT, analytics, operations, accounting, and compliance functions^[1]. Replicating a unified view, sophisticated fraud tooling, local acquiring, and embedded features across new vendors introduces risk, cost, and operational headaches. While technical integration may seem “quick,” the total effort—retraining, regulatory, data migration, process rebuild—makes switching disruptive and expensive.

· Churn is consistently low (volume churn <1%), and the majority of growth comes from existing clients expanding usage, supporting sticky relationships^[1][2][3].

5. Total Cost of Ownership Advantage

· Adyen optimizes the “hidden” payment cost stack—interchange, scheme fees, fraud, and failed transaction expenses—by leveraging tools like intelligent debit routing, local acquiring, and network tokenization. Even if Adyen’s direct processing fees (“take rate”) trend lower, the platform’s ability to shrink the cumulative costs of payments (which can be 10–20x greater than its direct fee) creates long-term value, deepens integration, and encourages client loyalty

6. Consistent Innovation & Engineering Culture

· Weekly shipping of new platform features, full ownership of the codebase, and rapid reaction times to changing client needs or regulation mark Adyen as unusually agile for a large fintech.

Adyen Competitors:

1. Stripe

· Stripe matches Adyen in digital scale and developer-friendliness. It’s especially strong in the U.S. and small/medium business segments, though increasingly targets large enterprises. Payment volume scale is similar for both, with Stripe recently growing slightly faster in North America

2. PayPal (Braintree)

· PayPal’s Braintree directly challenges Adyen for large enterprise payment relationships, focusing especially on clients within PayPal’s peer-to-peer and checkout network.

3. Checkout.com

· Rapidly scaling in Europe and Middle East with a flexible, modern platform aimed at large enterprise accounts

4. Legacy Acquirers (Worldpay/FIS, Fiserv, Global Payments)

· Have enormous client bases and capital. However, their tech architecture is generally tangled, slowed by legacy acquisitions, which slows platform innovation. These players still dominate “traditional retail,” but enterprise merchant migration is increasingly toward platforms like Adyen and Stripe

5. Indirect Threats

· Large technology companies (Apple, Google, Amazon) are expanding their own payment initiatives. While not direct replacements for Adyen’s core merchant-facing platform yet, the risk is present if any strike partnerships or launch infrastructure for B2B payments at a global scale.

6. Pricing Wars & Commoditization

· Emerging and established competitors may trigger aggressive price competition, compressing “take rates.” Adyen resists by positioning itself on value and low total cost, but as payments margins compress across the sector, this could erode even the “platform premium.”

If you are interested in the prompt that inspired this, please let me know, and I would be happy to share it with you.

Thanks,

Dave