Good afternoon again, everyone. I'm Harshita Rawat, Bernstein's senior analyst covering payments, processors, and IT services, and I'm delighted to be joined today by Ethan Tandowsky, Adyen CFO at Bernstein's 41st Annual Strategic Decisions Conference. Ethan, thank you so much for joining us today.
Thanks for having me.
Ethan, for those in the audience who may be less familiar with Adyen, can you give us a brief overview of Adyen and its growth story?
Yeah, sure. We are a global financial technology platform who's helped some of the biggest enterprises in the world to accept payments all over the world. Think of the likes of Meta or Google on the digital side, or Nike or LVMH in what we call unified commerce, where there's an in-person payments component. More and more, we've also branched out into what we call platforms, where especially vertical SaaS businesses are selling in embedded financial products, including payments into their customer base, and we're providing them the white label technology, essentially, to do that all around the world. We processed about $1.4 trillion in payments volume last year in 2024, and we're operating across many markets with just under 30 offices around the world. Yeah.
Fantastic. Ethan, just to kick off the rest of our conversation, can you talk about the current spending trends you're seeing across Adyen's platform? At $1.4 trillion scale, you have a lot of great insights.
Yeah, that's true. I think the reality is we're very much long-term oriented as a business, right? The way that we look at our growth trajectory is how do we, of course, onboard new customers, but also within our customer base, how do we expand what we call share of wallet? How do we do more of the proportion of our customer's business over time? That's been the biggest part of our growth. Next to that, our growth also comes from the growth of our own customer base. It's something that we look at. We don't have perfectly precise data because both the growth of our customers themselves and the growth of our share of wallet within that customer base is mixed into the same growth.
Having said that, we shared on our Q1 earnings call back at the end of April that there's nothing to date that we've seen that's really shifted in overall volumes or that's outside of expectations. Of course, if you look in specific pockets, you may see something that moves a bit, but on an overall platform level, we haven't seen real shifts in volumes against what we would expect.
Ethan, let's talk about Adyen's secret sauce, right? You've been consistently outgrowing your addressable market online and offline, and this has kind of been regardless of the competitive dynamics. Wallet share gains power a majority of your growth, as you mentioned, right, like in any given year. For those in the audience kind of less familiar with your secret sauce, can you talk about your competitive moat with respect to the single global platform, data, innovative products?
Yeah. So we've taken an approach since the start to build indeed one platform to service the needs of all of our customers around the world. To do that across channels, across geographies, whether you're here in the U.S. buying something in person or you're online buying something in Australia or in Brazil, that's all processed for us on one platform. What that means is that the pace of innovation that we can bring to the market is typically higher than our competitors.
Where that is visible is, for instance, on the digital side, improving auth rates, so the percentage of transactions which get approved by the card networks, the right set of local payment methods that you can offer, the buy now, pay later that you can offer, the debit networks here in the U.S. that you can offer, all of the various account-to-account payment methods all around the world, the various wallets that you have, the right geographical coverage from a payment method perspective, that you can drive down overall payments costs, right? One of the things that we have always talked about is we price for the value we drive, which means we're not the cheapest option. If you take a market like the U.S., 90%-95% of the costs in payments are not the costs from us.
They're the costs from scheme fees or interchange, the shopper's bank charges. If we can help optimize for our customers amongst these characteristics, they give us more share of wallet, and that's been driving our growth over the year, which has allowed us to grow faster than the overall market. The same is true if you also talk about unified commerce. Those are our businesses where there's also an in-person component. The fact that we bring that same single global platform across online transactions, across in-person transactions, that's of a lot of value to our customer base. It not only helps streamline operations, but it enables various flows, like buying something online and returning it in store, as a simple example. Getting more into platforms really opens up the small and medium-sized business segment to us in a way that we weren't going after previously.
I think that combination of really focusing on speed of innovation, of bringing new functionality to market, and always staying ahead of competition has allowed us to gain faster than the market. At the same time, the market is growing still, in our estimation, high single digits, low double digits, and that's additional to the growth that we're seeing on share of wallet side. We are not only growing share of wallet, but growing in a relatively fast-growing market.
Ethan, there have been some periods where there has been some aggressive pricing by competitors, but you've continued to outgrow the market. You alluded to some of this earlier, but remind us about why pricing is only part of the equation when it comes to merchants and their evaluation of the payments processors. It is also a lot about quality, reliability of the platform, your data, the total cost of ownership.
Yeah, yeah, it's a great point. I think the question in payments has been, is it strategic or is it a commodity? Does everybody offer the same, or is there a real difference in outcomes that you can drive different payments providers? I think what we've been able to prove over time is that there is real differentiation that you can provide if you build, if you provide better technology, if you provide better service levels. We're very much enterprise-focused, so we have an account management team focused on each individual account who really understands deeply their needs, helps them day-to-day with their payments operations. That combination has proven that there's differentiated value within payments, right? It's much more strategic than I would say it was even 10 years ago for us.
If you take a market, I'm sure we'll get into it, but if you take a market like unified commerce, where we historically just started with luxury retail, what you've seen is that many verticals have seen the strategic importance of payments who previously didn't, right? More broadly across retail, that was the case, and now we're seeing it more in hospitality and food and beverage. This emphasis on the customer experience has really increased over time and allows us to, yeah, to prove that there's differentiation within payments. What I mentioned before, if you can drive auth rate improvement, if you can do that while managing payments costs, probably we'll get into the U.S. debit at some point, but there's many ways to balance fraud, revenue performance, cost savings, authentication.
If you can do that well, you can provide a really differentiated solution, and that's ultimately what we've been focused on.
That's great. Ethan, let's talk about AI. Can you talk about how e-commerce is evolving with respect to agentic payments and what role does Adyen play here?
Yeah. I mean, there's many use cases. I think one of the ways that we've been investing in AI is leveraging, again, the strength of the amount of transactions we're processing on the platform. We released a new product, and I'll get into the agentic piece, I promise, but one of the things that we've rolled out recently is Adyen Uplift, and the power of it is that we're now making decisions across performance, fraud, cost, authentication, using that $1.4 trillion of payments volume instead of specific merchant-by-merchant data. Machine learning, AI has been a huge part of at least our offering over the last years, and it continues to play an important role. You talk about agentic commerce and kind of the development in e-commerce. I think it's an interesting trend, one that our customers are interested in.
They see both risks and opportunities, of course, with it. I think we'll continue to take the angle of how do we support merchants. That's entirely our focus. How do we allow them to thrive in a world where the way transactions are made changes? I think we're well positioned to do that because we've built a technology platform that can adapt quickly, that's really good at identifying fraud. Of course, fraud will change. That can tokenize shoppers, which understands well what types of payment methods an individual shopper would like to use. We feel well positioned to adapt if agentic commerce is going to become a meaningful part of e-commerce flows. So far, we're a bit in the track our customer needs, focus on real use cases today, and then develop from there.
You mentioned Adyen Uplift. I want to follow up on that. Tell us more about the product and specifically what are you hearing from your customers?
Yeah. Adyen Uplift does two main things. One is that, again, I mentioned it brings the power of all the data across the platform together and it makes sure that we make decisions across each of the important components of a payments transaction. Again, I've said it quite a few times, but authentication, authorization rates, payments costs, these are all the factors that we balance in making individual choices of how to route transactions. That is one thing that it does. It leverages the power of the platform. The second thing that it does is also very powerful for our customers. It ultimately is a recommendation engine. Every single one of our customers can interact with Adyen through what we call our customer area, essentially the web portal that we've built.
In there, they can go to the uplift section of the website, and they can see, okay, Adyen knows that for my business in my vertical, in my geographies, these are the three recommendations that they would make for me. Maybe we think that they should add a payment method in a specific market because it will drive higher conversion, but has the potential to lower costs. Maybe they should add additional data points into their payments transactions because that has the chance to lower costs with the schemes. Maybe there is another optimization that they should make, but we have automated and scaled the recommendation engine to all of our customers. What they can do from there is they can say, okay, that sounds like a smart recommendation. I think I want to do it, but I do not want to try it with all my volume at once.
They can create an A/B test. They can say, hey, maybe I want to test 10% of my transactions or 20% of my volume with that optimization, and I'll leave the other 90% or 80% or whatever percent on the control. As long as then they see the good performance, they can then roll that out across their entire volume stack. I think that scale, that automated way of making recommendations, but also allowing our customers to test and only then make changes once they've tested, I think is really powerful. It will help us drive product adoption, not only in the functionality that we have today, but also in whatever we deliver over the coming years that will come continuously into that recommendation engine and help our customers continue to optimize and for us continue to create that differentiated payments experience.
That's great. Ethan, a key aspect about Adyen, and you alluded to this earlier, is the deep integration with many local payment methods. Tell us more about this. How is Adyen differentiated here and why are local payment methods increasingly important for any merchant?
Yeah. So what we've seen over the years is that the least number of players you have in the chain, the better results you get. The more points of friction, the more connection points you have between many parties in the chain, the less likely you're going to get to the highest auth rates, for instance. That's something we've been building out for a number of years, local acquiring connections to Visa, Mastercard, to Amex, to Discover, so that we're global, but we're also local. At the same time, there's very different shopping behaviors in different parts of the world. I live in the Netherlands. In the Netherlands, if you want to buy something in e-commerce, you use a payment method called iDEAL, essentially a bank-to-bank payment method.
If you would open a web shop in the Netherlands and you would not have iDEAL, it would be very difficult for you to succeed. That exists in many, many markets all around the world, right? Another classic example is if you are a luxury retailer, a big part of your customer base is Chinese tourists coming abroad to Paris or to wherever. You want to meet them also with their local needs, right? Maybe they want WeChat Pay or they want to pay with Alipay. Making sure that we have the wide range of local payment methods has been important to our customers.
We have always taken the approach we build it direct because the moment that we start to do that with partners in between, the harder it is for us to optimize and to make sure that the service levels are what they would expect. We have always taken the approach of, yeah, we are the ones directly connecting merchants to payment methods. We offer a range of them, but we also do that as deep as possible, deeply integrated. That is what enterprise customers look for.
Let's also talk about some of your products in the U.S. Regulation II brought a lot of changes to the U.S. debit market. How do your products, such as debit routing, help customers save cost, and how are they different versus what peers offer?
Yeah. I mean, Reg II, it's relatively old. The fact that there's been an attempt to drive competition on debit transactions in the U.S. has been around for some time. I think what we've seen is that the alternative networks to Visa and Mastercard were always much less invested in, of course, than those. There was, even though it was imperative that you have the opportunity to route across these alternative rails, it was difficult in practice because maybe chargebacks didn't really work, or there was no real opportunity to do a split of capture and authorization, which is a process which is quite common with Visa and Mastercard. There were a number of functionalities which didn't exist across the other networks.
It is not enough just to say that you offer the routes to all of these alternatives, but it also needs to work at a level where it is a realistic option. What we have been investing in over the last few years is how do you really deep build integrations into these alternative networks so that when somebody swipes their card, it is a real choice of whether you send that to the larger networks or to the alternatives. What we have seen so far is really promising. We ran a pilot. We saw 22 basis points increase in authorization rates when we were making the choice about where to send that traffic. It is not only that. We saw that in combination with 26% cost savings on those transactions.
Our customers were able to realize both cost savings and increased performance by allowing us to make the decision about which transactions to route to which provider. Again, if I connect this back to Adyen Uplift, one of the recommendations that many of our customers will find in that Adyen Uplift suite is, hey, you have quite a big amount of U.S. debit traffic. If you allow us to do the routing across which network, we expect we can get X% cost savings and this percentage authorization performance, and they can test it live. We saw that we doubled the number of customers using this product in the second half of last year, and that pace is continuing into this year. It is solving a real need for customers. There is strong traction, and it is a way amongst others to differentiate in a market like this.
Ethan, I want to touch upon a topic very important for investors, the addressable market for Adyen. A concern some investors might have is that you're already quite penetrated in digital verticals. Example, in Europe, U.S. is quite competitive, and then on offline, some verticals or merchants might not be addressable for you. What would you say to that, and how would you frame your addressable market?
Yeah. I think our addressable market has been growing. First, we moved into offline. Still, 80-85% of payments transactions are offline today. We started just in e-commerce over the last, yeah, seven, eight, ten years. We've been building out our in-person presence. That's still under 20% of our total volume. If you look at us and compare it to the total market, it's completely inverted from what the opportunity is. There's a huge opportunity for us to continue to gain in unified commerce. I mentioned it earlier, but you've seen that the importance of payments has broadened beyond just retail into many other verticals who see it as important. F&B, hospitality, even some everyday retail, that is becoming, that is moving into our sweet spot in a way that previously it hadn't been. That's one major opportunity.
The other is that we were very much enterprise-focused. S&B, we did not go after. Because so many of these software businesses are looking to embed payments and broader financial services, we see them as an enterprise customer, and they do the distribution. They do the support to all the S&Bs underneath it. That has opened up a huge part of the market that we previously also did not have access to. In many ways, the TAM is expanding. I think the question around specific markets, take Europe digital. Digital is the biggest part of our business. That is 60% of our customer base, our volumes. In Europe, where we have been the longest. Still, it is fastest growing, right? Europe in the last, in the second half, we talked about Europe being the fastest growing market for us. That in North America.
The opportunity that we still have in digital Europe, our most mature market, is still far from running its course. We shared at our investor day back in November 2023 that we think we're around 20-30% wallet share within our digital customer base. We're still doing the minority of payments for our digital customers, which means there's a huge opportunity in that customer base alone to expand next to the fact that there's still plenty on the new business side to win. I would say even in our most mature markets, we feel like we still have quite a bit of runway ahead. Next to that, the TAM has been expanding across offline, more and more verticals coming into that with a strategic focus on payments. Platforms has really opened up the S&B part of the market for us.
Some markets we're still completely fresh to, like Japan, for instance, and India, key markets for us in APAC, we're really just getting started in some of those markets as well. We think most of the growth is still ahead of us, not behind us.
Let's unpack some of this. Let's start with the verticals, right? Like you've talked about how you started off with high-end retail, and then you've had successes in everyday retail and hospitality. As you look out into the next three to five years, what are the most important target verticals for you, and how are you going about that opportunity?
I would still say that they're the same, the ones that you listed. I think part of the risk is also to lose focus as an organization and go too wide. These verticals were still a small fraction of the overall markets, even in these verticals, even in just the markets in which we're operating. I think these will continue to be the focus verticals for us. It's still going to be in large part retail across large format, across small format. It's hospitality. It's food and beverage. It's a bit more and more everyday retail. It is going to be important for us to focus on these verticals and make sure that we capture significant market share in them and then kind of expand from there. Part of it is a bit opportunistic, right?
As certain innovative players in other verticals also focus on payments as part of their strategic offering, their way of dealing with improving customer experience, we also will keep a bit of that flexibility. At the same time, I think it's going to be important for us just to drive focus in those markets. They're big enough as they are to make sure that we capture them.
I also want to follow up on your comments on unified commerce, which is 26% of your volumes. A common investor question we get is how big is the opportunity, really, especially given that your value proposition may more resonate with global businesses, selling across multiple countries, maybe more digital-focused businesses. How do you think about the offline opportunity for Adyen?
Yeah. To a certain extent, I agree with that assessment. I think where we create value is where there's multiple geographies, where there's multiple sales channels, so where there's online and in-store, or where there's a high number of terminals or operational complexity, right? You typically end up with an enterprise where they are either a domestic business where they have online and offline, or where they have geographical spread, so they're across multiple markets, or often all three of them together. That's where we go direct, and that's where we differentiate for our customers. Next to that, a huge part of why we win in the platform space, so helping small and medium-sized businesses, is because of our unified commerce offering as well, so also the in-person component.
There you have less of that kind of high scale or geographic complexity or, yeah, you do have the multiple sales channels often. The platform that we work with has the need to simplify their own complexity and therefore wants to work with a player like us, even if their end customers do not have that same level of complexity. On the enterprise side, based on the factors I mentioned before, that is where we see the real value. That is where we see going direct and where we see, I do not know, a food and beverage platform or a health and wellness platform or a sports and entertainment platform that is really focused on providing software to a specific vertical.
They add a lot of value by bringing payments embedded within their offering, and that allows us to reach the part of the market which we would have previously said was kind of out of our reach because it did not have that same level of complexity. That part is starting to come in. We talked about unified commerce and platforms. Food and beverage is across both, and we have a different approach, whether that is going to small business or going to enterprise level direct. We are quite clear in how we split that out and how we go to market. I think that ultimately is allowing us to go after an end-to-end vertical from smallest to largest.
Let's also talk about some of your geographic markets. Europe is a very complex payments market. You are one of the market leaders in that market, and you also continue to grow at very, very healthy growth rates. The U.S. is a slightly different market where there is a little bit more concentration on the digital side, but you also have single-digit market share within U.S. digital. Maybe talk about the U.S. market and how you see that evolving, and then I have some questions for some of the other regions.
Yeah, sure. I think there's a few things in the U.S. market, right? Maybe it's helpful to tell a bit how we've approached this market. We've been in the U.S. for a long time, been building out a team. We thought originally the way to service this market would be to help U.S. headquartered businesses go international. That was the first idea. That's how we started to build out an office, I don't know, 13, 15 years ago, something like that. We started with helping many of the large, especially Silicon Valley players, go international. What happened is that we were also winning business outside of the U.S., and many of those businesses asked us if we could help them go into the U.S. We started helping international businesses in the U.S. That's what brought us to a U.S. offering.
As we built up both of those things, showed our performance with U.S. businesses going international, showed our performance with international businesses going to the U.S., we started to also win U.S. domestic business, right? U.S. domestic business within international scope, but also just pure domestic players, the likes of Dick's Sporting Goods, for example, who had complexity across channels, right? We started to win those types of businesses as well. I think the main factor is that complexity has been increasing here. One, because more payment methods are now in the U.S., whereas if you previously had Visa, Mastercard, Amex, Discover, you had it kind of completely set. Now you see the Buy Now, Pay Laters. You see the U.S. debit networks having a bigger prominence. You see Pay by Bank having more relevance with certain subsets of the population.
The complexity across payment methods has increased. The complexity across unified commerce has also increased, right? Now there is this need to bring a unified solution to your customers across in-store and online, same interaction with the brand, no matter how you interact. That has brought more complexity. If you bring in the platforms piece of wanting to bring more services, right, embedding payments, but also potentially wanting to bring a bank account or a debit card or short-term working capital, that is all added complexity as well. That is something that we are well positioned to provide also from a technology perspective, but also because we have been investing in our licensing structure. We have a banking license here in the U.S. We have a banking license in Europe. We have a banking license in the U.K. We bring the licenses and the technology to really bring that deep integration.
I think the reason that we're winning here and why it's one of our fastest growing regions is because the complexity here is increasing and the real strategic importance of payments has been increasing.
Even more than a year ago, you also accelerated sales hiring in the U.S. Also, let's zoom in on that and tell us about how that's going and how does that play into your land and expand strategy here in the U.S.
Yeah. So we've been investing, especially in 2022 and 2023, a lot in growing the team. The biggest part of that was in the U.S. That was across commercial roles, so sales, our account management team. So the account management team is responsible for our existing accounts, growing those accounts, and providing them day-to-day operational support. It was also building our tech teams. We've been building a tech hub in Chicago, making sure that we're building our products close to our customers as well. The hiring has been kind of across the board, big focus on U.S. San Francisco has a big office. New York here has a few hundred people. We're building a big presence in Chicago on the tech and operations side, so continuously investing in the team. Part of that has been sales hiring, right?
We really saw the opportunity to drive, yeah, growth in the commercial teams to help drive commercial expansion for us in the years to come. If we hire on the sales side, we do not typically see revenues associated to those people straight away. Our sales cycles are typically a bit longer, let's say a year. It takes people time to build up their pipeline, to close those deals, and then we have a land and expand strategy. We typically start small with new customers. Maybe we have one geography or one sales channel, or maybe where they are backup in a specific market. We prove our service levels and we grow from there.
That process takes a number of years to play out because those salespeople need to become efficient, but also their accounts that they bring in and get live on our platform, they need to expand over time. We track that progress quite closely. We see that the best way to track performance of commercial teams is to track them against their tenure with Adyen. People who are in their first year, you should track against people who were in their first year the year before or in their first year two years ago or in their first year three years ago. That is tracking very consistently with the previous cohorts of sales hiring we have done.
The other thing that we track and potentially is one of the risks of growing your sales teams too quickly is that you start to focus on markets outside of where your strength is, right? Maybe you start to go into more verticals or more areas which are less low-hanging fruit, so to say, where you're less well-positioned to succeed. We also track win rates quite closely, and that's also tracking in line with how we've previously seen win rates develop. I think all of those signs are positive. Of course, when you go through a hiring cycle, sometimes you make mistakes in a specific hire and you need to correct, but in general, I think we're really pleased with how the commercial teams have been able to scale up, drive performance, and help drive our growth over the years to come.
Let's also talk about your other international markets, Japan, India. Tell us about which of these international markets you're very excited about, the trends that you're seeing locally.
Yeah. So I think we're really excited. We talk a lot about U.S. as an important market for us. I think we've covered that at least at the start. Japan and India are two other markets that we're really interested in. Of course, because of their scale, right? Third biggest market, Japan, likely third biggest market in a few years, India in the world. It is not just about the size of the market, right? China is, of course, second biggest market in the world. We do not see real differentiation in our offering in China, so it is not an area we have a domestic offering. We do help Chinese businesses go abroad, but we have not gone after it as a domestic market. When we look at Japan and India, we see that there is a real opportunity to bring differentiated technology to those markets.
I always like this example, but in many ways, there's many things which are quite tech-forward in Japan, but in some ways, it still has a long way to go. Like chargebacks, if somebody claims a fraudulent transaction, the way that the communication still happens between acquirer, so that would be us, and the issuing bank, the one who's given the card to the shopper, it's by fax, right? Something I think we're pretty used to in the U.S. from long ago, but mostly disappeared. You still fax messaging between each other on a chargeback in Japan. In many ways, there's a lot of innovation that still needs to come to that market. We think we're really well-positioned to do it. We always start with going with our international customers into new markets. We have our existing customer base. We help them in more and more markets.
That's how we move into Japan. We're working with Amazon, for instance, there and many other customers. We think we can bring a real differentiated solution into what is a sizable market. India is very similar. India is going through a big digital transformation. They have a payment method there called UPI. It's a central government payment method. There's a lot of people coming into the digital kind of banking system via that, and we see a lot of interest from our existing customer base there also to bring a differentiated solution. It's a place that we have been investing. We set up a tech and operations hub also in Bengaluru. We've been building out a team in Mumbai for some time, and we're also really excited about the prospects of Japan and India.
I think Japan is probably more short, medium-term in terms of really being able to drive revenue growth. I think India is much more a longer-term play, but we have laid a lot of the basics there to really try to drive that growth for our customers over the years.
In many of these markets, U.S., Europe, a bunch of your international markets, you've acquired local licenses. Tell us about why those local licenses are important for what you do and how that differentiates Adyen versus your peers.
Yeah. In our world, there are different types of licenses you can get. The most common license we have is what's called an acquiring license, and that's a license which is granted by Visa or Mastercard. The way that they grant those licenses is market by market. Yes, it's one thing to have a global offering, but if you want to go to Australia, the best way to get higher authorization rates and lower costs is to do those transactions domestically on your own acquiring license. We have many acquiring licenses. We have an acquiring license in the U.S. We have one in Canada, in Brazil, in Mexico, all throughout Europe, in the U.K. We have it in Australia, New Zealand, Malaysia, Singapore, Hong Kong, right?
In each of these markets, we've got local licenses, and that means we can run those local transactions through those local connections. We both have that kind of global presence, but we also have the local kind of expertise and licensing. That leads to lower fees because it's not cross-border. It's domestic transactions. That's lower fees from the card networks. We also see that those transactions are more trusted by the issuing banks and therefore more likely to get approved. That's something that we've rolled out around the world, something that our customers value. What we've also been building out is our license framework or structuring around banking licenses. We got that in the U.S., Europe, and the U.K. What that allows us to do is provide bank accounts, to provide debit or credit cards, to provide short-term working capital.
Where this is really relevant is especially in the platform space, right? Again, to this SMB. If you take an F&B, let's take a restaurant as an example. A small mom-and-pop restaurant has different needs than a Meta or a Google or a Nike that I referenced before, right? Probably it's difficult for it to get financing. We have their sales history because we know their payments volumes. We know well how they've processed payments over a certain history of time. We have access to their payments flow. We can make an underwriting decision based on their sales history, but we can also collect a portion of their payout every single day until they've paid back those funds.
That's something that we can do in these markets because of those licenses and something that's a real need of platform customers, which wasn't a real need of enterprise customers. We are also expanding across those types of products, leveraging our own licenses, but really trying to drive differentiation through the technology and that licensing stack. I think long-term, it's not likely that the risk profile of Adyen will change. We will find a way to manage that risk with other parties at some point. For now, that provides us a lot of flexibility to drive new products into our platform customer base.
I feel like we have not talked enough about platforms, which I think this is 14% of your volumes growing 50%. You kind of talked about some of the exciting things that you are doing here, how this kind of opens up new customers. You alluded to this a little bit in your response to the licenses question, but how should we think about the embedded finance kind of addressable market within platforms and how big that opportunity is for Adyen?
Yeah. We think that of the financial products we've been talking about, that issuing and capital, what we call capital, so short-term financing, will be the biggest revenue pools that we will go after. It all starts with payments, right? Everything is connected to payments. What we've had a big focus on over these years is how to drive payments volume growth. That is somewhere around 60% over the last quarter. It is growing quickly. It is the fastest growing part of our business. When you build that relationship, when you have that payments volume on your platform, you can also attach other products to it, right? For instance, our capital product works because there are underlying payments transactions. So far, we've been very focused on how to drive payments growth.
Having said that, a huge part of our sales pitch and our commercial go-to-market is that broader offering, right? Because many of these platforms, they're still new. Maybe it's a payments, and they're for sure new to financial products overall. They want to build that out onto their roadmap. They want to work with a partner who's future-proofing their offering. Therefore, it's important to pick a payments partner that can also do those other services, but it will just take longer for them to roll out those other products. That's what we've seen so far, that we've been able to scale embedded payments quickly. We see a lot of interest in demand for other financial products.
The early feedback we get on the product, we are live on each of these products, is positive, but it will just take more time for those products to scale out than the embedded payments piece.
Ethan, I also want to switch gears and ask about payments orchestration, where some merchants can dynamically route based on your needs, based on their needs. Do you view this as a big trend? How does Adyen position itself for this?
I think in a large part, payments orchestration has existed for a long time in the enterprise space, right? The largest enterprise always has routed traffic to different providers, especially in the digital side. In many ways, that part we've gotten quite used to. If you can bring differentiated value and you can show differentiated value, that's an opportunity for you to capture a bigger share of wallet. It's a big reason that we've actually been gaining share of wallet and gaining market share over the years in the past. You see more and more players try to position themselves, I guess, up funnel in the payments value chain, whereas the kind of settlement flow has some value. Most of the value is being seen in the optimization component. How do you manage for fraud? Again, how do you do authentication?
How do you bring auth rates up? That all mostly happens up funnel. That is actually something that we have seen as a trend too. We offer our fraud tooling separate from our full-stack acquiring. We offer our authentication separate from our full-stack acquiring, which means you can use another provider, but still use that component of the tooling. I think that is logical because while most large digital customers want to multi-source payments, there are many parts they do not want to multi-source, like fraud tooling or like authentication. They find a lot of benefit from doing that from one vendor. Parts of our stack we have been modularizing and making available on a broader set. In the end, if I look at orchestration, it is going to be do you provide value? If you provide the most value, you will get the volume.
I think that's a good position to be in. I think when I first thought about orchestration, I thought volumes would just be swinging back and forth consistently day to day, hour to hour, and that's not what you see in practice. You really need to get to an apples-to-apples comparison. That typically takes a quarter of data, but we're always closely engaged with our customer and see it. I honestly see it more as an opportunity to gain share over time than as a challenge.
Fantastic. Ethan, I want to ask about capital allocation. You have $4 billion of cash on your balance sheet, excluding merchant cash. I know you need some cash for your licenses, bank licenses, etc., but you also do not do any acquisitions. Your platform is completely organic. How should we think about capital allocation and uses of cash going forward?
Yeah. So again, we think we have a long growth trajectory ahead of us. I think the flexibility of the strength of our balance sheet, of our financial position, has really been advantageous to us in driving that growth and something that I expect to continue to be advantageous to us in the future. For instance, if you want to get into financial products, it's very important what credit rating you have because you're servicing in some ways banking-type services. We have a credit rating of A-minus, which is industry-leading in payments. For banking, it's a relatively normal credit rating. It's important that we keep that to be able to scale financial products. It's important in the way that we discuss with regulators. I think if I think about it from a shareholder perspective, right, the shareholder return is mostly going to be driven off growth.
At the same time, it's not that we just want to continue to pile cash forever. We need to consistently assess whether we're using it in the most optimal way. I'm quite confident that over the short term, that that's going to be the flexibility. That flexibility of driving that growth is going to be the best way to use it, but we'll continue to reassess and decide when that point is no longer most relevant.
Great. Ethan, we only have a few minutes left. My last question for you, what are the top risks you worry about in the context of Adyen?
We talk about execution risk a lot. I think the risk is lacking focus as an organization. Consistently being distracted, jumping on the next new thing. Of course, some of them, you always need to be in exploratory phase, and you always need to look at what new technologies are coming, what's happening in the market. You also need to listen to your customers, and you need to listen to the pain points, the problems they want to solve. We need to think of the solutions, but we need to hear the problems from them. As a management team, that's where we probably spend most of our time thinking about, are we sufficiently focused as an organization? Are we sufficiently listening to our customers? Are we hiring the right people?
All of the execution and focus components, are we building the right culture in the organization? Are we giving the right freedom and autonomy in the organization? All of these things around execution, that's where we spend most of our brain cycles, our thought cycles, making sure that we're doing that right. I think that's our biggest risk.
That's great. Ethan, thank you so much for joining us today. It was a great conversation.
Thank you.