BASF ESG Report

We are invested in the global payments platform Adyen. The company offers the full payment stack including gateway, risk management, processing, acquiring and settlement. Adyen have an impressive range of clients: Microsoft, Uber and Spotify in the world of enterprise and digital; H&M, Subway and GAP in retail; and the leading exchanges eBay, Alibaba and Etsy.

Adyen’s key competitive advantage is that they offer a common back-end infrastructure for authorising payments across online, mobile and in-store merchant sales channels. This single platform enables all transactions, irrespective of channel, to be similarly identified in the merchant’s system, giving the merchant a unified view of all transactions. Thus provides shopper insights, and helps combat fraud. The single platform in turn also gives shoppers a uniform experience across all sales channels. A further advantage of the standardised platform is that technology updates can be very quickly updated across all geographies. Adyen, 
for example, were the first to introduce the 3DS2 tool to solve for new PSD2 regulatory requirements. Crucially the common back-office infrastructure has produce industry- leading 80% payment acceptance rates. Interestingly, Adyen are currently introducing network tokens which may increase authorisation rates by a further 2-6%.

Sales could grow by some 40% per annum over the next few years. Adyen’s large multinational or Enterprise segment should continue to grow strongly as existing clients further develop their own online offerings and expand into new geographies. As much as 80% of growth comes from existing clients. Adyen have also been successful at adding new merchants. As we mentioned earlier, the company’s single, ‘Unified Commerce’, platform is a powerful competitive advantage which should enable market share gains. For example, Adyen has taken on eBay 
as a new customer, which should add 15% to revenues in 2021. Adyen are also now approaching smaller companies with a simpler, ‘like a camera with an auto setting’, ‘Mid-market’ offering. Geographically, there also remain great opportunities in LatAm where credit card penetration is very low (50%) and Adyen technology is superior to local operators. There 
is also an opportunity in countries like Japan where digital payments remain underdeveloped.

Whilst the share is optically expensive, trading on 70 times 2023 earnings, it is nevertheless reasonable value considering that the business should grow at some 40-50% per annum 
over the next 4 to 5 years. The business is highly profitable, generating a 56% EBITDA margin.