J.正式版. 摩根-美股支付与IT服务业：支付市场份额手册（第12版）-2021.5.21-119正式版

NorthAmericaEquityResearch

21May2021

PaymentProcessing

PaymentsMarketShareHandbookTwelfthEdition

Thisreportisaprimerandoverviewofthepaymentprocessingecosystem,summarizingthelatestmarketshare,growthandpenetrationtrendsforpaymentsworldwide.Specifically,thereportincludes:

Anoverviewofthepaymentprocessing/servicesecosystemandindustryparticipants(i.e.,whoaretheplayers,andwhatservicesdotheyprovide?)–amarketsizedbyMcKinseytobe~$1,900Binglobalpaymentrevenues.

Alookatthepaymentprocessingandservicesvaluechainandeconomicmodelofvarioussub-sectors,includingfundflowdiagramsofcard-basedpaymenttransactions.

Alookathistoricalvolumegrowthtrendsandpenetrationmeasuresfordomesticandinternationalcardmarkets,highlighting(1)cardpenetrationhasgrownabout150bpsperyearintheU.S.andlikelytripledthatpaceduringthepandemic(weestimateeverypointofPCEpenetrationequatesto~250bpsofaggregatevolumegrowthtoMastercard/Visa),and(2)fastergrowthpotentialoverseasfueledbylowerpenetrationratesformanyyearstocome.InapostCOVID-19world,weseeapull-forwardofseculargrowthledbye-comm/omni(advancedbythreeyears),contactlessandB2Bautomation.

Marketconsolidationremainsathemeandshouldcontinue,especiallyasdistributionandconsumptionofpaymentsshiftstodigitalandsoftwaremodels,forcingincumbentstoembracetech-baseddistributionandacceptmoreofawholesaleroleorrisklosingsharetocontemporarychallengers.Wecontinuetoexpectagrowingdividebetweenbank-baseddistributionandtech-baseddistributionmodels.Tech-baseddistributionshouldcontinuetogrowat2xthemarketforyearstocomeandisjust~12%penetratedintheU.S,butgrowingrapidlyaslegacysystemsarereplacedbymoderncloudsolutions.

Ananalysisoftheinternational“greenfield”opportunity,focusingoninternationalmarketsthatmostresemblethatoftheU.S.(fromaGDPpercapitaperspective)andthespreadbetweenmatureandemergingmarketcard-basedpenetrationrates.Weidentifiedaboutadozenkeyinternationalcountriesthatwethinkarethemostimmediatecashconversionopportunities.ThebiggestrisktoTAMisnationalism,inourview,asmorecountriesconsiderdevelopingdomesticpaymentschemestogaingreatercontrolandreducedependencyonforeignbrands.

Marketsharebreakdownofthepaymentnetworks,domesticacquirers,domesticcreditanddebit,domesticPIN-debit,prepaid,POSterminalprovidersandkeyissuers.Wealsotouchupontheemergenceofon-demandbanking,neo-banks,andtherenewedinterestinB2Bpayments.

Payments,Processors&ITServices

Tien-tsinHuang,CFAAC

(1-212)622-6632tien-tsin.huang@BloombergJPMAHUANG<GO>J.P.MorganSecuritiesLLC

ReginaldL.Smith,CFA

(1-212)622-6743reginald.l.smith@J.P.MorganSecuritiesLLC

AndrewDPolkowitz

(1-212)622-1219andrew.polkowitz@J.P.MorganSecuritiesLLC

PuneetJain

(1-212)622-1436puneet.x.jain@J.P.MorganSecuritiesLLC

HiteshMalla

(91-22)6157-3897hitesh.malla@J.P.MorganIndiaPrivateLimited

Seepage116foranalystcertificationandimportantdisclosures,includingnon-USanalystdisclosures.

J.P.Morgandoesandseekstodobusinesswithcompaniescoveredinitsresearchreports.Asaresult,investorsshouldbeawarethatthefirmmayhaveaconflictofinterestthatcouldaffecttheobjectivityofthisreport.Investorsshouldconsiderthisreportasonlyasinglefactorinmakingtheirinvestmentdecision.

Tien-tsinHuang,CFA(1-212)622-6632tien-tsin.huang@

NorthAmericaEquityResearch

21May2021

TableofContents

PaymentServicesOverview

4

IndustryPlayers

4

OtherPaymentServiceProviders

8

IndustryLinesBlurring

9

ValuationsHighestinDigitalandMerchantSub-Sectors

12

PaymentProcessingEconomics

13

MerchantAcquirerandProcessorEconomics

13

PaymentNetworkEconomics

15

SampleDebitFundFlows

17

SampleCreditFundFlows

18

DomesticCardMarket

19

ALookattheRiseofElectronicPayments

19

DomesticMarketShouldContinuetoGrowataPremiumtoRetailSales

22

DomesticBankcardVolumeContinuestoGrowataPremiumtoBroaderRetail

Sales

28

InternationalCardMarket

30

InternationalGrowthLagsThatintheU.S

30

DomesticSchemesontheRise?

33

ChinaOpeningbutRemainsElusivetoForeignFirms

34

DomesticMarketCaseStudies

35

SizingtheInternationalOpportunity

41

U.S.CreditCardSnapshot

44

BuyNow/PayLaterEmergingasanAlternative,ButItLooksMoreLikeDebitthan

Credit

47

U.S.DebitSnapshot

49

PINvs.Signature

51

DomesticCardIssuers

55

U.S.MerchantAcquiringSnapshot

57

AcquiringMarketShareShiftThroughTime

57

MerchantAcquiringDistributionGoingTech

61

PlentyofOpportunitytoSupportNewEntrants

62

MerchantAcquiringConsolidation

64

POSTerminalProviderSnapshot

67

GeographicalMarketShares

69

IntegratedPOSSolutionsGainingTraction

71

FocusonSecurity

75

On-DemandBanking

76

AmericansLargelyBanked,IncreasinglyDigital

77

AddressableMarket:EveryonewithaSmartphone

78

>$30BNear-TermInterchangeOpportunity

78

2

Tien-tsinHuang,CFA(1-212)622-6632tien-tsin.huang@

NorthAmericaEquityResearch

21May2021

On-DemandBanking:CompetitiveSummary

79

On-DemandBanking&PrepaidValueChain

81

DigitalCommerceSnapshot

81

SizingDigitalCommerce(ExclIn-StoreProximityPayments)

81

Globale-CommerceOutlook

83

U.S.e-CommerceTrends

83

E+M=DigitalCommerce

85

eCommerceShiftingtoMobile

88

ExtendingintothePhysicalWorldwithProximityPayments

89

Person-to-Person(P2P)AppSurvey

90

B2BPaymentMarket

94

AR/APSpaceIsGiganticbutComplicated

95

PointofInteraction:CardableMarketOpportunity

97

TheEuropeanPaymentsMarket

98

PSD2andOpenBanking

99

TheCanadianPaymentsMarket

101

TheLatinAmericanPaymentsMarket

103

TheAsiaPacificPaymentsMarket

109

Mastercard/VisaTaleoftheTape

112

PaymentVolumeMix

113

3

Tien-tsinHuang,CFA

NorthAmericaEquityResearch

(1-212)622-6632

21May2021

tien-tsin.huang@

PaymentServicesOverview

Thepaymentprocessingindustryprovidestheinfrastructureandservicesthatfacilitateandenableelectronicpayments.Keyindustryparticipantsincludemerchantacquirersandprocessors,paymentnetworks,cardissuerprocessors,cardissuers,point-of-sale(POS)terminalmanufacturersandgatewayproviders.Thedigitizationofpaymentshascreatedsomehybridcompanies/servicesineachoftheaforementionedareas,butthecoreplumbing,whichreliesheavilyondistributionandscale,remainslargelyintact.Theindustryischaracterizedbyrecurringrevenues,highoperatingleverageandrobustfreecashflowgeneration,fueledbythecontinuingsecularshiftfrompapertoelectronicformsofpayment.

Figure1:CardTransactionFundFlow

Source:J.P.Morgan.

Theterms“merchantacquirer”and“merchantprocessor”areoftenusedsynonymously,buttheyare,infact,twodistinctfunctionsthat,insomecases,areprovidedbythesameentitybutcanbeprovidedbyseparateentities.

IndustryPlayers

MerchantAcquirers

MerchantAcquirersarethe“distributionandsales”armofthepaymentsindustry.Acquirerssignmerchantstocardacceptanceagreementsandaretypicallythemerchant’sfirst(andprimary)pointofcontact,contractingdirectlywiththemerchant.Acquirersearnagross“discountrate”ofroughly2%ofthesaleamount,mostofwhichisremittedtothecardnetworkandultimatelythecardissuerasinterchangeincome.Netacquiringrevenues(netspreadaftersubtractinginterchangeandpaymentnetworkfees)areafixedtransactionfee(forlargermerchants)and/orapercentageofthesaleamount(forsmallermerchants).Merchantacquiringspreadsareinverselycorrelatedwiththesizeofthemerchant.PubliclytradedmerchantacquirersincludeAdyen,Cielo(Brazil),EVOPayments,Fiserv(FirstData),GlobalPayments,Square,andFIS(Worldpay).SeverallargeacquirersareownedbybankslikeChaseMerchantServices(formerlyPaymentech),Elavon(U.S.Bank),andBankofAmerica(post-BAMSJVdissolution).Merchantacquirerscomeinvariousformsandsizes,includingbanksubsidiaries,bankjointventures,unaffiliated/independent

4

Tien-tsinHuang,CFA(1-212)622-6632tien-tsin.huang@

NorthAmericaEquityResearch

21May2021

directsalesfirms,independentsalesorganizations(ISOs),independentsoftwarevendors(ISVs),VARs,etc.See

Table25

foralistofthetop10merchantacquirersintheU.S.Wenotethetop10U.S.merchantacquirerscapture75%ofbankcardpurchasevolume,andweexpectongoingconsolidation.

AcquiringIsAllAboutDistributionandScale

Merchantacquiringisdifferentiatedbysalesapproach,astherearemanychannelstoaccessthefragmentedmerchantmarket.Keysaleschannelsincludebanks,non-bankscaleprocessorsandtheirsalesforces,ISOsandISVs.Itiscommonforlargecommercialbanks(e.g.,WellsFargo,Citi,BankofAmerica,etc.)tohavejointventuremerchantacquiringpartnershipswithlargeprocessors.Thejointventurestructureallowsbankstosellmerchantacquiringservicesthroughtheirextensivebranchnetworkandsmallbusinessbanking/treasuryrelationshipswithoutthehassleorcostofbuildingtheirownpaymentprocessinginfrastructure.Bankacquirersclaimabout~45%ofthemarket,highlightingthestrengthoflegacybankingrelationships.However,non-bankentitiesaregenerallygrowingfasterduetotheircommission-drivensalesforcesandimprovedtechofferingsdesignedtohelpretailersruntheirbusinessesbetter.

Figure2:MerchantAcquiringIsAllAboutDistribution

Source:CompanyreportsandJ.P.Morganestimates.

IntegratingPaymentswithSoftwareHasBeenaWinningModel…

Integratedpaymentsisthemarryingofpoint-of-salehardware,businessmanagementsoftwareandpaymentprocessing.TherehasbeenanincreasedfocusonintegratedPOS,asmerchantsareincreasinglydemanding(andbenefitingfrom)integratedsystemsduetoanumberoftrends,including(1)decreasingcostoftechnology(e.g.,cloud),(2)demandformorepaymentoptions(e.g.contactlesspaymentssuchasApplePayorQR-code),(3)specializedindustry-specificsoftwareembeddedinsuchsystemstoimprovebusinessoperations,(4)newsecuritystandards,and(5)theproliferationoftablets.Thewinningdistributionmodelforsmallandmid-sizedmerchantsshiftedfrom“feet-on-the-street”salestotechnology-ledsalesaboutfivetosevenyearsago,sparkingan“armsrace,”aslegacyacquirerssoughttechpartnerstoembedtheirpaymentsolutionsinto:FDCbuyingCardConnect;GPNbuyingPayProsandAPT;WPbuyingElement,Mercury,Moneris,andPaymetric;TSYSbuyingTransFirstandCayan.

5

Tien-tsinHuang,CFA(1-212)622-6632tien-tsin.huang@

NorthAmericaEquityResearch

21May2021

…ButPowerIsShiftingtoSoftwareProviders–RiseofPayFacs

Afteryearsofpartneringwithmerchantacquirersforacutofprocessingrevenues,savvysoftwareprovidersareincreasinglybringingthepaymentelementin-house(becominga“payfac”)toretainabiggerportionofthemerchantacquiringeconomics.SquareisperhapsthemostfamousoriginalPayFac,retainingthelion’sshareofacquiringeconomics,whilepayingitsback-endprocessorpenniespertransaction.AmorerecentexampleofanISVconvertingtothePayFacmodelwouldbeLightspeed,utilizingtechnologyfromFinixtotakepaymentsin-housewithWorldpayasprocessor,andmorerecentlytappingStripetoenterCanadaandotherU.S.verticalsandAdyenoverseas.Softwarehasbecomethekeymeansofmerchantengagement,evidencedbythesuccessofSquare,whichgivesawayitsbasesoftwareinhopesofmonetizingpaymentsandotherservices.AnotherexampleisGlobalPayments,whichhasacquiredsoftwareassetsoutright(e.g.,AdvancedMD,ACTIVENetwork,Zego)foritssalesforcetodistributeandpenetratepayments.Moreover,companieslikeBraintreeandStripehavequicklygainedscalebyfocusingondigitalcommerceanddevelopingpaymentAPIspopularwiththedevelopercommunitytopower-leadingmobileappsanddigitalplatforms/marketplaces.

MerchantProcessors

Merchantprocessorsarethegatewaytothepaymentnetworks,providingauthorization,datatransmission,datasecurityandsettlementfunctionsasanoutsourcedservicetomerchantacquirers.Processingisascale-drivenbusiness,withonlyahandfuloflargeplayers,andisoftenanoutsourcedserviceutilizedbymerchantacquirers.Inotherwords,merchantprocessingisacostofgoodssoldformerchantacquirers.Scaleprocessorsinclude:Fiserv(FirstData),GlobalPayments/TSYS,andFIS(Worldpay).Processorstypicallyearnaflatfeepertransactionprocessedandsourcetheirtransactionsfromtheirownsalesforce,bankpartners,VARs,ISVs,and/orfromindependentsalesorganizations(ISOs)thatoutsourcetheirnetworkgatewayandprocessing/settlementneeds.

MerchantAcquirersandMerchantProcessorsAreNottheSame,ButCanBeIncludedIntheSameEntity

Theterms“merchantacquirer”and“merchantprocessor”areoftenusedsynonymously,buttheyare,infact,twodistinctfunctionsthat,insomecases,areprovidedbythesameentity,butcanbeprovidedbyseparateentities(see

Figure3

and

Figure4,

below).ThetopthreemerchantprocessorsrankedbyvolumeareFirstData,ChaseandWorldpay.

6

Tien-tsinHuang,CFA

NorthAmericaEquityResearch

(1-212)622-6632

21May2021

tien-tsin.huang@

Figure3:U.S.MerchantAcquiringVolumeShare–2020 Figure4:U.S.MerchantProcessingVolumeShare–2020

Source:TheNilsonReportandCompanyreports.

Source:TheNilsonReport,CompanyreportsandJ.P.Morganestimates.

Table1:TopU.S.MerchantAcquirersandRespectiveProcessors–2020

Acquirer

BankCardVolume

Market

Processor

($bn)

Share

ChaseMerchantServices

1,205

20%

In-house

FIS(incl.Worldpay)

700

12%

In-house

WellsFargo

650

11%

FirstData

GlobalPayments(incl.TSYS)

502

8%

In-house

Fiserv(incl.FirstData)

446

8%

In-house

BankofAmerica

438

7%

FirstData

Elavon

219

4%

In-house

CitiMerchantServices

190

3%

FirstData

PNCMerchantServices

48

1%

FirstData

Truist

45

1%

FirstData

Source:Companyreports,TheNilsonReportandJ.P.Morganestimates.

PaymentNetworks

Paymentnetworksarethebackboneoftheelectronicpaymentssystem,connectingandswitchingtransactionsbetweenacquiringbanksandissuingbanks,enablingelectronicpaymentauthorization,clearingandsettlement.Networkprovidersgoverninterchangeratesfortheirrespectiveissuers,setrulesandcompeteonthebasisofmerchantacceptance,reliability,priceandadditionalvalue-addedservices.Networkoperatorsearntransactionalfeesbasedonthenumberoftransactionsprocessedandinsomecasesalicensingorassessmentfeebasedonthenotionalpurchaseamount.Notablenetworkprovidersinclude:Visa,Mastercard,AmericanExpress,eftpos(Australia),Discover/PULSE,Interlink(Visa),NYCE(FIS),Accel(FISV),UnionPay(China),Interac(Canada)andSTAR(FirstData).

CardIssuerProcessors

Issuerprocessorsprovideoutsourcedauthorization,settlement,customerservice/callcenters,loyaltyprogramadministrationandstatementprintingandmailingservicestothecardissuingcommunity.Notablescaleplayersinclude:TSYS(GPN),FirstData(Fiserv)andFIS.Issuerprocessorshavehistoricallyearnedanominalmonthlyservicefee(peractiveaccount)fromthecardissuer,andinmanycasesatransactionfee,butcanalsosignlicensingagreementswiththelargestcardissuersinterestedinrunningthisfunctionin-house.AccordingtoS&P,thetopsixissuerprocessors(FIS/WP,FISV/FDC,GPN(TSS),JKHY)capture90%ofspending.However,therearemoderncardprocessorslikeConductor,Galileo(acquiredbySoFi),i2candTutukagainingscalebyprovidinginstantissuanceofphysicalandvirtualcards

7

Tien-tsinHuang,CFA

NorthAmericaEquityResearch

(1-212)622-6632

21May2021

tien-tsin.huang@

See

Figure66,

onpage

68,

forsummarymarketshareofPOSterminals

popularwithfintechs.Webelievethereare200issuerprocessorsintheworld,over30%lessthanonthemerchantprocessingside.

TSYShassizedtheissuerprocessingmarketat$7Binannualrevenues(includesNorthAmericaandWesternEurope)andexpectsittogrowlow-singledigitsannually.Nilsonestimates2020U.S.card-basedspendingat$6.7T(+3%y/y),implyingatakerateof+/-10bps(lowerinEuropeduetomoreinterchangeregulation).Issuerprocessorsofferplatformsuniquetodifferentproductslikecreditcards,debitcards,private-labelcards,virtualcardsandpre-paiddebitcards.Assuch,themajorityofcustomersutilizingcard-issuingservicesarerepresentedbylargebanks,butFintechsarebecomingimportantclientsaswellwithuniquedigitalneedsthatrequiremodernplatformsandtools.

CardIssuers

Cardissuersmarketcard-basedproductstoconsumers,generatingtransactionfees(e.g.,interchange),nuisancefees(e.g.,latefees)andnetinterestmargininthecaseofrevolvingcards.U.S.cardissuersearninterchange,~180bpsofthepurchaseamountforcreditcardtransactionsandabout~$0.25pertransactionforregulateddebittransactionsintheU.S.Cardissuerstypicallypaythenetworkanegotiatedtransactionfeeandaroyaltyfeebasedonthepurchaseamount,whichtogetherrunabout5bpsto10bps(JPMestimate)intheU.S.

OtherPaymentServiceProviders

POSTerminalProviders

POSterminalprovidersdesignandmanufacturepaymentcardreaderdevicesandsystems.Historically,theglobalPOSterminalspacewasdominatedbytwoglobalproviders:VerifoneandIngenico.In2009,thetwohadacombinedmarketshareof58%,whiletodaytheyaccountforjust18%ofshipments.Since2009,themarkethasfragmented,aslower-costAPACplayershavecapturedshare,demonstratedbyChina-basedTianyu’s10%marketshare,withChina-basedcompetitorsNewlandandXinguoduowning6%shareeach.Wenotetheemergingmarketsoverall–whichwedefineasAsiaPacific,LatinAmericaandtheMiddleEast–accountedfor~87%ofallterminalshipmentsin2019(flatto2018)andhaveprogressivelybeenbecomingagreaterdriverofoverallglobalshipments(comparedwith30%in2005),mirroringthegrowthinoverallpaymentvolume.

Historically,terminalprovidersearned“one-time”hardwarerevenuesfromthesaleofsystemstoacquirers,merchantsanddistributors,butterminalprovidersareincreasinglybranchingoutintoSaaS,serviceandmaintenanceareas(e.g.,gatewaymanagement,dataencryption,etc.),allowingthemtoearnrecurringrevenues.Therealestateatthemerchantisvaluable,andhighlycomplex,andterminalprovidersareincreasinglylookingtomonetizethispositionandtransitiontoas-a-servicemodels.Moreover,replacementcyclesareshrinkingassecurity(e.g.,EMV)andnewtechnologies(e.g.,NFC)emerge.Assuch,newentrantsleveragingmobileandtablettechnologyareattemptingtodisruptthemarketbutmustovercomesignificantcomplianceanddistributionchallenges.

GatewayProviders

Gatewaysarethedigitalequivalentsofphysicalterminalsandservetocapturetransactionsatthepoint-of-sale,translatetransactionsintothepropermessageformat,anddistributetothedesignatednetwork.Gatewayprovidersincluderetailgatewaysthatconnecte-commercetransactionstomerchantacquirersandalsowholesalegatewaysthatinterfacebetweenmerchantsofrecordandmerchant

8

Tien-tsinHuang,CFA

NorthAmericaEquityResearch

(1-212)622-6632

21May2021

tien-tsin.huang@

processors.ExamplegatewaysincludeCybersource(Visa),A,Adyen,2Checkout,C,Braintree/PayPal,Intuit,GlobalCollect(Ingenico),StripeandVerifone.

IndustryLinesBlurring

Historically,theaforementionedindustryplayersavoidedconflictsofinterestbystayingintheirlaneandservingeitherthemerchant,issuerorconsumer.Asshownin

Figure5,

below,cross-consolidationhasstartedtoblurthelinesbetweenclassicindustryplayersandhasfurthercomplicatedthepaymentsvaluechaintocreatemorecompetitionbeyondscale.Weattributethischangeinpartto(1)agradualre-distributionofwealthawayfrombankstotechfirmsthatareunafraidofcompetingandpartneringand(2)vendorslookingtoenhancelifetimevalueofcustomerbyaddingmorebreadthofservicestocross-sell.

Figure5:Cross-ConsolidationHasComplicatedthePaymentsValueChain

Source:Companyreports.

ConvergenceofIssuerandMerchantProcessors

Consolidationinthepaymentsindustryhasbeenthenorm,butthattrendwasamplifiedin2019withthreemega-mergersthatcombinedmerchantprocessorswith

9

Tien-tsinHuang,CFA(1-212)622-6632tien-tsin.huang@

NorthAmericaEquityResearch

21May2021

bank/issuerprocessors–the(1)$35BmergerofWorldpay(merchant)andFIS(bank/issuerprocessor),(2)$40BmergerofFirstData(merchant)andFiserv(bank/issuerprocessor),and(3)~$22BmergerofGlobalPayments(merchant)andTSYS(issuerprocessor).Ironically,Worldpaywasoriginallywhollyownedbybanks(WorldpaywasthemerchantdivisionofRBS,whichmergedwithVantiv,themerchantunitforFifthThird),thenspunouttoraisecapitalduringcreditcrisis,andthrivedasapubliccompany.So,itisinterestingtoseeWorldpayendupbackclosertowhereitcamefrom,withabank/cardprocessorthatprioritizesbanks(notmerchants).

ConvergencePittingTechAgainstBanks;Product/Capabilityvs.Distribution

WeviewtheFIS/Worldpaymergerasthelatestexampleofapaymentserviceproviderchoosingteams,inthiscasethebankteam,inthelonggameofwinningshareinthelucrativepaymentspace.Asdiscussedthroughoutthisreport,paymentsareincreasinglybeingdistributedandconsumedviatechnology.Thebanksaretheincumbentsinpaymentsgiventhebanks’advantagedpositionastrusteesofmoneypluslotsofscaleanddistributionviabranches.Technologyfirmsaregainingtrustgivenadvancementsinsoftwaredevelopmentinproductsandcapabilitiesthatappealtospendersandsaversofmoney.Asaresult,we’veseenbanksandbankprocessorsaddcapabilitiesbyacquiringtechnologyandprocessingassets,pittingbanksagainsttechnology/softwarefirmsnotonlyforshare,butforqualityacquisitionsaswell.Thisiswhyweexpectconsolidationtocontinue.

Figure6:MerchantAcquiring–PickingSides

Source:CompanyreportsandJ.P.Morgan.

Webelievetechnology/software(ratherthanpricingandlegacybankingrelationships)willcontinuegrowinginimportanceasakeydifferentiatorformerchantsandissuersinchoosingtheirpaymentpartner.Legacyacquirershavehedgedtheirriskplaysbyconsolidatingtogainscaleeconomics,(1)investinginsoftwaredistributiontomarketdirectlytomerchants,whilealso(2)sharingthosesoftware/techcapabilitieswiththebanksthathavenotmanaged/investedinmerchantsoftwareintegrationsthemselvesinexchangeforvastdistribution.Ontheotherside,techfirmscontinuetooutdeveloplegacycounterparts,quicklyaddingdepthinfunctionalitythatmodernmerchantsdesire(e.g.,curbsidepick-upmodulestodealwithpandemic),whilealsoaddingmorebreadth(e.g.,Stripeaddingissuingand

10

Tien-tsinHuang,CFA(1-212)622-6632tien-tsin.huang@

NorthAmericaEquityResearch

21May2021

treasuryservices,Adyenadd