So here’s the good news. Investor interest in Europe’s financial technology sector has never been higher. According to a report published in September last year by Innovate Finance and Magister Advisers, VCs poured around $8bn into fintech startups and early stage companies across the continent between 2010 and 2017 and over the course of that period, deal sizes rose significantly. In London - generally considered to be Europe’s Fintech Hub - figures published in January  by London and Partners found that the UK’s fintech sector attracted £1.24bn in 2017 alone.

Looking ahead, the European Union as a whole and the United Kingdom have both implemented regulatory changes intended to make it easier for fintech companies and challenger banks to gain traction in the market. As covered previously in this column, the UK’s new open banking regulations require major banks to share account data with licensed smaller rivals. Meanwhile, the EU’s Payment Services Directive 2 is intended to help non-bank financial service providers to compete on a level playing field with banks and other institutions.

Rising Above The Herd

All of which should be music to the ears of ambitious financial technology entrepreneurs but coming up with a great idea to ‘ revolutionize’ payments or provide an alternative savings and banking platform doesn’t guarantee success. For one thing, the sheer scale of fintech activity - not just in Europe but elsewhere in the world - means that this is an incredibly competitive marketplace. Added to that, even the best ideas can run aground on the rocks of customer disinterest or scepticism.

So how do you attract customers and rise above the herd?

Pieter van der Does, co-founder and president of payments company Adyen may have an answer to that question.

Established in 2006,  the Amsterdam-based company is currently valued at around $2.3bn and has has built a portfolio of more than 4,000  clients, including Netflix, Facebook, Uber and Spotify, plus retailers such as River Island and Superdry.

Perhaps the most surprising thing is that Ayden launched into  a segment of the payments market that was already well served. Put simply, Adyen offers a platform that enables retailers to accept payments, not only from customers using Visa, Mastercard and Amex  cards but also a wide range of alternatives, such as the payment solutions offered by Apple, Google and Paypal.

As such, Adyen’s service operates very much in the background. Consumers - those who subscribe to Netflix or buy from Superdry - are unaware of it. And for its partner customers, you could argue that it is merely a facilitator. It is a company that provides an essential but glamor-free service at the coalface of e-commerce.

So how has it succeeded in building a 4,000 customer base?

Start Slowly

Adyen started with an advantages in that Pieter van der Does already had form in the sector. In the 2000s, he was a founder of payments company BitBit, which was subsequently sold to RBS (Royal Bank of Scotland). van der Does went on to serve on the RBS board.

But as van der Does acknowledges, Adyen’s first challenge was to acquire customers and even with a track record, it wasn’t realistic to go straight after ‘big names.’ The first step was to go after low (or at least lower) hanging fruit. “Initially we did a lot with gaming companies,” he says. “One we had those companies, it was possible to bring the bigger companies on board.

Differentiation

As van der Does sees it, the key to gaining market traction was differentiation. So rather than simply providing a platform through which merchants could take payments, Adyen set out to add value. To be credible the company needed to create a global platform but  the plan was to offer something more than a commoditized service.

“The incumbents in the market were perceived in terms of IT,” he says. “But we set out to offer something that would serve the merchants.”

One component of that approach was a focus on customer data - and in particular, the kind of data analysis that would allow merchants to detect potential fraudster. Adyen claims a smart analytics system that not only helps merchants to reject potential fraud but also validates genuine customers who might - on other platforms - find their cards are not being accepted. As such, the company claims to boost card approval rates.  In addition, the system provides insights into shoppers and their spending habits. “A lot of companies claim to to collect a lot of data, but they are not necessarily using it well,” he says.

On the customer side of the equation, Adyen focuses on ease of use. For instance, reducing the complexity of logins and creating a user-friendly app interface.

A Changing Market

Now more than ten years old, Adyen could probably be described as fintech veteran - one of the old guard. So the challenge is to keep up with the changes as new wave of players at a time when a wide range of technology-driven financial services businesses are sucking up investment and bringing products to the market. Arguably, it's the incumbent banks that have most to lose as alternative-banking platforms fight to steal market share. But the payments market is one of the hottest sectors, meaning that relatively well-established players such as Adyen have to stay ahead of the game.

Commenting on the arrival of the EU’s Payment Services regulations (implemented on January 13) van der Does says: “New payment methods will come on stream and that will create questions for merchants.”  But it also creates questions for Adyen in terms of which methods to support. Van der Does says the company has to remain  nimble in terms of identifying and supporting those payment methods that are likely to achieve traction in the marketplace.  At the moment that means supporting more than 100 payment methods but also making choices about those not to support. “We are making choices on behalf of the merchants,” he says.

It’s a reminder that Fintech is continuing to disrupt markets and change the face of e-commerce. More investment into the sector will continue that process