Quality & growth runaway intact, but at a slower velocity than what many thought. High-teens IRR at conservative numbers in the long-term. Street oversimplifies headlines.
Thanks this is a very thorough and insightful writing.
I do have two question though:
1) I see some comments referring that Braintree's accelerated growth are not about price cutting but through better authorisation rates e.g. more advanced technology adoption such as Payment tokenization. Do you think this could factor more in their recent share winning? After all both PayPal's former CEO and CFO have claimed that they did not aggresively lower the unbranded rates, which negates some analysts' view.
2) In your comparison of Braintree vs Adyen full-stack growth, why do you adjust the number of PPCP effect out? Because it seems like this part revenue from platform prove to be very important for Braintree and they plan to grow with it much more in the future.
1) No I don't think this explains. For example, Stripe and even Global Payments have much better technology than Braintree and yet do not outgrow BT. It's def possible to read a few customer testimonials pointing to that (I haven't), but the overwhelming majority of checks mention better "pricing" (i.e., button discounts). To the c-level comments, they may be somewhat right on processing pricing because what I believe is really driving adoption of BT is button discounts, not processing pricing per se.
2) Two things: 1) Adyen's exposure to SMB clients is <1% so it's not quite comparable, 2) PPCP volumes are not customer wins nor wallet share gains - those SMBs were already PayPal gateway clients that just switched now to full-stack processing. If Braintree reported total TPV growth (including gateway) like Adyen does, there wouldn't be any uplift in volume - only in take rates.
Thanks this is a very thorough and insightful writing.
I do have two question though:
1) I see some comments referring that Braintree's accelerated growth are not about price cutting but through better authorisation rates e.g. more advanced technology adoption such as Payment tokenization. Do you think this could factor more in their recent share winning? After all both PayPal's former CEO and CFO have claimed that they did not aggresively lower the unbranded rates, which negates some analysts' view.
2) In your comparison of Braintree vs Adyen full-stack growth, why do you adjust the number of PPCP effect out? Because it seems like this part revenue from platform prove to be very important for Braintree and they plan to grow with it much more in the future.
Thank you.
Thanks for reading. These are good questions:
1) No I don't think this explains. For example, Stripe and even Global Payments have much better technology than Braintree and yet do not outgrow BT. It's def possible to read a few customer testimonials pointing to that (I haven't), but the overwhelming majority of checks mention better "pricing" (i.e., button discounts). To the c-level comments, they may be somewhat right on processing pricing because what I believe is really driving adoption of BT is button discounts, not processing pricing per se.
2) Two things: 1) Adyen's exposure to SMB clients is <1% so it's not quite comparable, 2) PPCP volumes are not customer wins nor wallet share gains - those SMBs were already PayPal gateway clients that just switched now to full-stack processing. If Braintree reported total TPV growth (including gateway) like Adyen does, there wouldn't be any uplift in volume - only in take rates.