Payment processing companies Block (SQ 0.03%) -- formerly known as Square -- and Netherlands-based Adyen (ADYE.Y 0.53%) are often thought of as competitors. And in many ways, this is true. Both provide payments solutions to businesses, and while their target business customers aren't exactly the same, there is certainly some overlap.

However, there are more differences than similarities between the two businesses, and the two are partnering to maximize the value they are offering their U.S. customers.

Adyen and Cash App are teaming up

Adyen and Block's Cash App have announced a partnership to offer Cash App Pay to Adyen's U.S. customers. In a nutshell, Cash App Pay is a mobile payment tool that allows Cash App users to pay online and in store for purchases, and it will soon be available to Adyen's customers in the United States.

Cash App Pay already lets users pay for goods and services at Square Sellers and was made available to e-commerce sites outside the Square network a couple of weeks ago. A few retail brands, including American Eagle Outfitters and Finish Line, have partnered with Cash App to offer the feature. However, Adyen is the first financial technology platform to partner with Block to bring Cash App Pay to businesses on a large scale, so this is certainly an exciting development. After all, Adyen is one of the largest payment processing solution providers in the entire world, with hundreds of billions of dollars in payment volume through its ecosystem annually.

Why the partnership makes sense

Adyen is one of the largest fintech companies in the world. But unlike Block and PayPal Holdings, Adyen focuses on large businesses. Microsoft is an Adyen customer, as are Uber Technologies, McDonald's, and Etsy. You may recall that eBay surprised investors a few years ago by dropping PayPal as its preferred payments solution -- that was in favor of Adyen.

While Adyen has an extremely impressive customer base, it's also important to realize that one of the biggest reasons U.S. consumers largely haven't heard of it is that Adyen doesn't have any consumer-facing products. Block has Cash App, and PayPal is a consumer payment service, but Adyen doesn't have anything similar. It makes money from swipe fees based on its merchants' sales volume, but is purely a service provider to businesses, not individuals.

So, by partnering with Block to offer Cash App Pay, Adyen gets a piece of the consumer side of the payments business without having to build its own consumer payments platform. And from Block's perspective, this adds an extremely valuable feature to the already popular Cash App ecosystem.

What it could mean to investors

Adding Cash App functionality to Adyen's businesses could be a big win for the company, as Cash App has 80 million annual active users. But it's important to mention that the specific terms of the deal aren't known, nor is it known how often Cash App users will actually make use of the Cash App Pay feature, so it's tough to gauge what this could mean to Adyen's bottom line. The same logic applies to the deal from Block's perspective.

Having said that, this deal could certainly add value to both platforms, and could help both Block and Adyen increase the value they offer their customers.