Do you think the story on digital payments is already written? Not so fast. Though the conversion to digital money has made rapid headway against cold, hard cash in the last couple of decades, much of the world is still very much a cash society.

According to The World Bank, 76% of adults globally now have a bank account or an account with a mobile money provider -- up from 68% five years ago. However, having access to financial services is just the beginning. Especially in developing economies, the majority of people with access only made their first-ever digital payment during the pandemic. Suffice it to say cash is alive and well, and digital money can still (and is expected to) see significant growth going forward.  

In the minds of U.S. investors, that points to opportunities for PayPal Holdings (PYPL -0.12%) and its various subsidiary businesses like Venmo. But PayPal's growth has been slowing and business execution issues have come up as the effects of the pandemic wear off. Before buying PayPal on the dip, give Dutch financial technologist Adyen (ADYE.Y 1.80%) a serious look first.

The difference between a consumer-facing app and a trusted business partner

PayPal and Adyen are both digital payments giants, but most consumers have never heard of the latter. Rather than building consumer-facing apps like PayPal has done, Adyen has instead come to the market from the other side of the equation. It works behind the scenes building a digital point-of-sale system for merchants, whether that's for in-person transactions or for e-commerce.

Adyen has focused on large businesses with its payments and financial management systems. An impressive list of customers are named on its site, from fast food superstar McDonald's to music-streaming giant Spotify. Remember when eBay decided to ditch PayPal a few years ago in favor of its own digital payments service? It's Adyen that is now silently powering the e-commerce company's own payments platform.  

That's part of the beauty of Adyen. While PayPal is a household name in financial services technology, Adyen is happy to provide a white-label service that merchants of all types can slap their own name on to build a stronger relationship with their customers. And as more big merchants around the world get up to speed with the digital times, Adyen is a perfect fit as a trusted fintech partner. 

An economic slowdown creates speed bumps

Adyen's incredible potential shows in the numbers. During the first half of 2022, the company processed 346 billion euros worth of transactions, a 60% year-over-year increase. That equated to 609 million euros in revenue in the first half of the year, up 37% from 2021.

A global economic slowdown will no doubt put a damper on Adyen's trajectory going forward this year and into 2023. Plus, the fact transactions are reported in euros (remember, this is a Dutch company) can be problematic for U.S. investors. The dollar has been on a record run this year, a side effect of the U.S. Federal Reserve's aggressive interest rate hikes. As a result, the dollar has gained in value against the euro. A stronger U.S. dollar lowers the value of overseas revenue and profitability. 

At some point, though, the dollar's run will slow -- perhaps even reverse a bit -- once the Fed is content with its work. That could be incredibly bullish for Adyen. This company is growing fast and is incredibly profitable. Free cash flow was 309 million euros in the first half of 2022, a whopping free cash flow profit margin of 51%. That puts Adyen in the same camp as digital finance infrastructure companies Visa and Mastercard in terms of profit-generating ability.  

In comparison, PayPal is projecting revenue growth of about 10% this year. Free cash flow margins for PayPal sit at about 20%. Economic challenges and currency exchange-rate issues are hitting the far-larger PayPal too, making Adyen the better business from a growth perspective.

Is Adyen the better buy?

As of this writing, PayPal trades at an enterprise-value-to-EBITDA ratio of 26. Adyen trades for a much-higher premium EV/EBITDA ratio of 45. However, for a 70% premium over PayPal, investors get a company that is far more profitable, growing revenue more than three times as fast, and has zero debt and lots of cash.

I own PayPal stock and plan on holding through its current downturn, but Adyen looks like a much-better buy right now. My new investment dollars for a digital payments stock will go toward Adyen.