JUNE 5, 2022
12 min read
So many talks have been recently heard about Marqeta Inc and what it exactly does, and that’s already happening after a decade after its appearance in the market. So, we’ve decided to come up with the condensed version of the company’s origin, services, pricing, clients, values, and plans. All of this is gathered below for you to get this topic straight and have no questions anymore.
Founded in 2010, this California-situated company has been recently valued at $4.3 billion and is planning to increase its worth up to $10 billion by the end of 2021. Is it possible? Almost likely if the company won’t make the fatal mistake. Why so? Because of its product uniqueness! Notably, the Marqeta stock is a subject of interest for many business players.
Compared to the other fintech, which is mostly concentrated on wallets or payment tools, the company has shortened the distance between businesses, because of Marqeta card issuing. That’s the primary reason why it rocks among clients and evokes other financial firms’ desire to build partnerships with. But everything is more complicated than it looks at first glance. Let’s dive into its genesis deeper to grasp the fuss about it!
History of Marqeta’s Creation
The Marqeta company history, especially at the stage of its launching, greatly depends on the founder’s resilience at the time of trial, as it defines whether the young project will overcome the initial challenges or will be doomed. In this regard, Jason Gardner, Marqeta founder and CEO, is a positive role model who generously cut his salary by 40% for the startup to stay afloat. Two top executives decided to follow the initiative, and 4 years later, the company already occupied the 16-story office building in Oakland. And can something be a clearer proof of the firm’s from-year-to-year revenue doubling?
However, this would never happen if the company didn’t pass the bumpy ride to the determination of its business model. After the sales experience, Holdman Sachs turned his attention to the new usage patterns for debit cards, for example Instacart Marqeta card. He started with the creation of a loyalty prepaid card, which got available after the purchase at grocery stores or retailers, like Jamba Juice, for the symbolic sum of $50-$55. Though earning $6 million on this, the entrepreneur went on with the further idea generation. It was the Facebook-set product, which appeared in the market in 2013, offering the gift card for sending and exchanging at specific spots, such as Olive Garden or Target. This second business model didn’t appear so profitable, and its creator was to dissolve the business in a year. But Goldman didn’t grieve over the failure for long; instead, he directed his imagination to the new business plan. In 2014, the inexhaustible genius brought the third project — the Marqeta open API platform for clients’ interface customization and managing cash flows, which is serving the needs of the different companies till now.
All these events have laid the basis for becoming a notable Marqeta issuer processor. Today it’s a B2B company that builds a bridge between tech-savvy startups and powerful fin services providers. By omitting the mediator, the company presents high-level innovative products for both parties on short notice, which is surely a competitive advantage of the company compared to traditional banking.
What Does it Offer to Its Customers?
Before entering the scene, Marqeta payment platform conducted a prior consumer behavior survey, digital-only banks features they consume. According to its findings, 64% of users showed readiness for choosing a non-traditional financial institution to provide them with credit card issuing. Being inspired by the target audience’s response, Marqeta issuing bank announced the “you see a card, we see endless possibilities” motto and designed 3 types of them: physical, virtual, and tokenized. As the former two are already the widespread commodity, let’s dwell a bit on the last one. In short, tokenized Marqeta cards allow users the lifecycle management of the digital sync cards with Apple Pay or Google Pay. As a result of the token generation within the card network (usually, American Express, Visa or Mastercard), the client’s banking credentials and other sensitive information are kept secure. But what’s the novelty then?
In contrast to previous players in the market, Marqeta startup noticeably rocked in terms of time and cost of the card program implementation. Instead of months- or even a year-long waiting for banks to review and approve the card release, the customers could have their request handled and proceeded in a short space of time. Moreover, they acquired wider access to manage spendings and other important metrics through the convenient dashboard. Finally, users were provided with real-time funding and risk management services to make their digital banking experience even more pleasant and safer. Thanks to these perks, the clients’ loyalty were rooted on a deeper level, and the Marqeta revenue 2020 reached the $290 million mark. Looking at the current pandemic-related trends, its popularity should be growing further.
How Does Marqeta Work?
To realize the process of its card issuing, think first about the private sandbox, instant and contactless payments, shrewd fraud supervision, and customized user interface. Thanks to it, the service presents the perfect solution for Marqeta partners to go through the whole card lifecycle management with no obstacles and time delays. As a rule, the average card issuing project passes the following stages:
- Building & testing. This initial phase is mainly devoted to card creation, choosing the cardholder, and setting PAN, PIN, and CVC.
- Issuing. That’s the stage about Visa, EdEx, and Mastercard integrations and the first trial of your virtual credit card.
- Core API configuration. Here it’s time to determine the card verification mode and configure your card accordingly. You may create an API funding source for an application or user API based in the United States using this feature, which doesn’t need you to provide the vendor with account information such as your bank account number or routing code.
- Customization. At this moment, you can create your logo, signature, and other graphics for your brand. Besides, this phase is connected with NFC and EMV-chip enablement.
- Tokenization as a service. You can attach your card to the digital wallets and implement the tokens technology through the app.
- Card management. This stage is required for card activation via IVR, its fulfillment, and further control of all the operations with your cards and their balance, in lots of countries, in different currencies.
- Security embedding. This is the final step that will keep your sensitive card data in safe storage and ensure its exposure only to you.
How Does Marqeta Make Money?
Getting to the question of how Marqeta issuer makes money, we can draw the parallel between the company’s payments fee structure model and Visa’s or Mastercard’s ones. Factually, they do it similarly: gather and receive the definite cut of every transaction. Annual revenue growth is huge. Usually, the percentage is low and fluctuates from 0,5% to 2% commission rate, where the average index constitutes 1%. As this payment requirement is more than reasonable in the market, new and new clients are attracted to such a business proposal.
Its business model is simple. It enables DoorDash, Klarna, Square, and other services to operate. It offers a worldwide, cloud-based, open API Platform for card issuance and transaction processing. The company has three main capabilities: issuing, processing and applications.
Surprisingly, its revenue model resembles those of the companies it seeks to replace. MasterCard and Visa are two examples. The major source of income for the service is exchange fees. When a consumer uses an approved debit or credit card, the merchant bank pays the card-issuing bank a fee.
The service receives a higher percentage of the interchange charge than Marqeta competitors. “Our partnerships with issuing banks ensure we get 100% of the interchange fees,” the company’s prospectus states.
This favors the debit card business. To collect interchange fees, the company has collaborated with banks with less than $10 billion in deposits. Exchange fees also are a significant source of revenue. Interchange fees and issuer processing services generate revenue for the company.
What’s The Cost, and Who Are Marqeta’s Clients?
Among the clients, there are global partners of all sizes that get expertise in eCommerce, digital banking, finance management, on-demand delivery, and even travel. So, as you see, the range of business areas is quite varied, and now it’s better to look at a few names to evaluate brand awareness:
- DoorDash — the San Francisco food delivery company that issued debit cards to help its clients with safe and automated order-related transactions. Thanks to Marqeta’s tech solution, CTO succeeded in reducing fraud to less than 5%, which is almost a half in progress improvement.
- Marqeta Card Instacart — another delivery company for US and Canadian customers with a focus on grocery. Together with Square, the fin services and digital payments leader, Marqeta developed the cash app solution to support the debit card money transfer function for 6 weeks. The users are granted 2 options: virtual and plastic cards to quickly proceed with payments.
- Kabbage — the Atlanta-based cash flow management company offering the consumer lending service that also issued the debit card. As a result, the company provided its clients with the opportunity to execute retail deals.
- Deserve — the Utah-originated credit solution firm that strengthened the weight of fintech through machine learning. Owing to Marqeta’s contribution, the former turned into the respectable credit card service provider for other financial institutions, consumer brands, or even universities.
Though this list isn’t full, you already have an idea which companies can be interested in card-issuing assistance, so now it’s time to mention some of latest Marqeta partnerships:
- CashFlows — in 2019 the firm suggested its services to the UK’s BIN sponsorship provider to grow their customers’ card usage and design more advanced spend control tools.
- Alviere — in 2022, it launched a partnership with Alviere which has a money transmitter license.
- Visa — the same year’s renewed partnership allowed Marqueta to broaden its marketing scope to 10 regions across Asia-Pacific and did a similar job for Visa’s expansion.
- Mastercard invests, too — this joined unity formed in 2020 and contributed to European fintech apps deployment with Twisto project as the test pilot in digital-first card programs under API technology.
What Marqeta Values is Humanity
But why did so many famous companies voluntarily become partners with Marketa? Dig deeper to understand the company’s culture and values system in addition to its expertise. What for? Business never raises well without genuine people’s devotion to work and the team’s common efforts. That’s why look under the hood before judging by the engine’s roar!
People come first in its mission, and that’s evident even from the remote work regime during the pandemic. While some business corporations put their human resources in danger by keeping the workplaces open, the company provides a safe and flexible work environment and boosts careers. In addition to the zoom calls on work-related issues, the teammates regularly engage in various online informal activities, such as virtual Olympics or talent shows. Therefore, they kept the number of employees. Through these pastimes, they get to know each other better and feel more than ‘the mere employees,’ but the talented and interesting personalities who, by the way, work together.
It’s another significant piece of its strategy, which affects all the processes, starting from hiring for jobs and ending with the company’s leadership projects. Among the latter, the platform recently participated in Brown Sugar Kitchen food purchases to help the homeless, struggling families, and children. In the meantime, the active part in similar nonprofit projects drove the company to open the Oaklanders Supporting Oaklanders fund. So, the social impact of the company is also tangible, no matter how high they have climbed over the financial technology leader.
Simplicity, Trust, Scale, & Security
These are the 4 cornerstones of payments eco system. Simplicity relates to the development of payment tools and technologies in a matter of days: no redundant features but customization at work. Trust is sustained via the 99.99% uninterrupted delivery. Scale is supported by Marqeta’s neat horizontal architecture, which allows growing the product’s network with the card programs. Ultimately, security is ensured through the Marqeta Address Verification System and 3D Secure extra protection that form the high safety standards for digital fraud prevention. This is why cryptocurrency is still a far future. Altogether, this package of values makes much difference when it comes to working with clients.
Despite the presence of physical cards in line of products, the company cannot be blamed for its low eco-friendliness, it boosts digital banking. Realizing that 74% of plastic cards aren’t subject to recycling, the company found the solution to make the planet safer — recycled plastic cards and works with an eco-friendly manufacturer. Besides, the company shows the steady rise of virtual card value on users’ part, which is stipulated by the product’s convenience and extra perks.
When is Marqeta going Public?
There is no scheduled date for the public debut, and the company isn’t trading much. However, after the S-1 form is completed, the process might take anywhere between two and three months to complete. MQ is the ticker symbol for the stocks on the New York Stock Exchange, where ordinary investors may purchase and sell it. According to reports, the IPO might garner up to $10 billion. The stock price information for the IPO has yet to be provided.
The company made its first corporate investment after becoming public in June 2021 in ConnexPay, a startup founded in 2017 that handles billions of transactions for travel, marketplace, and commerce intermediary firms.
As a result of this transaction, the firm will be appointed to ConnexPay’s board of directors.
According to a financials release issued in early December 2021 by the fintech company and the leading global retail bank, Klarna — which has expanded its partnership into 13 new European markets: the United Kingdom (UK), Germany (German), France (French), and Italy (Italian), as well as the Netherlands, Belgium, Austria, Ireland, Finland, and Denmark.
Also in December 2021, the fintech company announced a collaboration with First National Bank of Omaha (FNBO), expanding its network of partners that enable its customers to develop modern credit card systems. Shareholders expect big growth, though.
The next big date for Marqeta is the 5th of November, 2022. This is the earnings report date 2022. Its share price reaches $11.26 nowadays.
So, Why Did Marqeta Gain So Much Power?
Avoiding the resort to the bank as the mediator between businesses, the financial company got a lucky forecast in the international marketplace by positioning itself as the first modern card issuer tailored to both business and customer needs. Serving the tech-enabled companies, the card release provider brought unique value to the new economy. In addition, choosing the payment solutions API approach, it tangibly won time for the product preparation and delivery to the client, which sustained its competitive advantage immensely. To prove the point, the company is known for making $108 million in Q1, which manifests the 123% revenue 2021 growth compared to the previous year, when it was honored as the 33d on CNBC’s Disruptor 50 ranking. Meanwhile, the experts claim that Marqeta will boost even more in the foreseeable future, so let’s end with the short prognosis overview.
Future Expectations from Marqeta
When there’s already no doubt in the company’s current strong position in the market, the other open question remains — what is the company going to do next? As more and more people are speculating about the future usage of debit and credit cards, which is the firm’s core of the business, it’s interesting to think about its ability to survive in the next decades. What’s our summary on that?
In our humble opinion, despite the expected decline of card popularity among the next generation of users, this payment processor can remain the tech disruptor owing to its focus on ongoing innovation and market adjustment. Moreover, accounting for its legacy frameworks amelioration within the card and payments area, the financial firm knows how to behave with the reg tech rules to prevent damage to the company’s well-being and its partners. So, relying on these facts, we truly hope that the company will save its reputation as the global card provider and prove itself even more. Have to wait and discover!