What is Marqeta? Everything You Wanted to Know About Marqeta Inc.

So many talks have been recently heard about Marqeta Inc and what it exactly does, and that’s already happening a decade after its appearance in the finance industry and the market. So, we’ve decided to develop a 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. It plans to increase its capital to $10 billion by the end of 2021. Is it possible? Almost likely that 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 top fintech companies, which mainly concentrate on wallets or payment tools, the company has shortened the distance between businesses because of Marqeta card issuing. That’s why it rocks among clients and evokes other financial firms’ desire to build partnerships. 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

Marqeta’s success story relies on founder Jason Gardner’s resilience. He reduced his salary by 40% to keep the startup afloat, inspiring two executives to do the same. Within four years, the company grew and occupied a 16-story office building in Oakland, demonstrating its remarkable revenue growth.

Initially, Goldman Sachs explored new debit card usage patterns, including a loyalty prepaid card program and a Facebook-backed gift card product. While these ventures had mixed results, Goldman’s determination led to the creation the Marqeta open API platform in 2014. This platform, still in use today, allows clients to customize interfaces and manage cash flows.

Marqeta has become a leading issuer processor, directly connecting tech-savvy startups with various financial instruments and service providers. This approach eliminates intermediaries and enables the company to offer innovative products rapidly, giving it a competitive advantage over traditional banking methods.

What Does it Offer to Its Customers?

Before entering the market, Marqeta conducted a consumer behavior survey to understand the demand for digital-only banking features. The survey revealed that 64% of users were open to choosing a non-traditional financial institution for credit card issuance. Inspired by this response, Marqeta, as an issuing bank, adopted the motto “You see a card, we see endless possibilities” and introduced three types of cards: virtual or physical, and tokenized.

Tokenized Cards

While physical and virtual cards were already standard, let’s focus on the novelty of tokenized cards. These cards allow users to manage their payments instantly using their digital sync cards with Apple Pay or Google Pay. By generating tokens within the card network (such as American Express, Visa, or Mastercard), Marqeta ensures the security of the client’s banking credentials and other sensitive information.

Card Programs

One significant advantage Marqeta offered was the quick and cost-effective implementation of card programs. Unlike traditional banks that often took months or even a year to review and approve card releases, Marqeta streamlined the process, providing customers prompt service. Additionally, users gained access to a convenient dashboard to manage spending and track essential metrics. Real-time funding and risk management services further enhanced the digital banking experience, fostering deeper customer loyalty.

These advantages contributed to Marqeta’s revenue reaching $290 million in 2020. Considering the ongoing trends influenced by the pandemic, the company’s popularity is expected to continue growing.

How Does Marqeta Work?

To realize the process of its card issuing, think first about the private sandbox, instant and contactless payments, shrewd investment management, fraud supervision, and customized user interface. Thanks to it, the service presents the perfect solution for Marqeta partners to manage the whole card lifecycle with no obstacles and time delays. As a rule, the average card-issuing project passes the following stages:

1. Building & testing. This initial phase is mainly devoted to card creation, choosing the cardholder, and setting PAN, PIN, and CVC.
2. Issuing. That’s the stage of Visa, EdEx, and Mastercard integrations and the first trial of your virtual credit card.
3. Core API configuration. Here it’s time to determine the card verification mode and configure your card accordingly. Using this feature, you may create an API funding source for an application or user API based in the United States, which doesn’t need you to provide the vendor with account information such as your bank account number or routing code.
4. Customization. You can create your logo, signature, and other graphics for your brand. Besides, this phase is connected with NFC and EMV-chip enablement.
5. Tokenization as a service. You can attach your card to the digital wallets and implement the tokens technology through the app.
6. 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 many countries in different currencies.
7. Security embedding. This final step will keep your sensitive card data in safe storage and ensure its exposure only to you.

How Does Marqeta Make Money?

Marqeta’s revenue model is similar to that of other card networks, Visa and Mastercard, as it collects a portion of every transaction made through its platform. The company’s annual revenue growth has been substantial, and it typically charges a commission rate ranging from 0.5% to 2%, with an average of 1%. This payment requirement is considered reasonable in the market, making Marqeta an attractive option for new clients.

Marqeta’s business model is straightforward. It provides a cloud-based, open API platform for card issuance and transaction processing, enabling services like DoorDash, Klarna, and Square to operate. The company has three main capabilities: issuing, processing, and applications.

Interestingly, Marqeta’s revenue model resembles the companies it aims to replace, such as Mastercard and Visa. The primary source of income for Marqeta is interchange fees. When a consumer uses funds from an approved debit or credit card, the merchant bank pays a cost to the card-issuing bank.

Marqeta receives a higher percentage of the interchange charge compared to its competitors. According to the company’s prospectus, its partnerships with issuing banks ensure that it gets 100% of the interchange fees. This is advantageous for its debit card business. In addition to interchange fees, issuer processing services contribute to Marqeta’s revenue generation.

What’s The Cost, and Who Are Marqeta’s Clients?

Among the clients, global partners of all sizes get expertise in eCommerce, digital and mobile 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 reduced fraud to less than 5%, almost a half-in-progress improvement.
• Marqeta Card Instacart — another delivery company for US and Canadian customers focusing on grocery. With Square, the fin services and digital payments leader, Marqeta developed the cash app solution to support the debit card money transfer function for six weeks. The users are granted two options: virtual and plastic cards to proceed with payments quickly.
• Kabbage — the Atlanta-based cash flow management company offering the consumer lending service that also issued the debit card. As a result, the company allowed its clients to execute retail deals.
• Deserve — the Utah-originated credit solution firm that strengthened the weight of fintech through machine learning. Due to Marqeta’s contribution, the former became a respectable credit card service provider for other financial institutions, consumer brands, and even universities.

Though this list isn’t complete, you already have an idea which companies can be interested in card-issuing assistance, so now it’s time to mention some of the 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. It did a similar job for Visa’s expansion.
• Mastercardinvests, too — this joined unity formed in 2020 and contributed to European fintech apps deployment with the Twisto project as the test pilot in digital-first card programs under API technology.

What Marqeta Values is Humanity

Marketa’s general partnerships with leading companies can be attributed to more than just their domain expertise. The company’s unique culture and values also play a significant role:

1. Human Centricity: Marketa places people at the heart of its mission. This was evident during the pandemic, when the company provided a safe and flexible work environment, keeping employee engagement high through various online activities. This approach helped them maintain their workforce and build a sense of community.
2. Cultural Diversity: Diversity forms a vital part of Marketa’s strategy, influencing everything from recruitment to leadership projects. The company’s active participation in nonprofit projects like the Oaklanders Supporting Oaklanders fund reflects its commitment to social impact.
3. Simplicity, Trust, Scale, and Security: These are the four pillars of Marketa’s payment ecosystem. They provide simple, customizable payment tools; maintain trust with 99.99% uninterrupted delivery; support scalability with a neat horizontal architecture; and uphold security with advanced features like the Marqeta Address Verification System and 3D Secure extra protection.
4. Ecological Sustainability: Despite offering physical cards, Marketa is dedicated to environmental sustainability. They’ve responded to the plastic waste problem by offering cards made from recycled materials and promoting digital banking solutions. The rise in virtual card use among users shows this approach’s effectiveness.

In summary, it’s not just Marketa’s proficiency in financial technology but also its strong culture and values that make them an attractive partner for many famous companies.

So, Why Did Marqeta Gain So Much Power?

Marqeta’s strategic decision to position itself as the first modern card issuer catering to business and customer needs without relying on traditional banks as intermediaries proved advantageous in the international payment services marketplace. By serving tech-enabled companies and offering a payment solutions API approach, Marqeta gained a significant competitive advantage, saving time in product preparation and delivery to clients.

This approach has yielded impressive results, with the company reporting a gross profit of $320 million in 2022, marking a 38% increase from the previous year. However, Marqeta also reported a GAAP net loss of $185 million and an Adjusted EBITDA loss of $42 million for the same period.

Despite these losses, experts predict a bright future for Marqeta, anticipating further growth and success in the foreseeable future. The company’s innovative approach and strong market positioning contribute to these optimistic projections.

Future Expectations from Marqeta

When there’s already no doubt about the company’s current strong position in the market, the other open question remains: what will the company 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 business, it’s interesting to think about its ability to survive in the following 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 branding well-being and its partners. So, relying on these facts, we hope the company will save its reputation as a global card provider and prove itself even more. Have to wait and discover!