The digitization of commerce is helping to digitize card issuance – and, by extension, is leading Marqeta to Wall Street. As noted in this space, Marqeta’s IPO could value the firm at as much as $10 billion.
The company’s business is focused on issuing debit and credit cards to employees and contract workers through a single, cloud-based, open API platform, to enable what it calls “next-generation payment experiences.”
For all of 2020, the firm said sales were more than $290 million, up more than 100 percent year on year; the net loss was $47.7 million, better than the $58.2 million net loss logged in the previous year.
In terms of the cards themselves, the company’s platform allows its customers – among them Affirm, DoorDash, Instacart, Klarna, and Square — to create customized payment cards.
“Before the rise of modern card issuing, creating cards was slow, complex and subject to mistakes,” the filing reads. The platform, according to Marqeta, is powered by APIs to help create and issue cards for commercial and consumer use cases.
“Modern platforms with open APIs are democratizing access to ecosystems, including payments, giving businesses and their developers the tools they need to embed payments into their offerings with minimal friction,” said Marqeta. “In the past, payments have been the domain of a very limited number of players with specific expertise, and now, with modern platforms, developers have convenient access to this expertise.”
Rising Volumes
Since its inception in 2010, the company has issued more than 320 million cards, with $60 billion in volumes processed in 2020. At the end of last year, according to the filing, the company had 57 million active cards, defined as the number of transacting cards with one or more successful clearing events during the preceding 12 months.
In more recent activity, the company stated that for the quarter that ended in March, the Marqeta platform processed $24 billion of total processing volume, or TPV, up 167 percent from $9 billion in the three months ending March 31, 2020. In 2020, the Marqeta platform processed $60.1 billion of TPV, up 177 percent from $21.7 billion in 2019.
In terms of greenfield opportunities, the company said that its full-year 2020 TPV is less than 1 percent of the $6.7 trillion of transaction volume conducted through U.S. issuers that same year, and “a fraction” of the $30 trillion of value that crosses the payment card networks annually.
All S-1 filings carry a list of risk factors, and Marqeta’s include an acknowledgment that the company generates “significant net revenue” from its largest customer, Square. Any fluctuation in Square’s business could conceivably have a material impact on Marqeta’s results. In 2019 and 2020, Square accounted for 60 percent and 70 percent of Marqeta’s net revenue. For the three months ending March 31, 2021, 73 percent of the company’s net sales came from Square.
The firm further elaborated that the current agreement with Square for Square Card expires at the end of 2024, while the current agreement for Square for Cash App expires in March 2024 (though each contract renews automatically for successive one-year periods).
In terms of other forms of what might be termed “business concentration,” Marqeta noted that “a significant portion of our payment transactions are settled through one issuing bank, Sutton Bank.” For the years ending December 31, 2019 and 2020 and the three months ending March 2021, Sutton accounted for approximately 97 percent, 96 percent and 94 percent of the firm’s TPV settlement.
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