Marqeta is one of those Fintech unicorns that is killing it but not getting a whole lot of coverage because it is not consumer facing. Marqeta provides the digital rails to enable businesses to create innovative payment programs and cards allowing companies to customize their offerings.
Companies like Kabbage, Doordash, Square and more use its platforms. Marqeta was founded by Jason Gardner – a Fintech entrepreneur who previously founded PropertyBridge – a platform for mulitfamily real-estate. That company was aquired by MoneyGram in 2007.
Things at Marqueta appear to be going really well – so much so that the company raised $260 million in a Series E round launching the company into Unicorn status.
Since Marqeta is a digital infrastructure platform the company has an interesting perspective on the direction of Fintech. Recently, the company forwarded their predictions for the coming year which are shared below.
After a decade of unbundling in financial services, a great rebundling is coming
Over the last 10 years in financial services, the mantra seems to have been: why buy the whole album from a big bank, when you can go directly to fintech for each of the singles? New market disruptors have attacked every profit pool that traditional banks came to hold dear: mortgages, consumer lending, investing, deposits, cards. We’ve seen some rebundling in the market, but this is going to accelerate dramatically in 2020, concentrating around superior user experiences. Think about the journey of Square’s Cash App: it started with a simple P2P transfer service that was incredibly simple and users loved. The Cash App today incorporates pieces of competitors like Chime (debit card), Groupon (rewards), Robinhood (trading) and Coinbase (bitcoin). There are several disruptors in market who have built up a huge constituency by picking one service and offering a superior user experience. We’re going to see these companies break out into new adjacent products to increase the utility they’re providing their users and more fully monetize their opportunity.
Tech Giants will continue launching banking products without becoming banks
There’s been a longstanding narrative that tech giants will become banks, and with Google announcing it will begin offering checking accounts in 2020, some may see this as finally coming true. But what this development shows us is that there’s a path to market now for tech giants to offer banking products without becoming banks at all. Google is looking to partner with Citigroup and Stanford Credit Union, taking advantage of the backing of an FDIC-insured settling bank and new modern technology platforms to create a modern banking product within the Google customer experience, without the same bureaucratic burden. I think in 2020 this will become an attractive model for other major tech giants, allowing them to innovate in the rapidly evolving digital banking space and providing in-demand services for their users. At a macro level, this will further push banks into more of a utility and bring into question the power of their brands with consumers.
Omri Dahan, Chief Revenue Officer, Marqeta
Americans will continue to look at Fintechs for banking solutions, instead of their traditional banks
New fintechs, driven by shifts in technology and a war chest of venture capital, have been able to drive change in the market quickly. According to TransUnion data, 40 percent of personal loans in 2013 were originated by banks with just 5 percent coming through fintechs. Within five years, fintechs were issuing 38 percent of loans, and banks just 28 percent. There are now a growing number of fintechs competing with banks on every part of their traditional service offering: wealth management, investing, small business, payroll, merchant services, and more. An industry like investing has been upended by Robinhood and now Square’s Cash App, who have driven banking giants like Charles Schwab, TD Ameritrade and E-Trade to also start offering commission free online trades. Every nook of the banking industry now has several fintechs competing inside of it. The breadth of innovative and competitive offerings is growing and consumers are more open than ever to exploring new options.
If you can’t beat them, join them: more, larger financial institutions look to make Fintech investments or acquisitions
CNBC reported in September of this year that investments by large institutions in fintech was up 180 percent in 2019. Goldman Sachs, Citigroup and J.P. Morgan have all been incredibly active this year across the last few years. As new fintech entrants continue to disrupt these companies’ product portfolios, these investments will only increase. These larger institutions are not set up to innovate as quickly or aggressively as new contenders. When you add in the popularity of mobile, and the increasing consumer demand for an increasing array of new services, and the writing is on the wall that the giants in the market need to innovate at an exponential pace just to keep up. Building your own tech stack has been shown to be time-consuming and onerous, so legacy institutions will look to partner, acquire and invest with new entrants to future proof their businesses.
Vidya Peters, Chief Marketing Officer, Marqeta
More Hyper-targeted Digital Bank Start-ups will be Announced
Banking used to be a commodity, with very little competitive differentiation between providers in what services were offered. You could open an account, get a credit card and apply for a loan, with your ability to borrow money governed by a strict set of criteria used industry-wide. But with the proliferation of new technology (such as modern card issuing and payment processing) new banks can tailor their products to very specific constituencies. Examples of this are proliferating: Grasshopper Bank launched in May, a new digital bank targeting VCs, entrepreneurs and startup CEOs, providing a specific set of banking products tailored directly to their needs. There are digital banking tools targeting teens, like Current and Greenlight, digital banks for people interested in investing social causes, like Aspiration, and digital banks for the traditional underserved, like GoBank. Smart entrepreneurs are going to continue to use new technology to serve new niches in the market and this will only speed up in 2020.
Perception of Calibra will flip on its head when it launches in 2020
Facebook’s plans for its Calibra digital wallet and new global cryptocurrency Libra have taken a beating in 2019, as regulators around the world raised security, privacy and oversight concerns. Facebook’s predicament has been a clear indicator of the difficulties that arise when you’re first in any space.
Facebook is trying to do something big and complicated and has dived headfirst into a difficult path. Money is speeding up to meet the pace of technology and Calibra would be the most advanced realization of a seamless global vision for how we transact. The company has stayed the course and answered questions head-on, wearing the toll of being a trailblazer. I predict after initial speed bumps, Calibra will launch as planned next year, and after a year of bad press, perception of the new currency will turn around when the market sees the ease of use and seamless experience powering this new method of transaction.