During the past 10 years, there’s been a significant increase in technology-focused firms that have attempted to disrupt traditional sectors. New initiatives such as payments firm Square (NYSE: SQ) grocery delivery service Instacart, and Uber Technologies (NYSE: UBER) are just some of the companies that are providing innovative services to millions of consumers.
Many of these tech firms are now trying to offer financial services as well and the payment card sector is also being transformed by Fintechs like Marqeta.
Recently, the payments solutions provider submitted its application to go public. In its filing, the firm provided pertinent details so that investors may get a better understanding of Marqeta‘s business model (including its financial performance during the past few years).
Established in 2009, Marqeta aims to streamline the payments process. The firm has spent the last 10 years developing tech infrastructure that lets businesses quickly and seamlessly issue their own payment cards. These cards can be physical, digital or even tokenized.
There’s also no need for issuing banking institutions and card networks. This has enabled firms to issue customized payment cards a lot faster than they were able to do so before using Marqeta’s services.
What Marqeta can do particularly well is assist large service providers with remaining competitive in their industries. The Fintech firm works cooperatively with disruptors such as Square and Uber and it also works with more established institutions (including Goldman Sachs).
Marqeta assists customers with creating various payment card products in a fast and efficient manner. The firm’s customers are able to pay up for this service. Marqeta offers different features that allow clients to easily customize cards like dynamic spend control options that helps firms better control the funds being spent while lowering the risk of fraud.
Marqeta is making money on a per-transaction basis, which is a model that’s somewhat similar to what’s currently used by payments giants such as Mastercard and Visa.
Marqeta handled 1.6 billion transactions last year via its platform (across the globe). The Fintech reports around 57 million active cards, as of the end of last year.
Marqeta’s usage-based business model depends on the transaction processing volume, with the majority of its earnings from charging interchange fees for payment card transactions. Additionally, Marqeta generates earnings from charging various processing fees, ATM usage fees, and for fraud alert notifications.
In the firm’s S-1 filing, Marqeta reveals that it generated $290 million in revenue in 2020, which is around twice what it earned in the previous year. Marqeta further revealed that it recorded a loss of $47 million, which was considerably less than the $59 million loss it reported in 2019.
Marqeta’s business growth can be measured based on its transaction processing volume. Last year, the Fintech firm handled $60 billion in TX volume, which is substantially more than around $21-22 billion cleared during 2019.
This level of activity remained steady during Q1 2021. The firm reported handling $24 billion in total volume, which represents a 167% increase from Q1 2020.