Podcast #64 - Marqeta deep dive

Marqeta's mission is to be the global standard for modern card issuing. They enable other companies to develop, launch and operate card products, by providing the underlying technology that powers many of the new innovations in the payment space, including digital payments, buy-now-pay-later (BNPL), digital wallets, and just-in-time (JIT) funding (automatically funding an account in real-time during the transaction process). Their platform gives their customers full control to build a card that’s right for them and their end-users, allowing them to offer card products in a fraction of the time compared to legacy solutions.

• Marqeta was the first company to create an open API for issuing physical prepaid, debit and credit cards as well as digital cards, but competition is on the horizon from larger players such as Stripe and Adyen.
• Global money movement is estimated to total $74 trillion in 2021 consisting of 4 trillion individual payment transactions. In 2020, Marqeta processed $60B, <1% of the estimated card transaction volume in the US, and <0.2% of the global card transaction volume - they have an enormous total addressable market that they have barely penetrated.
• Marqeta have many well-known customers including Square, DoorDash, Instacart, Klarna, Affirm, Afterpay, Coinbase and Google.
• Marqeta has a usage-based pricing model where they take a cut of 20 basis points from each transaction, which means as their customers grow, Marqeta grows with them. Marqeta has achieved a dollar-based net retention rate of >200% for the past 2 years running.
• Square currently account for >70% of revenues, creating significant customer concentration risk. This relationship will be up for renewal in 2024.
• The company are on track to achieving a total processing volume of over $100B this year, representing a CAGR of >250% over six years.
• Higher net losses of $69M in 2021 were driven by share-based compensation resulting from the IPO and are non-recurring.
• The company has $1.5B cash and very low debt, and will be able to sustain the business for many years while revenues grow.

Companies mentioned in the discussion include Marqeta, Square, DoorDash, PayPal, Stripe, MasterCard, Visa, Google.

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