Cash App’s firmly in place — and will be a significant contributor to Marqeta’s top line for years to come.
And with that bit of news, investors took stock of the card issuer and payment processor’s latest results, liked what they saw and bid the stock 14% higher in after-market trading.
Simon Khalaf, CEO, said in a post-earnings interview with Karen Webster that the revenues gleaned from Block (Marqeta’s largest customer for years, with more than three quarters of net revenues as measured through the first half of the year) will help underpin diversification.
And in his estimation, for Marqeta, where Tuesday’s quarterly report showed total processing volume growth of 32% to $53.6 billion, there’s ample opportunity to shake things up.
“The existing financial systems, the existing payment networks … they need to operate at internet and mobile speed,” Khalaf said.
Khalaf assumed the helm of Marqeta earlier this year after serving as chief product officer, and as he told Webster, even though he’s been at the company for roughly a year and a half, “I may be new to Marqeta, but I’m not new to hypergrowth.”
Growth opportunities lie ahead, and are ripe to be captured, Khalaf said, with ample opportunity to introduce card issuance and power earned wage access (EWA) — all part of embedded finance — across a variety of business models.
“We’re going to see a lot of traction in marketplaces,” he said, noting that Marqeta is and will continue to see opportunity in speeding payments and EWA across labor marketplaces, creator platforms and retail platforms.
EWA, he said, has taken on a special urgency in the wake of bank runs and the spectacular Silicon Valley Bank collapse earlier this year. Technology, virtual cards and pushing funds to those cards in a just-in-time manner can solve for the issues of trust inherent in the banking sector, through the creation of virtual ledgers, Khalaf said, enabling platform clients to expand their own offerings. Uber, a Marqeta customer, is a prime example of how extensible platforms can be, as drivers are able to tap into wages as they end shifts.
Another avenue to growth lies with seller financing, Khalaf said, adding “No bank really understands how fluid the marketplace business is.” The traditional lending conduits, he said, ask a hypothetical Amazon or Etsy seller to offer up years of profit and loss statements — data that may not be available given a limited operating history — and then offer up a slew of restrictive lending covenants.
Across the Marqeta model, Khalaf said, virtual cards allow lenders to fund borrowers in a much more streamlined fashion, across traditional rails.
“Marqeta’s approach,” he said, “is that you’ve got a freeway — so drive a faster car.”
As he noted to Webster, “Embedded finance is poised for growth because it’s a product that consumers love.”
The platforms themselves, he said, are likely to realize that the consumer experience has to improve, and the platform operators will also realize their technical limitations in making sure that consumers don’t have to grapple with the stutter steps of juggling browsers and apps — so they’ll enlist the aid of Marqeta to get things done (and manage chargebacks and satisfy the regulators too).
Looking ahead, he said, Marqeta’s plans for the current quarter and beyond are to continue to convert bookings to revenue. The company, he said, “overshot” bookings by a significant amount, as commentary on the conference call revealed that bookings through the last three quarters were up 150% from a year ago.
Management also noted on the call that one-third of the deals signed in the quarter were “flipped” deals, where Marqeta replaced an incumbent provider. International expansion also represents a key initiative, as 40% of net new bookings came from outside the U.S.
“We have programs going everywhere, and you have to be able to support them across the globe,” said Khalaf, who noted that for Marqeta’s clients, “The more they decide to do it [embedded finance] … the more that brings business to us.”