Marqeta IPO focuses on fintech fees

Marqeta is a debit card company that gets most of its business through Jack Dorsey’s payment processor Square. Its goal is to complete one of the largest listings of fintech companies this year and test a business that thrives due to restrictions on traditional banks mode. The 2008 financial crisis.

At the top of the company’s listing price range, Marqeta’s market value will be close to 13 billion U.S. dollars and will raise as much as 1.1 billion U.S. dollars in an initial public offering scheduled for Tuesday.

The IPO adds to the recent and planned fintech listings of a series of companies including online lender SoFi and free broker Robinhood.

Headquartered in Oakland, California, Marqeta creates branded debit and prepaid cards for corporate customers, including delivery group DoorDash, Swedish financial technology company Klarna, and Square.

Marqeta’s listing plan has drawn attention to the relationship between fintech start-ups and small US community banks, which have become increasingly close partners since the financial crisis.

Most of Marqeta’s revenue comes from exchange fees, which are fees that merchants pay when customers use debit cards to make purchases.

Due to the Durbin Amendment in the 2010 Dodd-Frank Act, banks with assets less than US$10 billion receive higher exchange fees from transactions than large lenders.

You can call it arbitrage, you can call it a loophole, whatever you want to call it. [However,] We will most likely change in a few years, if any

Fintech startups, such as Marqeta and Chime (a personal finance application that is rapidly growing in the United States), have already taken advantage of this difference by partnering with small community banks and reducing fees.

Marqeta’s largest partner is Sutton Bank, which received a payment from Marqeta in exchange for an exchange fee. The company also passed a portion of the revenue from the exchange fee to Square and other customers.

Some analysts and investors question the long-term viability of the institution, and the growth of fintech start-ups has attracted the attention of regulators and large banks.

In the prospectus, Marqeta warned that the exchange fee was subject to “strict legal and regulatory review” and stated that it had consciously cooperated with exempt banks under the Durbin Amendment.

Callum Godwin, chief economist of CMSPI, a global payment consulting company, said: “You can call it arbitrage, or you can call it a loophole, whatever you want to call it.” However, “we are likely to change in a few years. , If any,” he said.

As blocked Americans turned to digital financial services such as Square’s Cash App and e-commerce companies such as DoorDash, Marqeta’s business flourished during the pandemic.

Marqeta’s net income more than doubled last year to $290 million, while losses narrowed to $48 million. In the first quarter, Square’s business accounted for 73% of Marqeta’s net income, an increase from the previous year. According to the company, Marqeta’s agreement with Square will last until 2024.

If Marqeta reaches the high end of its price range, its market value will be approximately three times its valuation when it was raised in May last year. Granite Ventures and Iconiq Capital were the company’s largest external investors before the IPO.

Marqeta CEO Jason Gardner (Jason Gardner) will hold 10 votes per share in the company’s shares worth 1.7 billion U.S. dollars.

Goldman Sachs and JPMorgan Chase will serve as lead underwriters for the offering.