Oct 13, 2020

COVID-19 has altered business models of banking irreversibly

Banking
covid-19
Barclays
Marqeta
William Girling
2 min
A new report from Marqeta indicates that 96% of European banks have been affected by the pandemic, with 78% stating it will shape their future strategy
A new report from Marqeta indicates that 96% of European banks have been affected by the pandemic, with 78% stating it will shape their future strategy...

A new report from Marqeta indicates that 96% of European banks have been affected by the pandemic, with 78% stating it will shape their future strategy.

Among the prevalent changes will be an increased focus on cashless payment methods, less physical branches and enhanced digital banking services. From its survey of 200 executives, 80% responded that COVID-19 had accelerated their digital transformation, with 89% declaring that R&D had been expedited from months to years.

Indeed, the financial services landscape has changed so comprehensively in such a compact timeframe that the majority (76%) consider banking business models to be irreversibly altered. 

Change is coming

A renewed emphasis on innovation, particularly in the field of data analytics, means that banks have the opportunity to create a faster, better and more intuitive digital-based experience for customers. 

Marqeta relates that approximately one third (34%) are concerned that failing to keep pace with new developments would result in losing their market share.

“COVID-19 has ushered in a new age of digital banking. Banks need to ensure they are prepared to adapt for this world, and many are set to double down on digital services and capabilities,” stated Ian Johnson, Managing Director Europe at Marqeta.

“But, to do this, they need to overhaul legacy technologies that don’t provide the agility required to respond to the needs of the market. To adapt and thrive, traditional banks need to be supported with modern core banking and payment platforms that can support the requirement to digitally transform and provide the flexibility needed for their future banking strategies.”

Barclays executives found Pennyworth

High-profile executives appear to be taking this sentiment onboard; Jeremy Takle and Ben Harvey, both former directors at Barclays, have recently founded the neobank venture Pennyworth in an effort to fix what they consider ‘broken banking’.

Simultaneously addressing the shortcomings of both high-street and first-gen digital banks, Pennyworth’s mission is to finally deliver a 21st-century banking experience to consumers.

“Banking is broken and our mission is to fix it by making it easier for busy people with complex needs to achieve their financial goals,” said Takle

“Traditional banks continue to exploit busy people by providing poor value, impersonal service, and the first wave of neobanks have failed to break that inertia because they are too busy battling to win current accounts that most people don’t want to switch.”

The success of this venture could be a catalyst for still-further change in modern banking, which could be unrecognisable by 2030.

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Jun 10, 2021

Marqeta’s IPO shines a light on fintech fees

Fintech
IPO
Banking
Payments
2 min
Shares of payment processing company Marqeta closed up 13% after its market debut Wednesday on the Nasdaq

Marqeta, a fintech company, raised $1.2 billion with an initial public offering that priced high and exceeded expectations. The company priced its shares at $27, above the expected range of $20 to $24, and giving it a market valuation near $15 billion. Marqeta stock jumped 13%, closing at 30.52 on the stock market today.

This IPO adds to a number of recent fintech listings from companies such as the online lender SoFi and the no-fee brokerage Robinhood.

Founded in 2010 and based in Oakland, California, Marqeta sells payment technology that’s designed to detect potential fraud and ensure that money is properly routed. The company also creates customised branded debit cards and prepaid cards for corporate customers that include the delivery group DoorDash and Swedish fintech Klarna, as well as Square.

A large amount of Marqeta’s revenue comes from interchange fees, which is the transaction fee that merchants pay whenever a customer uses a credit/debit card to make a purchase. Due to the Durbin Amendment in the 2010 Dodd Frank Act, banks that have under $10bn in assets receive higher interchange fees than larger lenders from the transactions. 

This has allowed fintech start-ups, such as Marqeta and Chime, which is a personal finance app in the US, to take advantage of this by partnering with small banks and taking a cut of the fees. 

An increase in profits

Marqeta’s business has drastically increased during the pandemic as people in lockdown have turned to digital financial services such as Square’s Cash App and ecommerce companies such as DoorDash. The company more than doubled net revenues to $290m last year while narrowing losses to $48m. Business from Square made up 73% of Marqeta’s net revenue in the first quarter, which was an increase from the previous year. Marqeta’s agreements with Square last until 2024, according to the company.

Ian Johnson, SVP, Managing Director, Europe, Marqeta: “As the world becomes increasingly interconnected, more people are relying on digital payments to move through each day. Companies throughout Europe are looking for ways to offer better payment solutions for their customers. Marqeta is proud to be a publicly traded company and looks forward to bringing an even greater focus to scaling our products and delivering modern card issuing that launches cards quickly and provides greater flexibility than traditional card programmes. We’re pleased to support European businesses with ambition and purpose who use our platform to help write the future of payments.” 

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