Marqeta’s IPO shines a light on fintech fees

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.”