Marqeta bets big on embedded finance

US-headquartered Marqeta is one of fintech’s most well-known publicly listed companies.

It reached a $17bn valuation when it floated its shares on the Nasdaq, has a star-studded client list and is slowly but surely making its way across the fintech sphere conquering different verticals and countries.

The card issuing and payments giant is big in expense management and on-demand delivery — it counts Instacart, DoorDash and Uber among its clients — and supports fintechs Afterpay, Sezzle and Klarna, meaning SVP and managing director international Jeff Parker is probably not far off when he says, “in the future, we will own the BNPL space”.

So with all that going on, what is the next big thing for Marqeta? Embedded finance.

In fact, more than 50 per cent of the business already is embedded finance, Parker told AltFi, and that’s only going to grow.

“The technology actually really enables these non-financial services providers to embed that into their user experience. So it's a massive market,” Parker said.

He noted that the big banks will probably get involved and make their way over to a more modern infrastructure, but clearly, it is a bit more difficult for the legacy players to make the leap, which leaves the market open for companies like Marqeta.

‘Marqeta in a box’

In Europe, Marqeta is currently just a technology provider, but in the US it provides ‘program management services’, which means everything you need to build a card program, from KYC and onboarding to customer service and anti-money laundering.

Particularly when it comes to embedded finance, customers are looking for an all-in-one package, Parker said.

As Marqeta continues to grow in Europe — it is currently just three years old with a team of around 50 people — it will bring its ‘managed by’ services over from the US.

Having acquired US-based credit program management business Power Finance in January this year, it will also likely bring its capabilities to Europe after it’s fully integrated in the US.

“I think we're only just getting started in Europe,” Parker said.

“And this is probably our biggest next bet, I guess, outside the US, both for new companies, but also we’ve got a load of our US clients who want to come into Europe. So we're a good launchpad for them to come across.”

Both the US and Europe have seen a boom in consumer interest in embedded finance over the past few years as the technology and comfort levels surrounding it have become more mainstream.

In recent Marqeta research, all signs pointed towards customers looking for convenience when it comes to payments. 

Increasingly, consumers are making payments directly through retailer apps, adding cards to virtual wallets and feeling comfortable leaving their physical wallets at home and just relying on their phones.

In both the UK and the US, around 70 to 80 per cent of consumers said they used P2P payment transactions at least once the previous 12 months, and around 70 per cent have used a mobile wallet in the same time frame.

But while a still significant 70 per cent of US consumers said they had made a contactless payment in the past 12 months, a chart-topping 95 per cent of all UK consumers said the same.

65 per cent of consumers in the UK even said they believe cash will disappear completely, and almost half (44 per cent) said this will happen in the next 10 years.

Parker continues, 

“We’re at an inflection point when it comes to legacy providers coexisting with new-age payment services,” Parker said in a statement.

“While our report shows a current balance between traditional and digital-first, embedded finance is challenging companies to think about how they build payment solutions into their offerings. 

“Long-term consumer loyalty will depend on who can provide the most exceptional end-to-end user experiences.”

The next five years

So the next 10 years aside, where does Parker see embedded finance ending in the next three to five years?

Simply put, “everywhere”.

“I just don't see how it can't,” Parker said.

“And it depends on how you define embedded finance, but most products or services in the world have a financial component required, and I don't understand why any business that is involved in that would not want the payment fees embedded into that experience to make it seamless.

“It increases engagement, it increases loyalty, it increases transaction success rate.”

So in Parker’s view, banks aside, everyone is going to want embedded finance.

But even without the big, traditional players involved, Parker still put in a firm prediction of 70 to 80 per cent within the next three years.