Half of Marqeta’s top 20 customers grew by more than 50% year over year, according to the embedded finance company’s second-quarter earnings. The card issuer also saw its net revenue jump by 61% over the same span, driven by its suite of risk solutions such as 3DS and RiskControl.
“There's always been doubts about whether Marqeta is a single-trick pony, or is this new platform,” CEO Simon Khalaf told Banking Dive. “I think this earnings release finally puts these concerns to bed with a platform that looks like a platform, acts like a platform, and walks like a platform. It is a platform.”
Marqeta's partnerships with Varo Bank, Affirm, Visa and Zoho and its new office launch in Warsaw, Poland, underscore the expansion of the payment platform's market presence as it navigates the financial landscape and boosts its compliance standards.
Khalaf, contrasting the priorities and business models of tech firms and financial institutions, compared the operational focus of two CEOs: Jamie Dimon of JPMorgan Chase and Sundar Pichai of Google. While Dimon most likely does not monitor the daily active users or app engagement, Pichai regularly tracks consumer engagement metrics like YouTube user numbers, search engine numbers or cost per click, Khalaf said.
Khalaf spoke with Banking Dive about how banks, which have historically catered to high-end clients, need to focus on customer service to compete with fintechs that are providing smoother transactions.
Editor's note: This interview has been edited for clarity and brevity.
BANKING DIVE: What challenges do you see with respect to bank-fintech relationships, with the technology and innovation that's helping make transactions smoother?
SIMON KHALAF: We, as an industry, are aligned on basic principles, which is with the regulators — no one wants hackers on the network, no one wants money laundering on the network, and no one wants to mess up with bad lending rules.
We're obsessed with great consumer experience. But [regulators] are motivated by taking the least amount of risk [and] we're excited by reducing the toughest risks, so it creates that disconnect. So, that, I'd say, is a challenge in a broader term to our industry.
I'd say the second one is: Banks have done a very good job at monetizing the areas that have low risk. I hate to use a cliche as “catering to the rich.” No, I mean, that's not what they do. They are in a risk management business. And reduced risk is always when you cater to either wealthy folks or when they have assets that they can secure a loan against. So, expanding the purchasing power to everybody requires significant investment in technology. If the banks need to compete in this space, then they need to change not just the dollar amount that they're investing, they need to change their behavior.
Banks need a different kind of leadership, a different kind of procedure, and a different kind of attitude, which is why you are in the customer services business. Tech learned this the hard way in the last 20 years. … Innovation happens in a second.
When you talk about technology, do you also consider artificial intelligence?
I don't believe in hype cycles. Artificial intelligence is like software. It means nothing, right? It is so broad. And what we saw in the last year is generative AI having a life … Gemini and ChatGPT created a language that can articulate the value of AI. But AI has been around and will be around and will increase [in] the underwriting, rewards management, as well as, I'd say, open up the credit box. All of these are going to use AI big time.
How do you anticipate the regulatory landscape evolving in the next few years, and how is the market preparing to tackle that?
The number-one thing is the regulators will be happily engaged in how well software and AI will reduce risk — that is going to be positive. The second thing is around fair lending and equity. The machines are not biased, but training of machines could be biased. So, the regulators are going to have to focus [on] the integrity of the entity that is training machines, not what machines are doing. I think that is a much easier process than going bank by bank and extracting samples and seeing whether there has been bias. Their job will get easier. But they have more work upstream. Let's say, there are 3 million people in bank branches approving or reducing a loan. It's hard to check what they're doing. But it is much easier to check what is training a machine, and I think that will be a shift in the regulator's mind.
What emerging market trends are you particularly excited about?
Where technology is going to take the banking sector and put it on steroids, there are two areas: underwriting, which uses technology to reduce the risk of capital access, and financial services [that] have been a guest in altering consumer behavior.
What I mean by a guest: About 70 years ago was the innovation with a credit card. It used to be — you get paid, you go buy something. And the ability to extend credit allowed consumers to have more elasticity of purchase and allowed merchants to do something more than twice a month, which is the payment cycles — that was innovation that has implications in the trillions.
Nothing has happened since, I hate to say. [Financial companies] extended the rewards to consumers with the attempt to modify consumer behavior, but those are static. Today there's not a single retailer that doesn't have dynamic pricing … Believe it or not, there isn't a single marketplace, whether it's stock marketplace or equity marketplace or foreign exchange marketplace, that doesn't have dynamic pricing. But the rewards structure in fintech is 1.5% cash back. Imagine that you move to dynamic reward structure, you will alter consumer behavior, very simple. So, these two things — underwriting and dynamic rewards — will be revolutionary.
