Would prepaid replace credit cards? Case of Marqeta, a Facebook backed startup

The success of Square, Dwolla and Starbuck’s mobile app has led to new startups trying to tap the potential areas in the payments industry. Marqueta, a startup based out of Emeryville, California claims to offer a money card that gives customers the ability to make money for the things they buy every day and enables merchants to capture repeat business.

Marqueta was founded in 2010 by Jason Gardner. In 2010, Marqueta received US $5.75 Mn in Series A funding from investor Greylock Partners. In 2012, Marqueta acquired $950K in Debt funding and further received US $14 Mn in series B funding from Greylock Partners, Granite Ventures and Commerce Ventures in May 2013 bringing their total up to US $19.6 Mn.

The user visits the +M platform run by Marqeta, which is an online dashboard. After signing up, the customer can choose from a variety of retailers, see the offers available and select only the one’s that he/she is interested in. A physical Marqeta card arrives in the mail – although there’s also an Android and iOS app – pre-loaded with all the offers that the customer has selected. He can then visit the store, shop and walk away with extra credits on his Marqeta card.

Below is a video, which shows how Marqeta works:

Source: Marqeta Cards

Marqeta’s business model has resemblance to that of ‘pay-in-advance for your coffee’ Starbucks card model. The difference being that Marqeta has extended its payments platform by offering services for employers, membership organizations, cities, affiliates, charities and even schools.

Marqueta recently partnered with Facebook for the Facebook Card. With this, users can gift a friend on Facebook using any of the deals from Marqeta’s +M platform. Friend will then receive a Facebook card by mail which he/she can use for redeeming the gifts. How is this different from a gift voucher? The customers can receive different gifts from their friends all on a single card i.e. their Facebook card. Marqeta’s +M Platform allows multiple loyalty accounts to function on a single card. The Marqeta API allows retailers to manage gifting, loyalty, promotions, cash back offers, charitable donations, and other incentive structures through a simple turnkey solution. As a result, a Facebook user who receives gifts from multiple merchants can redeem those gifts offline using a single card.

According to Jason Gardner, CEO of Marqeta, merchants generally don’t want to change their point of sale when adding a loyalty program, they want to use their existing infrastructure and credit cards; and they do not want to have to retain anyone using the new loyalty systems. Marqueta’s customers include Target, Jamba Juice, Olive Garden, 1800 Flowers, Discover and Sephora among others.

LTP View: With no direct competitors today in the pay for return on your capital space, the biggest remaining challenge for the three year old company may be scale and exposure. Marqeta’s approach to rewards system that is giving customers more money to spend on grocery, restaurants, dry cleaning etc. rather than reward points to redeem gifts, may help in increasing its adoption rate.