​How Marqeta is Powering the Next Generation of Payment Issuing and Processing

Joel Anderson  |

In 2013, Facebook (FB) revealed that it was introducing a new Facebook branded gift card. Users could redeem value at a variety of Jamba Juice (JMBA), Olive Garden (DRI), Sephora (LVMUY), and Target (TGT), all from the same reusable card. When you receive a Facebook gift, it automatically gets transferred to your card. The move was a shrewd move from the social media giant, helping them find yet another way to keep people on their platform for more of their lives and connecting themselves to consumer behavior that much more closely.

However, if you’re looking for the company that made it possible for Facebook, as well as Affirm, Kabbage, DoorDash, and Instacart, to build sophisticated payment cards, you need to look to Marqeta, an open-API payment processing system that works with clients to help them offer card and payment systems to fit their platforms. They’re helping revolutionize the way people do everything from offering gift cards to small business loans, all through a platform that their clients can take control of, formulating their own system.

An Issuing and Processing System Built from Scratch

For founder and CEO Jason Gardner, Marqeta is not his first rodeo in the fintech space. Marqeta is his third company, after founding Vertical Think in 1999 and then PropertyBridge in 2004, which was acquired by MoneyGram International in 2007.

“I had really fell in love with the payments, and PropertyBridge was on the money in or the acquiring side of the ecosystem, whether online or offline,” says Gardner. “I became fascinated with the other side of the ecosystem, which was issuing and processing. If you look at the companies in that space, they’re very old, and built on very archaic hardware via mainframes, archaic programming language, etc. At the time, a lot of us here in the fintech world were talking about publicly-available APIs and platforms, companies like Stripe, Twilio, and Braintree, and nobody was really addressing the issuing and processing side of the ecosystem using modern open source languages, modern open source databases, and modern hardware. The thinking was, ‘Let’s go build an issuing and processing system from scratch, and convince the main networks, Visa (V), MasterCard (MA), and Discover (DFS), to put up their hardware as part of our data setups.’ And we did that.”

Building an API payment processing system from the ground up wasn’t easy, but it did provide Marqeta with a unique chance to serve a wide array of businesses.

“Over a two and a half to three-year period, we built an entire issuing and processing system from scratch,” Gardner continues. “It was the first new issuing and processing systems in about 15 years. Discover was the first to give us their hardware, then MasterCard and then Visa, and it really started out as eating our own dog food. We built the Marqeta card, which at the time had the hallmarks of the ability to pause or authorize a transaction based on a very specific set of rules. That allows a business to have millions of closed-loop accounts on top of open-loop rails. So, we ended up having 1,000 gift cards through a single card. When you would swipe that card, we knew who you were, where you were, how much money you had for a specific merchant, and they could authorize off of that.”

An Open and Useful Platform within a Rigid Framework

The flexibility that Marqeta can offer their clients is what truly sets the company apart. With so many different options available for companies to customize their products, it allows Marqeta to serve a broad audience in a variety of ways.

“We had a lot companies coming to us, large public companies, startups, etc. saying, ‘Hey, we’d love for you to expose your API,’ says Gardner. “The thought was always to do that, but we didn’t want to do that right off the bat. That was an enormous responsibility so we wanted to get it right. But at the end of 2014, we opened up our API, and in 2015, we began scaling. As of 2016, we’ve scaled up very significantly. It’s still very hyper focused around issuing and processing, specifically in the B2B space, but we power all kinds of companies, whether large public companies or startups. We’re powering innovation in payouts, alternative lending and credit, on-demand delivery, expense management, and e-commerce enablement.”

However, building the sort of open platform that Marqeta has is never easy, but it’s especially hard when you consider the difficult regulatory environment Marqeta is operating in. The finance space, by necessity, is fraught with rigid regulations meant to keep people’s money safe, and those only get further entangled once you start crossing national boundaries. For a company like Marqeta, one that’s leaving its process open enough to allow clients to build so much of their own product, that could present challenges. Marqeta, though, has gone to great lengths to ensure that all of its products can still fit within this rigid framework, much of it simply being a matter of investing in the right resources.

“We have an army of lawyers and experts who understand the payment space,” says Gardner. “Gizelle Barany, who’s our General Counsel, spent 10 years at Blackhawk, and she has an enormous amount of experience in payments and the legal construct.”

Beyond that, though, Marqeta is doing the difficult work of understanding the network of different regulatory bodies so that their clients don’t necessarily have to. And much as the zeitgeist may be for disruption and the tearing down of old ways of doing things, Gardner has found that operating in the payment space requires a healthy level of respect for the regulations in place to keep it safe.

“You spend a lot of time understanding how the environment works and we take it very seriously,” Gardner continues. “I think as a startup, it’s pretty easy to dismiss the regulatory environment because much of it was built for the ‘80s and ‘90s and now we’re looking at a complete payment ecosystem. But you have to respect it, because it can literally put you out of business if you’re not applying everything you’re doing to the regulatory environment correctly. It takes experts to do that, and we invest enormous amounts in making sure that we can navigate the waters here or internationally. We’re considering Europe in 2017; we’re considering Latin America and Asia to do the same. Every single country operates differently. A lot of times you can look at the EU as a whole, but there are many different rules because many of those countries have their own networks that operate differently. When you want to go out and build a business, you have to do it correctly.”

But how does that jive with the open-API structure of Marqeta and the emphasis on helping clients build their own payment systems? It’s not easy, to be sure, but Marqeta works very hard to keep that framework intact, even in the face of a complicated regulatory landscape.

“Ignorance is bliss when you’re going out and building an issuing and processing from scratch,” says Gardner. “If we knew what we know now at the time and had the hindsight, we might scratch our heads and say, ‘Why would I go out and do this?’ It almost seems impenetrable with regards to building it. But we’ve done it. We’ve done an amazing job at it, and companies can come in and, in a few minutes, build prototypes. We then have to take them through a regulatory construct, they need to get approved by the bank and the network before they can launch. So, really that assembly line of regulatory oversight is actually part of the entire process of bringing someone live.”

Issuing and Processing Still a Sector in Need of Innovating

For Jason Gardner, getting into the issuing and processing side of fintech was a solid choice. However crowded the space for fintech startups may seem from the outside looking in, Gardner insists that issuing and processing actually remains relatively untouched by other emerging growth companies.

“I wouldn’t categorize issuing and processing as a crowded space at all,” says Gardner. “In fact, there’s very few companies that have innovated on this side of the payments ecosystem for a couple of reasons. Number one: the engineering challenges are enormously complex. It’s very, very heavily regulated, whether it’s state or federal, every single country has their own network, their own rules around PII (Personally Identifiable Information). This is a pretty hard space to go and innovate in. We are the only company in all of issuing and processing globally that provides publicly available APIs and really gives access to the network, so that these companies can build all kinds of technologies, whether it’s supporting their core business or it is their core business using our system. That’s unique compared to anything else out there.”

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