The card-issuing platform Marqeta disrupted a decades-old industry by creating an open-API-based infrastructure that enables its clients to instantly issue digital or physical cards with flexibility, control, and scale. It now powers a broad share of the fintech and e-commerce economy. In this episode of Talking Banking Matters, we talk with the company’s founder, chair, and now former CEO Jason Gardner. The following edited transcript presents highlights from the conversation, which we recorded just after he stepped down from the CEO role at the start of the year.
Matt Cooke, McKinsey: The card-issuing platform Marqeta broke new ground in 2010, when it created an open API for issuing digital and physical payment cards and for processing payments. Essentially, it could be said the company invented modern card issuing. Today, Marqeta provides infrastructure and tools for companies to build and manage their payment programs, giving them greater control over which purchases are authorized. Based in Oakland, California, the company launched in 2010. It did not go public until 2021, however. During that time, it went through 15 rounds of funding, the last being its IPO, when it reached a valuation of just over $16 billion.
We spoke with Marqeta’s founder, Jason Gardner, a lifelong entrepreneur, about why and how he built Marqeta, the challenges of scaling, and his recent decision to step aside as CEO. We talked just weeks after he became executive chair and handed over the CEO reins to his successor, Simon Khalaf, who is a veteran of Twilio and Yahoo. We started by asking Jason how he got into the payments industry and why he scuttled a plan to open juice bars in Australia
Jason Gardner, Marqeta: I got into fintechs in the first place when I had been planning to move to Australia to start a chain of juice bars like Jamba Juice that we were going to call Crocodile Coolers. I had breakfast with a friend of mine, Ryan Gilbert, who is now the head of Launchpad Capital, and he said he had an idea to add electronic payments to rent- and lease-related payments. I was so blown away by his idea that I dropped everything, and we started Property Bridge, which we eventually sold to MoneyGram International.
I was at MoneyGram for a couple of years, and in 2009, I was having dinner with a friend, who told me my next business should involve putting a bunch of Groupon coupons on a single payment card so users didn’t have to juggle multiple Groupons. I had no idea what card issuing and processing was back then, and that idea was also like getting struck by lightning. I just fell in love with it and started building.
I did not know exactly what we were going to build at the time, but to solve the problem of being able to put many Groupons on a card, we had to build this thing called an issuing processing system from scratch. The way we built it was by delivering APIs but specifically to ourselves, so we could build the technology that would let customers use our technology. Then, in 2013, we got a call from Facebook, and they said, “We want a card that can let us put multiple gift cards from different merchants on one card.” Imagine it’s your birthday, and your friends want to send you a bunch of different gift certificates from different merchants but all on one card. It turned out the only company in the world that could do that at the time was us. We were 19 people at that point, and we were kind of blown away that Facebook was calling us.
In 2014, we opened up the API, and in 2015, we suddenly found incredible product–market fit, to the point where we had to actually stop taking customers and operationalize. Scale is absolutely the hardest thing you will ever deal with in building a business, and we were wholly unprepared for it. We took a gamble and didn’t really take on customers for about six to nine months while we were operationalizing the business. And then when we really hung out our shingle in 2016, we took off like a rocket because we had such good product–market fit.
Matt Cooke: The technology that Marqeta pioneered allows companies to identify more precisely the specific merchant where a payment card is being used. At the time, processing systems did not include precise geographical information that GPS systems now enable, making it difficult for payment system users to know exactly which payment terminal an authorization was being requested from. Without this technology, digital companies such as on-demand delivery services could not effectively scale. Jason explained this further and told how it led to Marqeta carving out a new category in finance.
Jason Gardner: There was technology out there at the time that let you add merchants to a card: they were mall cards at the time, but you had to go around to every single merchant and physically swipe the card to get both the terminal and merchant ID associated with that specific merchant. That was really an impossible proposition, because we would never be able to physically go to every single merchant. The magic of what we had built was that it allowed us to use third-party data like Google’s map API to pinpoint with greater than 99 percent accuracy that a given payment was tied to the right merchant at the right time, and that allowed us to go and scale this technology.
What really helped us get up and running was having Facebook as a customer. And then eBay was our second customer. At the same time, we were meeting with DoorDash, Postmates, and others. We had invented this technology called JIT—or just-in-time—funding. The modern card-issuing category is something that Marqeta not only invented but completely pioneered, which is now commonplace all over the world. We were trying to build the card to be in a terminal state, so that the card is expecting the order the DoorDash driver is picking up. When the driver picks up food from a merchant, that purchase is matched with the order. We take the ISO 85831 message, which is generated from the point of sale, and then convert that to a JSON2 message. This lets the system confirm that the right driver is picking up the right order for the right customer, along with some other metadata, so that when the transaction is complete, the customer’s ledger is instantaneously updated. And then the card goes back to the terminal state, and they drop off that order.
I was talking about this with Sean Plaice, the co-founder and CTO of Postmates, and when I described this to him, the look in his eyes was like, “Oh, my God, this solves our scaling problem.” Their challenge was that they were putting money on drivers’ cards in the morning—it could be thousands of dollars—and they didn’t know what was going on until the end of the day, because the bank they were using at the time was sending them flat files at the end of the day. Drivers could be picking up the wrong order, and they had no way to know until the end of the day.
We focused on the on-demand delivery sector because I felt we needed to target a particular field that would be a market we could address. We felt if we targeted the right sector and placed all our eggs in that one basket and made it work, we would prove out the technology, and then we could add on other verticals and “commerce disruptors,” and then move upstream to larger and larger institutions.
We felt if we targeted the right sector and placed all our eggs in that one basket and made it work, we would prove out the technology, and then we could add on other verticals and ‘commerce disruptors,’ and then move upstream to larger and larger institutions.
Matt Cooke: Acquiring companies is among the trickier of the crossroads that new ventures reach. Whether such acquisitions are done to acquire technology and talent or to neutralize a competitor, these transactions add a new dimension of challenges to the process of scaling. Jason talked about how staying focused on their customers' need for Marqeta's software to be always on guided their decision to acquire Power Finance, the fintech infrastructure start-up.
Jason Gardner: It’s actually going to deliver a lot more challenges, because we’ve never acquired a company before. We felt it was the right acquisition at the right time for Marqeta. Acquiring any company adds a set of challenges. We spent a lot of time in diligence with them, as you can imagine, making sure of the technology. We’re a customer-first company, but the technology is paramount to everything that we do.
We still have this culture within the business that we treat every customer like they’re our only customer. They call, you pick up the phone; they text, you respond immediately. That way, they feel heard and supported. The reason is that we either support their core business or we are their core business. When we spent time with Power [Finance], looking at the technology, our engineers, who are some of the best engineers in the world, said that if they were going to build anything, they would build it exactly like this. That helped us a lot in regard to knowing that the technology and how it was built would scale appropriately for our customers as we go into this world of credit and credit cards, which we’ve had a vision to do for years.
The program management part of building credit cards is intense. We could have built it ourselves, but that would take a couple of years, and we felt like we would miss an opportunity. So we decided to acquire Power Finance, and we’re pretty excited about getting them up and running on our platform and getting customers going up.
Matt Cooke: As happens nearly always with a novel technology, Marqeta’s success inspired others, and today the company has many competitors. We asked Jason to talk about their competition and what Marqeta’s advantage is in the industry that they created.
Jason Gardner: For some time, we didn’t have direct competitors, and I always reminded the company that you can’t be as successful as Marqeta is and not attract a lot of competitors. I think the first one that really stood out was Stripe. We knew they were building a competitor. They had actually been a customer of ours for years and used our technology for a part of their business that was beginning to scale. I remember having a conversation with John [Collison], and I saw a little twinkle in his eye, and I said, “I just saw a twinkle in your eye.” He said, “Well, you know, this is a pretty interesting business.” So I knew it was coming.
The one thing I’ve always said when I’m talking to prospects is that you can’t reverse engineer 13-plus years of operations. We have already seen every single corner case for our customers’ businesses that you could ever imagine, and someone new coming in is going to be learning from us.
So I told our team we will continue to work in service to customers, and add other ways of money movement which is in service to modern card issuing. If we began to move away from our core competitive advantage and add other things, it would degrade our core business. And I don’t want to go compete with a Stripe or an Adyen or a Checkout. Those entrepreneurs are really good at building technology, and they have built amazing acquiring systems. I really don’t want to go compete with that. There are 3,000 competitors in that space, versus 200 to 300 in issuing and processing. So the odds are in our favor. If we continue to focus on modern card issuing, we’ll continue to be successful and lead the industry.
Matt Cooke: We wanted to follow up on Jason’s comments about having spent several decades living at start-up speed as a serial entrepreneur. We asked him to talk about life as a founder CEO, what it takes to build a company such as Marqeta, and how he decided to hand over to his successor.
Jason Gardner: It was very high highs, and horrible depression, and very low lows. You can’t not have that in building a business. A lot of it is because you hire an employee, and an actual human being shows up to work on their first day, and they need a lot more than just roles and responsibilities to be successful.
And as a sole founder and CEO, you just don’t want to let anybody down. You don’t want to let your customers or employees or investors or the industry down. So every second of every day, you are working to make the best, most informed decisions you can possibly make. In many ways, the harder you work, the luckier you get.
But what we built was absolutely the right time at the right place within financial services and fintech. Scaling that business and raising money were difficult at times. And then when we hit success, it came so fast that we were wholly unprepared to scale. We had to stop and take nine months just to operationalize the business. This is a very complex business to run. Payments in and of itself is deceptively complex.
Sometimes you can wonder how you even survived building a business over 13 years and going through so many rounds of funding and then taking it public. But that journey for me was incredible. I feel so lucky to work with all these great people and great customers. All of our largest customers are still with us over all those years.
When it came to deciding whether I was the right person to lead the company over the next decade, it was a lot of soul searching, a lot of discussing with other founder CEOs who stepped into an exec chairman role or just a board role. Ultimately, I decided I wasn’t the person to be leading into the future. And through the process of hiring a chief product officer, we found our next CEO in Simon Khalaf, who was at Twilio at the time. Simon has been an entrepreneur and has been a CEO four different times, so I couldn’t be more excited about having him as the CEO.
Matt Cooke: Company culture can be another crossroads for start-ups as they scale. Maintaining the spark and magic that the founding team builds can be seriously challenging when teams grow and relationships between functions necessarily grow more distant. Jason talked about how keeping focused on understanding customer needs has helped Marqeta maintain its culture as it has scaled and gone public.
Jason Gardner: I had three values from day one when I started the business. One was to hire subject matter experts—people who are the best at what they do. Number two is really having this kind of open culture. I didn’t want any offices, because I felt like I wanted to operate as asynchronously as I possibly could. And number three, it’s always about the customer. We treat every customer like they’re our only customer.
The way I balance these is by focusing on responding to customers. We have to listen a lot more than we talk. We have to be able to understand their business. At one point, for example, we even had people become DoorDashers to get an intricate understanding of our customer. Our test DoorDashers would go out and use the card we were building for them to see how it worked, doing things like using the card for something other than picking up an order [to see what happened].
I think this willingness to do things like that was a unique competitive advantage for us and really speaks to our culture and how we serve our customers. I’m a big believer that culture eats strategy for breakfast.
Matt Cooke: Given this growing competition, we wondered what Jason sees as Marqeta’s key to ongoing success and what the company’s strategy is going forward, especially given that incumbent banks might be considering a choice between becoming Marqeta’s customer or its competitor as they seek to find their share of the embedded finance opportunity.
Jason Gardner: What’s critical to our success is the strategy of embedded finance. We started with this idea of commerce disruptors, which was the on-demand delivery companies; buy now, pay later; the business expense management like Expensify and Ramp, which are companies on our platform. And then we went into digital banks with companies like Block and Lydia, out of France. And then we went into larger merchants, companies like Google and Uber, and then the large financial institutions. I don’t think any one business is critical to our success, because we’re finding that the strategy we’ve been going forward with has been doing well, and we’re going to invest more in that.
It’s about how you take features and functions and package them in a way for embedded finance.
It’s about how you take features and functions and package them in a way for embedded finance. More and more companies are going to recognize this and will need to recognize who customers are loyal to. First off, they’re loyal to their own money above everything else. And then they want to work with trusted institutions to make sure they can go and build their business together.
For us, we’re not focused on any one industry, and we’re also not boiling the ocean. We have a number of targets that we’re focused on where we think we can be successful, in addition to those where we’re continuing to be successful. But it really comes down to knowing what our strategy is and how we are going to bring our products to market to attract bigger and bigger customers.
Matt Cooke: Taking a company public is one of the ultimate challenges for founder CEOs, and we had Jason talk about that experience.
Jason Gardner: Going public was one of the greatest joys of my life. The whole process was wonderful. At the time, I was the largest shareholder and still am, and the board really left it up to me. They said, “You’re going to have to lead the company into the public markets, so you have to really decide if this is something you want to do.” I decided to do it for a couple of reasons. One was that I felt I would not have another opportunity in my lifetime to take a company public, and for an entrepreneur, it’s sort of an elite status. Another is that the discipline of preparing was something I fell in love with. You are preparing the business and understanding a lot about the operational cadence you have in the business. The discipline about how you run the business is truly paramount.
Matt Cooke: The fintech sector overall has had a tough couple of years, with pandemic-driven digital acceleration cooling off a bit as consumer spending habits adapt to both the end of COVID-19 lockdowns and increased inflation. At the same time, rising interest rates and unsettled economic indicators continue to make for unfavorable capital markets.
For Marqeta, all of this coinciding with a CEO change has not been greeted warmly by investors. The company’s stock has underperformed the market so far this year, and first-quarter losses were higher than expected. Critics point to the company’s reliance on a narrow set of large customers. In May, new CEO Simon Khalaf announced Marqeta would lay off 15 percent of its 1,000-strong workforce and take “restructuring actions” to reduce its operating expenses. Stock buybacks of up to $200 million were also announced. However, the stock price responded favorably to Khalaf’s statements.
Despite the ongoing turbulence that continues to put drag on fintechs generally, the fact that Marqeta broke new ground as the first modern card-issuing platform may set it apart from others. The ability to create a new system that takes a whole industry forward, as Marqeta has, can require an esprit de corps that is hardwired into an organization. We look forward to seeing how the disruption Marqeta introduced continues to play out.