Marqeta, a debit card company that gets most of its business through Jack Dorsey Square’s payment processor, aims to complete one of the largest listings for a fintech company this year, testing a business model that has boomed because of traditional margins imposed after the 2008 financial crisis.
On top of the company’s market price range, Marqeta would have a market capitalization of nearly $ 13 billion and rise as much as $ 1.1 billion in a first initial public offering that should be marked Tuesday.
The IPO adds to a number of recent and planned fintech listings by companies including the online provider SoFi and the tax-free brokerage Robinhood.
Based in Oakland, California, Marqeta creates branded debit cards and prepaid cards for corporate customers that include the DoorDash delivery group and Swedish fintech Klarna as well as Square.
Marqeta’s listing plan has drawn attention to relations between fintech start-ups and small community banks in the United States, which have become increasingly close partners since the financial crisis.
Most of Marqeta’s revenues come from exchange fees, the costs that merchants pay when their customers use debit cards to make a purchase.
Due to the Durbin Amendment in the 2010 Dodd Frank Act, banks with assets of less than $ 10 billion receive higher exchange rates from larger providers than transactions.
Fintech start-ups such as Marqeta and Chime, a fast-growing personal finance app in the United States, have taken advantage of this discrepancy by partnering with small community banks and taking a reduction in fees.
Marqeta’s largest partner is Sutton Bank, which receives a payment from Marqeta in exchange for the exchange fee. The company also transfers a portion of its revenues from exchange rights to Square and other customers.
Some analysts and investors have questioned the long-term viability of the deployment, with the growth of fintech start-ups attracting attention from regulators and large banks.
In a prospectus, Marqeta warned that exchange rates were subject to “intense legal and regulatory scrutiny” and said he was consciously associating with banks exempt under the Durbin amendment.
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“You can call it arbitration, you can call it a gap, whatever you want to call it,” said Callum Godwin, chief economist at global payment consulting firm CMSPI. Still, “we’re very likely years from now that something has changed, if anything,” he said.
Marqeta’s business grew during the pandemic as blockchain Americans turned to digital financial services like Square’s Cash App and ecommerce companies like DoorDash.
Marqeta more than doubled its net revenues to $ 290 million last year while reducing losses to $ 48 million. Square’s business accounted for 73% of Marqeta’s net revenues in the first quarter, a concentration that has increased from the previous year. Marqeta’s agreements with Square will last until 2024, according to the company.
If Marqeta reaches the top of its price range, its market capitalization would be roughly three times the rating it received during a May financing last year. Granite Ventures and Iconiq Capital were listed as the company’s largest foreign investors prior to the IPO.
Marqeta CEO Jason Gardner would own a stake in the company worth $ 1.7 billion at the top of the range, through a special class of shares bringing 10 votes to the stock.
Goldman Sachs and JPMorgan serve as the main underwriters of the offering.