marqeta_card

Customer loyalty programs and gift cards are essentially broken – for every merchant not named Starbucks, that is. Nearly 25 percent of the coffee house’s revenue comes from the purchase of food and beverages using pre-paid gift and loyalty cards (or apps). For everyone else, it’s nearly impossible to get a consumer to register a gift card or provide complete and accurate identity information when they do.

The rub is, every time a consumer refills one of these cards, she’s giving the company an interest free loan. And every time a user then makes a purchase using a registered card, she’s providing the company with invaluable customer behavior data – when, where, and what do we buy, and thus how can the company convince us to do so more often. Any merchant would kill for this info, but most struggle to get it. Starbucks not only has massive scale and reach, but also had to develop its own payments architecture to integrate these cards with its POS system. Few other merchants have come close to duplicating this feat.

That is until online-to-offline commerce and payments startup Marqeta solve this problem with its multi-retailer loyalty card platform, +M. Today, Marqeta is announcing $14 million in Series B financing from Greylock IL, Granite Ventures, Commerce Ventures, and other angel and strategic investors, as well as the mother of all partnerships. While the company’s February integrations with Jamba Juice and 1-800 Flowers have proven to be big wins for its business, today’s announcement that Marqeta is now powering the Facebook Card has the potential to be a game changer. I mean, there’s nowhere else you can go to immediately get access to 1 billion consumers, and their real identities.

The key to landing the Facebook partnership is Marqeta’s +M Platform which 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 all those gifts offline using a single card. Users don’t need to sign up to receive a Facebook Card. Rather, one will be sent in the mail once they receive their first gift. All future gifts will be added to that same card.

“With each of our relationships, we’ve deliberately targeted specific demographics, and we have many more relationships coming,” Marqeta founder and CEO Jason Gardner says.

One of the biggest problems with traditional loyalty and gift cards is anonymity. Users either don’t register their cards, or do so with fictitious or incomplete identity information. Without this information, merchants cannot capture customer behavior data with each transaction for use in future marketing efforts. By connecting all these cards to a Facebook account – with the platform’s now famous “real identity” policy – this is no longer an issue.

Marqeta-powered cards achieve the Holy Grail of connecting the online to offline and fully closing the marketing and redemption loop. With a customer relationship built on the foundation of real identity, merchants can better convert one-time customers into repeat business. And while Facebook chose to implement the +M Platform via an old-world plastic card, the technology is equally applicable to a mobile app, a biometric reader, or other input technologies.

The three year old startup previously raised $7.3 million in Seed and Series A funding which Gardner says was used to build out the complicated technology required to manage multiple merchants on a single card.

“It seems simple to take in a credit card swipe and generate a receipt from one of a few merchants,” the CEO says. “What’s very hard is the logic that goes into making decisions around a swipe event and generating that receipt micro-seconds.”

This latest round of funding will be used to build out infrastructure, personnel, sales, and marketing, Gardner says. The Marqeta team has already grown to 37 people between California and Florida.

This is Gardner’s second payments company, his first being PropertyBridge, a multi-family real estate rent processing platform that sold to Moneygram International. Marqeta COO Eric Bachman has previously held senior executive roles for Golden Gateway Financial, U.S. Bank, Wells Fargo, NextCard, BankServ, CES and others. In other words, there’s a reason this team been able to solve such a massive problem that demands combining payments, commerce, and consumer marketing.

“When we initially invested two years ago, these guys stood out from the crowd of payments and deals companies because of their payments backgrounds,” Granite Ventures managing director Chris McKay says. “The platform also had fundamental technology and represented a real exchange of value between merchant and consumer. We thought of them sort of as an anti-Groupon.”

Where competitors have failed in the past is in trying to co-mingle various merchants’ cash in a single account, McKay says, something Marqeta does not do. With no direct competitors today in the “pay for return on your capital” space, according to McKay the biggest remaining challenge for the three year old company is scale and exposure. Payments, after all, is a volume game.

While it would be great to sell directly to merchants, Groupon, LivingSocial, and the other “feet on the street” local sales companies have proven this model unsustainable. Partnering with Facebook as a means of reaching hundreds of thousands if not millions of small business around the world is a far more efficient strategy, but one with its own risks. Not only is Marqeta giving up a piece of its pie to the partnership, but it also risks becoming too reliant on a single partner or platform. Look no further than Zynga to see how quickly that can go wrong. There’s likely a happy medium to be reached, but that will have to come with scale and defensibility.

Marqeta is in a good place today. The company has built highly-defensible IP and thus attracted several large partners who are eager to leverage its technology. There remain challenges including both raising awareness among merchants and combatting consumer concerns over privacy and security. The good news is that Facebook’s mighty marking engine and a bank account full of cash can overcome a lot of problems.

  1. Marqeta, the most advanced payment card platform ever built