Marqeta CEO says his platform is not a ‘one-trick pony’

Half of Marqeta’s top 20 customers grew more than 50% year-over-year, according to embedded finance firm second quarter profitsThe card issuer also saw net revenues grow by 61% during the same period, driven by a suite of risk solutions such as 3DS and Risk control.

“There have always been doubts as to whether Marqeta is a one-dimensional horse or whether it is a new platform,” the CEO said Simon Khalaf told Banking Dive. “I think this earnings release finally puts those concerns to rest with a platform that looks like a platform, acts like a platform, and walks like a platform. It is a platform.”

Marqeta Partnerships with Bank Varo, Confirm, Visa and Zoho and the opening of a new office in Warsaw, Polandhighlight the expansion of the market presence of the payment platform, which moves in the financial environment and raises compliance standards.

Khalaf, comparing the priorities and business models of tech companies and financial institutions, compared the operational focus of two CEOs: Jamie Dimon of JPMorgan Chase and Sundar Pichai of Google. While Dimon likely doesn’t track daily active users or app engagement, Pichai regularly tracks consumer engagement metrics such as YouTube users, search engine traffic or cost per click, Khalaf said.

Khalaf spoke with Banking Dive about how banks that have traditionally catered to high-end customers need to focus on customer service to compete with fintech companies that offer smoother transactions.

Editor’s note: The interview has been edited for clarity and conciseness.

BANKING DIVE: What challenges do you see in the bank-fintech relationship, considering the technologies and innovations that facilitate transactions?

SIMON KHALAF: We, as an industry, share core principles that align with regulators – no one wants hackers online, no one wants money laundering online, and no one wants to interfere with bad lending regulations.

We’re excited about great consumer experiences. But (regulators) are motivated by taking the least risk (and) we’re excited about reducing the most difficult risks, so that creates that disconnect. So I would say that’s a challenge for our industry more broadly.

I would say the second one is: Banks have done a great job of monetizing low-risk areas. I hate to use the cliché of “appealing to the rich.” No, I mean that’s not what they do. They’re in the business of risk management. And there’s always less risk when you’re either appeaseing rich people or when they have assets that they can use to secure a loan. So extending purchasing power to everyone requires a significant investment in technology. If banks are going to compete in this space, they’re going to have to change not just how much they invest, they’re going to have to change their behavior.

(B)anks need a different kind of leadership, a different kind of process, a different kind of mindset, which is why you’re in the customer service business. Tech has learned this the hard way over the last 20 years. … Innovation happens in a second.

When you talk about technology, do you also consider artificial intelligence?

I don’t believe in hype cycles. AI is like software. It doesn’t mean anything, right? It’s so broad. And what we saw last year was generative AI having life… Gemini and ChatGPT created a language that can express the value of AI. But AI has been and will be and will increase (in) risk assessment, reward management, and I would say open up the credit field. All of these areas will use AI to a large extent.

How do you think the regulatory environment will develop over the next few years and how is the market preparing to face this situation?

The bottom line is that regulators are going to be eager to engage with how well software and AI are going to mitigate risk — that’s going to be positive. The second thing is fair lending and equity. Machines aren’t biased, but training machines can be biased. So regulators are going to have to focus on the integrity of the entity that’s training the machines, not what the machines are doing. I think that’s a much easier process than going from bank to bank and taking samples and seeing if there’s bias. Their job is going to be easier. But they’ve got more work upstream. Let’s say there’s 3 million people in bank branches approving or declining a loan. It’s hard to see what they’re doing. But it’s much easier to see what’s training the machine, and I think that’s going to be a change in regulators’ thinking.

Which emerging market trends particularly excite you?

Technology has the potential to impact the banking sector and give it a new dimension, but this concerns two areas: risk assessment, which uses technology to reduce the risks associated with access to capital, and financial services, which have contributed to changing consumer behavior.

What I mean by guest: About 70 years ago, the innovation was the credit card. It used to be like, you get paid, you go buy something. And the ability to extend credit allowed consumers to have more flexibility in their purchases and allowed merchants to do something more than twice a month, which is payment cycles, that was the innovation that has trillion-dollar implications.

Nothing has happened since then, I’m sorry to say. (Financial companies) have expanded rewards for consumers, trying to change consumer behavior, but they are static. There is not a single retailer today that doesn’t have dynamic pricing… Believe it or not, there is not a single market, whether it’s the stock market, the equity market, the forex market, that doesn’t have dynamic pricing. But the reward structure in fintech is 1.5% cash back. Imagine moving to a dynamic reward structure, you change consumer behavior, very simple. So those two things, embracing and dynamic rewards, are going to be revolutionary.