Marqeta Inc. has launched a consumer rewards prepaid card in hopes of capturing the success of Starbucks' loyalty program and spreading that wealth to other merchants.

After nine months of testing in the San Francisco Bay Area, Marqeta introduced a prepaid card on Sept. 19 that allows merchants to add extra money to the accounts of customers who are willing to go online and "pay up front" for goods and services at their stores.

"Look at the Marqeta card as an accounting engine with a payments wrapper on it," Marqeta founder and CEO Jason Gardner says.

Consumers go onto the Marqeta website to find merchants who accept the cards. Consumers then establish accounts with the stores they plan to visit.

When a consumer commits $500 to a grocery store with an online order, that grocer may add another $30 to the account, Gardner says. The consumer can keep track of the accounts through the Marqeta mobile application or by going online. Merchants establish the amount of extra money they will add to an account, or customize offers for specific days or time periods, Gardner says.

In addition, each time the consumer swipes the card at the point of sale, Marqeta sends a text message with a receipt and a note about how much money is left in that specific merchant account, Gardner says.

Marqeta operates as the card issuer and payment processor, while the transactions go through the Discover Financial Services network as signature-debit transactions, Gardner says. "Discover is our first network partner, so the card is accepted at any merchant that takes Discover cards," he adds.

Gardner previously co-founded Property Bridge, an online rental payment portal, eight years ago. Even then, he watched Starbucks closely.

"I was always fascinated with Starbucks and the fact that people would pay in advance for coffee then swipe a prepaid card," Gardner says.

Three key factors were needed to bring the Starbucks concept to other merchants, Gardner says. "There had to be no [need for] integration at the point of sale, it had to be a cloud-based service and there had to be no extra training necessary for the cashiers," he says.

Gardner put all of those factors to work when founding Marqeta in January of 2010 and beginning to establish the accounting technology needed to create a single prepaid card for numerous merchants.

That work has paid off in a "totally new and fresh idea that represents a good value exchange between the consumer and merchant," says industry analyst Todd Ablowitz, president of Centennial, Colo.-based Double Diamond Group LLC.

"It's an excellent use of the open-loop prepaid infrastructure provided by Discover, and it broadens the type of customer loyalty that Starbucks enjoys," Ablowitz says.

Merchants pay Marqeta a "success commission" at 5% to 10% of the transaction, depending on volume, Gardner says. "But Marqeta pays the card loading fees, so the merchant never absorbs those costs," he notes.

Consumers can use their other payment cards to load funds onto the Marqeta card, thus earning points or rewards if available on those cards as well, Gardner says. In addition, Marqeta is able to process two transactions for one purchase if the consumer spends more than the amount committed to a merchant. "If the cardholder spends $300 at a grocery store, but had only $280 in the account, the extra $20 is taken from the payment card he uses to load his Marqeta account," Gardner says.

In that way, the consumer never has to worry about spending more money than he has loaded onto the Marqeta card.

Sutton Bank in Ohio, an issuing bank for Discover, has established a single account for Marqeta to hold the consumer funds.

Gardner did not disclose how many consumers currently hold Marqeta cards after the pilot testing, but did say more than 250 merchants in the San Francisco area accept the cards. With today's launch, Marqeta is preparing to introduce the card across the country, he says.

Consumers won't lose interest in the Marqeta card because it does not operate in the same manner as a "daily offers" card or service, Gardner says.

"Marqeta is based on the 'everyday spend' idea with merchants such as grocery stores, gas stations, clothes stores, and pet care shops participating," Gardner says. "The whole idea is for the consumer to keep coming back to the store, because that is where he has committed his money ahead of time."

And it's an idea that should work, Ablowitz says.

"The payments industry has had a constant barrage of mobile payment and merchant deals schemes unfold in the past year or two, but the Marqeta card is one of the better ones I've seen," Ablowitz says.

"It's a great way for merchants to capture the 'captive spend,' to get a guaranteed spend at their stores, plus the money they put in as a loyalty reward is going to be spent at their store," he adds.

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