The long-term promise of mobile wallets has been that plastic cards could disappear, even from the point of issuance.
But today, a physical card is still a part of the package, with some wallets even using them to speed setup by reading the card's account numbers through a phone's camera. Ultimately, the potential exists to issue the card within a mobile wallet, and Marqeta is working to make that a reality today.
Marqeta says it is now the first issuer processor to offer instantly issued tokenized eligible cards, making that function available to certain developers on the Visa network offering Apple Pay. Though Marqeta supports enrollment through using a smartphone's camera, this update bypasses that process and replaces card numbers with tokens.
"No one before us has taken a virtual card and just inserted it into Apple Pay," said Marqeta CEO Jason Gardner. More importantly, the technology has "tons of use cases" in other settings, Gardner added.
The tokenization technology is provided through the Visa or Mastercard networks, a process Marqeta has worked on for more than a year with the card brands and Apple.
Indeed, the card networks were vital to making this next step. Gardner was quick to note in February that the announcement Visa made in opening the Visa Developer platform would benefit all of the payment networks that had already been operating with open APIs. And it helped push along the virtual card process for mobile payment systems.
"We were all kind of guinea pigs in the game of how do you generate an instant issuance card and drop it into Apple Pay?" Gardner said.
Tokenization replaces card numbers with a series of unrelated characters, which are meant to be useless if compromised by a fraudster. A card can have different tokens for recurring payments on different websites, Gardner said. "If a particular site got hacked, the consumer could just get rid of that token and not the card," he added.
Many issuers are advancing their platforms because of the new technologies available, said Brian Riley, director of card services for Mercator Advisory Group.
"Marqeta is not going to knock out TSYS or First Data, but it is a pretty novel system," Riley said. "Many of these issuers offer great programs, but the question is always whether they work with all of the other platforms."
It is not far-fetched to believe that virtual cards will be significant payments tool in the future, especially on the corporate payments side of the fence, Riley said. "It is certainly a play for Marqeta in the B-to-B world it focuses on because every niche, like the corporate travel world with $700 billion running through it, can be exploited with good software."
While Square operated through processor Chase Paymentech, and Stripe ran on top of Wells Fargo when they launched initial services, Marqeta essentially built its issuer processor portfolio from scratch five years ago.
"We didn't have what those others had, so our first iteration of that was the Marqeta prepaid card," Gardner said. "We had to prove the technology would work, and we did that."
After that, Oakland, Calif.-based Marqeta showed its penchant for exploring new technology and bringing new innovation to the payments landscape.
First, the company advanced its prepaid card concept in which a consumer would go onto the Marqeta website to choose stores it wanted to engage with in a loyalty program that rewarded users for committing to a certain amount spent. As an example, a user might say it would use $500 through the card at a certain grocery store, and that grocer would reward that commitment with an extra $30.
More than three years ago, Marqeta worked with Facebook to provide the social media giant with its first stored-value Facebook prepaid card, carrying the concept of Marqeta's original prepaid card program in which consumers were rewarded for committing to pay for products or services in advance.
As those partnerships or technology advancements stalled — Facebook shut down its plastic card in 2014 — Marqeta opened its APIs for other developers.
"We had learned a lot with our own card and in working with other companies," Gardner said. "By 2015, we were boarding companies onto our platform and growing very fast."
Gardner does not share financial information or reveal the current number of clients, but he did confirm that there won't be any branded Marqeta cards in the future on the loyalty or general purpose reloadable sides of the ledger. The focus going forward is to provide services to others.
"We provide everything else to several issuing banks, plastic card manufacturers and other companies making use of our APIs," Gardner added. "Everything we do is B-to-B and open API in prepaid, debit or credit."
Though Marqeta may seem like a chameleon changing its colors often, Gardner sees it as practical business sense.
"I would think of it more as a journey, rather than vacillating back and forth between business models."