Good morning. For those of you who don't know me, I'm Craig Maurer. I'm Co-Director of Research here at FT Partners. We're very excited to have Patti Kangwankij.
Kangwankij.
I got it right? Yeah.
Yes, you got it.
Okay. Of Marqeta joining us this morning. Thanks again for coming.
Happy to be here.
So look, maybe you can start with an introduction of Marqeta for those in the room who might not know your business in detail. You are a public company, and you've been that for a number of years, but there's been some change over time, so maybe we can talk about that.
Marqeta is a modern card issuing platform, and we've been at the leading edge of the issuer processor for over a decade now. We have grown significantly in the past year, north of 30% in volume and are over $450 billion of volume on our platform run rate annually. We operate in 40 countries and on one single kind of modern platform. A lot of our customers are the big fintech leaders in the space, and we talk about our business in four use cases: buy now, pay later lending, which has the likes of Klarna, Affirm, Afterpay, and Sezzle; expense management with Ramp, BILL, and Expensify; on-demand delivery with DoorDash, Uber, and Instacart; and kind of the neobanks, which include Cash App and Square, Coinbase, OnePay, which is kind of Walmart's issuing arm.
We have built a really nice business over the last decade.
Mm-hmm. For the audience, we like to keep things casual, keep things flowing. If you have questions, don't wait for me to prompt them. Just raise your hand and we'll get to them. But before we go down the list of questions here-
Yes.
Maybe you could talk through the transitions of senior leadership that have happened over the last few years because there have been some changes. Mike, CEO, double duty as CFO for a while. So maybe talk about where you are today.
Yeah. We have a full leadership team today, so we're excited. We had our Chief Product Officer join a couple of weeks ago. By background, I joined Marqeta about seven months ago as the CFO. Mike Milotich was named. He has been the CFO for the past, I think, four years now. In the last year, he was playing double duty with CEO and CFO and he has built out the full leadership team. We hired a people officer, a technology officer, and a product officer, and we're really gelling and working through 2027 planning now.
That's great. Just to level set, maybe you can talk about highlights from this year and the guidance you've set. Your guidance runs through two large renewals, Block moving through its next pricing tier, moderation in Cash App new issuance. So maybe talk about the factors that have gone into guidance.
Yeah. Why don't I just start with those kind of moving pieces, then I'll go into some of maybe the growth factors longer-term. But yeah, so we guided towards 11%-12% gross profit growth for 2026. The three factors that you mentioned equate to about 7-8 percentage points of that growth impact. The first component was the renewals of two last deals that were negotiated in the fintech boom. So they had kind of a little bit of a higher price and we believed would have a material impact this year. That was worth about 3 percentage points. The second was the Cash App tiering on the pricing of the contract. So in 2023, when we renegotiated that contract, there was one tier which was about 2x the step down.
And at that time, we were thinking about this as when we reach this next level of growth and incentivizing Cash App to build with us. We said at that point we would reward them for this growth. And so there was a step down in pricing that hit at the end of 2025 that had a full year impact that was about 3 percentage points. And then the last item was the Cash App new issuance moderation. We've talked about that throughout the year, and that was worth about 1.5 percentage point . If you add back maybe the first two items, which are unique to 2026 and won't happen after 2026, that's about 6 percentage points. And if you add that back to the 11-12, you get to the mid to high teens.
But when you think about the broader growth, I think we see still very broad-based growth across our customer base and our use cases. And in the markets that we operate in North America and where we're certified abroad, we're still only 2% of the overall market share, and we really feel strongly that we're in this wave of modernization that will continue for a long time.
Mm-hmm. Just to ask on this point you made, what are you seeing in Cash App new issuance relative to what you communicated in August?
Yeah. I think in short, it's as expected. When we communicated in August, what we had said is we saw a slight new issuance decrease in June, more in July, and that we would continue to see this ramp downwards towards the end of the year, ending with no new issuance. It's still TBD where it ends up, but the flow and the trend is as expected for now. I guess two things I would point to on that is, this is just a new issuance item today. We are still issuing cards for them, and that's being diversified. But we have millions of existing customers who are interacting with us every day, and interacting in banking products like direct deposit, et cetera. The second is our relationship continues to grow. This is, for them, a way to diversify their processor and their bank.
But we have been adding programs and services across the Block relationship, which includes Square, Afterpay, and Cash App.
Yeah. That leads me to my last question on this topic, which is, with the contract coming up in 2028, how does the setup compare to the last renewal?
Yeah. The last time we renewed was in the middle of 2023, and our renewal is up in the middle of 2028. In the last renewal, we did decrease price about 40%. But in that contract, what we also did was we added a number of competitive pricing tiers, which go beyond where we think we're going to be in 2028. So that sets up somewhat of the baseline. It also sets up the protection for if volume moves up or down. We think we're well-positioned, and our relationship continues to be strong as we think about when we set up these contracts, a lot of times we aggregate volume across different programs, so that they can see the benefits of scale on our platform.
And just to tie this off with a bow, what is the concentration in your business with Block today, and how has that evolved?
Yeah. What we disclose is it is about 41 percentage points today. It has been decreasing quite meaningfully over the years. A lot of it is due to our non-Block customers, actually. One of the stats we talk about is our non-Block customers are growing 2x what Block is, and Block is a massive business continuing to grow on our platform.
Okay. That is 41% of?
Net revenue.
Net revenue.
Yeah.
Okay, great. Moving on from Block, maybe talk about inflection points and structural growth. Where does the next leg of growth come from for Marqeta, and what are the most concrete things you can talk about in terms of points of success when thinking about that?
Yeah. I will say that over the last decade, our growth has really been built around these leading fintech players. Thus, we talk about our top 10. I think the stat that we talked about this last quarter is six of our top 10 customers by gross profit were growing north of 50% on a volume basis. That continues to grow with the fintech's winners growing as well. They are pushing the bigger enterprises to also embed payments within their platform. The combination of that, we still feel like we are in the early innings of that. Maybe three areas of additional newer vectors of growth for us. The first, international. International is about 20% of our growth, and a majority of that comes from Europe. Europe grew between 2022 and 2025, 100% annually. So 8x what it was several years ago.
A majority of that volume was processing only. This past year, we acquired a company called TransactPay, which added the ability to do program management with an EMI license in Europe. With that capability, we believe that there is going to be strong momentum for North America customers to move there with the same level of service that we see here. The second is around value-added services. This is the program management and other services around processing that makes us, I think, more unique. That includes fraud and risk services. It includes tokenization. It includes analytics. It includes program management type services. All of those is still a small percentage of our gross profit already. It is only about 7%. But as we are moving up market with enterprises, they are looking for a fuller solution.
If we can provide that, it not only adds revenue but also gets a stickier client. Maybe the last point of growth that I would mention is managed credit. We have been processing credit for a long time already, but this is the fuller offering for credit. That includes onboarding, underwriting, and servicing of the credit. We have now a program live for commercial and consumer today, and we have a number of programs that are going to come live over the coming quarters as well.
Yeah. Thinking about credit, you did have a big announcement, I think it was, correct me if I am wrong, about 18 months ago with American Express. Talk about why American Express came to you. Historically, they have done a lot in-house. They have done some with TSYS, so maybe talk about what drove that relationship.
Yeah. I was not here at that time, but I think American Express was really, as they were looking at the partnerships that we have in the industry with our customers, they wanted to be kind of involved. We try to be agnostic between banks and networks and really provide a level field. So we feel like we have built a relationship across all those and we are one of the largest kind of modern processors today. So, I think they saw that too, and we look forward to announcing more updates on that in the coming quarters.
Mike spent a long time at Visa. Does it allow him to sort of talk across both of those sides of the business?
Yeah, I think he was at Amex too.
He was.
Yeah. He's been around. He's been on that side, and I've been on the issuer side.
You guys got it covered from both angles.
Yeah.
Thinking about new vectors, right? Buy now, pay later grew over 40% in second quarter against a real tough comp. Expense management volume was up over 50%. How much of that growth is category expansion versus share gains?
Yeah. I think it's both. I very much think it's both. It is our customers growing in a growing market. For buy now, pay later, a lot of it has been due to flexible credentials where they have now this pay-anywhere card, where they are working directly with the consumer, and they've also been expanding internationally. It's quite amazing to see, this past quarter, we're about 2x what we were at the beginning of last year and growing about 10 percentage points higher than we were in the first quarter of last year. It has been tremendous growth over the last year and we feel there's still more growth to come there. From an expense management perspective, like you said, north of 50% this year, four consecutive quarters of increasing growth in that use cases.
It is really from some of these more modern expense management platforms really driving their end user growth. We hope that part of it is our product offering, which gives them unique configurability with the controls around them. But we have seen a lot of those players continue to grow.
Okay. Maybe unpack what happened with single-use virtual card volume at one customer, and sort of the defensibility of that business relative to program management per se.
Yeah. We did talk about the single-use virtual card, which had some impact to the second half of growth. What I'd say is maybe I'll take a step back a little bit in that a lot of these buy now, pay later customers of ours actually were early in the diversification of their processing. So they've had that for several years. Because a couple of years ago, a lot of their business was based on virtual cards, which you could move around relatively easily. Since then, over the last year, we've had the pay-anywhere card come out and the use of flexible credentials. This one customer of ours, it only does this flexible credential consumer card with us, but they have multiple processors for virtual card.
As the shift and the growth, which was really astounding in the last year, their mix between processors was a little uneven. So they spent some time to try to rebalance it, and so some of the virtual card moved from there. We still feel very strongly, again, I've talked about the incredible growth. We're still expecting north of 30% in this kind of use case, even with this diversification. Where we think about defensibility, obviously, our contracts and we have pricing tiers to incentivize growth, but it's also just leading with the technology. We were early on in the Visa flexible credential, and we have a new program coming out with Mastercard one in the coming quarters as well.
When you think about once you're in a customer and that customer grows and adds additional processors, how do you fight to retain volume? What wins larger volume share once you're competing internally, which is very different from competing, say, for an RFP, right?
Yeah. It's an interesting one. But I think if people are in the payments industry, we know that diversification, I was in the acquiring business and the issuing business. Large companies want to diversify their risk, whether that's processing and/or the banks behind it. So this is a very natural thing. Actually, most of our large customers do that already today. What you hope is that you remain the primary processor. There's a couple ways that you do that. One is obviously the contract. The contract is when you think about the incentives to, we price based on volume, and to the extent you have more volume with us, you get favorable pricing.
A lot of that obviously comes into play, and usually what we have seen is a lot of customers go, they get to somewhere like 90/10, 80/20, and then you settle out from there. That usually happens in new issuance first, and then broadly. Then the second is obviously continuing to innovate and to work with them. Especially like Block, we have a deep relationship throughout the organization on the product and the engineering side, and then you continue to innovate with new products and hope to prove your value.
Mm-hmm. As we think about competition, maybe expand on the competitive landscape today. How has it changed? We have modern players here like Thredd and Adyen. There are legacy players like TSYS, First Data, i2c, so on and so forth. Now we have Visa making some noise with DPS and Pismo. Talk about how the landscape is continuing to evolve.
Yeah. I think in this wave of modernization for issuing, there is room for many players, we think. But in terms of the level of competition, I think the intensity really has not changed much over the last few years, but what has changed is the players that you hear about more. It really depends on what region, what use case, and where you see various competitors in that. Visa in particular, I think has come up quite a bit. DPS and Pismo, they have come out and said they are targeting middle to smaller banks and fintechs. We are looking for, we have talked about moving upmarket to enterprise as well as large financial institutions. Where we do overlap some, what customers talk to us about is our engineering expertise, our modern platform.
It is our API configurability, our fraud capabilities, and that we can provide this full stack of services with our EMI license and program management abroad.
So maybe discuss that full stack a little bit because value-added services is a buzzword for anybody looking at the payment space. But what are those products, if you can break them down, that are really having the most impact in driving actual dollars to the bottom line?
Yeah. I think there is a few. But I think a little bit of it is the combination of many of these that add to the thing. We think about program management, which is the management of the banks and the networks on behalf of our customer. Additionally, the value-added services, which our biggest one is real-time decisioning, which is our risk and fraud. So we obviously take ML and AI, and we take a lot of this data to help better decision for our customers. There is tokenization, which we have been a leader in for many years, and then there is a number of data and analytics products that our customers use as well. Again, this has grown significantly over the past several years, about 7% of our gross profit today, and really actually make our customers a little bit stickier into our ecosystem.
Okay. Now, a couple of years ago, I think it was maybe, I do not know, 18 months ago, two years ago, there was some noise around the banks that are part of your bank partners. Can you talk about that landscape a little bit? That landscape continues to evolve as well in terms of sponsor banks, things like that.
Yeah. Well, I was not, again, here a couple of years ago I would say. Broadly from my seat today, where we try to, and we have briefly mentioned this today, we try to provide both agnostic place for customers to come who want to use whatever bank they want. And we obviously have a lot of relationship banks in different regions as well as various networks. So we like to be the neutral party within that. What we do tend to highlight for our customers is, though because we bring a lot of these relationships, we pass on the scale benefits that we get. So if we are working with a particular bank and we get the benefits, they are not just negotiating on their own directly with these organizations, but because we aggregate volume across our ecosystem, we are able to pass those on to our customers.
This is where we can differentiate a little bit, and the total cost of ownership sometimes is very competitive.
Okay. As we continue talking about innovation, stablecoins is something we can't get away from talking about. You have partnerships with Zero Hash and BVNK, and you're part of the OpenUSD standard. Can you talk about how those opportunities are evolving for Marqeta? Is there truly commercial demand for stablecoin settlement at this point?
Yeah. It is definitely the hot topic right now, and we do think stablecoin is great for global money movement. When you think about stablecoins, it should be cheaper, faster, and definitely more secure. With our capabilities, we believe that we are well-positioned given our platform. In terms of the stablecoin transactions, we think what really will matter is the interoperability with fiat currencies. You need a number of the cards to be stablecoin-backed and be able to transact, and then you need consumers and users of those cards to be able to use it at the thousands of merchants without changing the payment rails. Our customers have been demanding that, and then we have been building out those capabilities and working on these partnerships.
We did announce the partnerships with BVNK and Zero Hash over the last couple of months, so we're working closely with them to be able to provide this capability. What also makes us confident in this is we were early with the crypto-backed cards, and so we have live and work with Coinbase and Bitpanda on the crypto side and have proven that, I think, our flexible platform and capabilities have been able to meet that demand. Also our multinational business, which we've been growing rapidly over the last several years.
Okay, and just in terms of actual flows right now, is anything material to discuss?
Nothing material yet. I think we're still very early on in this use case. But it will be interesting over the next few years.
Yeah, absolutely. Back to some of the numbers, and before I do that, are there any questions in the room? Okay. So wanted to talk about take rate for a moment. Gross profit take rate was down about a basis point in the second quarter. What's driving that, and how should we think about the trend?
Yeah. So I think I will first start by saying gross profit dollar is how we are optimizing, and we optimize that within year and also optimizing the largest gross profit dollar that we can have in the next several years with the growth that we have. But we do pay attention to gross profit take rate. Obviously, it's a big driver of gross profit dollars. There are maybe two things structurally for 2026, and then I will take a step broadly about the trend over time that we believe are deliberate business decisions and will continue. So the two for 2026 were the same ones that we've mentioned that are unique. One is the renewal of these two large deals that were negotiated in the fintech boom. And then the second is this larger step down in the Cash App price tier for the year. Those are 2026.
Beyond that, they will not happen again. Going forward, I think there are three trends that are somewhat structural that will impact the business, but we are actually leaning in on. The first is, are customers growing with us? We have talked about a lot of our customers growing significantly, six of the top 10 gross profit customers growing north of 50%. The way we structure contracts is mainly based on volume. We are incentivizing customers to grow with us, to build on our platform, and this will continue. When the increase in volume happens, it is always still, we structure the contracts, is always accretive to gross profit. But we do pass on some of the savings and the volume benefits. The second is we have talked about Europe. Europe traditionally had a lower take rate, and particularly most of our Europe volume was processing only.
We talked about the acquisition this past year where we acquired TransactPay, and now we have the program management capabilities there, and that will get added as we think about the coming years. But given the growth has been north of 100% for three years in a row, it did weigh in on our take rate over the last year. Then third, the first two that I just mentioned there are the ones that are probably what the majority of what you saw in this past year, along with the 2026 items. Going forward, we have talked about moving up market. Our deal size, Mike mentioned that deal sizes signed in the past quarter was 90% higher than the year before.
When we are moving up to the enterprise, and we are, again, we price with volume, they will see the benefit of pricing, and that will get incorporated into our base. But why we are leaning in on this enterprise and moving up market is really because we feel, one, these deals higher confidence deals. These are established companies with big user bases, which we believe could be big businesses with embedded payments, and they have the ability to move and add more services. So they can grow internationally with us, value-added services, and we believe there is a bigger opportunity there. So while you can see that there are some trends that will bring it down, I think we are really optimizing for the biggest gross profit dollar that we can have in a couple of years.
Okay. If we move the discussion to the bottom line, how do we think about incremental margins? Volumes have multiplied over the last few years. Headcount has been flat for four years now. So how do we think about that moving forward? At what point in your evolution and your investment in new technologies are you going to have to reinvest in personnel again?
Yeah. Well, it's an interesting one. I'll just take a step back. Payment platforms, we've talked about how it takes a lot of upfront investments, both in fixed costs as well as people and relationships, et cetera. They really scale very nicely, and we've seen the benefits. Now that we've reached this $450 billion annualized volume, most of the incremental customers and volumes really drops to the bottom line. You've seen profitability this year really increase, and we still feel like there is a lot of leverage to come, and we're just at the tipping point where we're seeing that. Maybe two other things that will help, I think, in terms of productivity and efficiency leverage. One is value-added services.
These are the services surrounding the customer, and we believe as we sell these into enterprises and we grow that business, that obviously has a very good gross margin and can drop to the bottom line very nicely. The second is, we can't get away from it, AI. There has been a lot of efficiency gained from that, and I think we'll continue to see that. Again, I think there's a lot of opportunity for additional leverage. We talked about, I think, 12% expense growth this past quarter. But in the next two quarters, it should be about flattish. Excited to continue to lean in.
How much is AI allowing you to drive those efficiencies? I know it's a touchy question with jobs and everything else, but just some high-level thoughts would be great.
Yeah. It's something we discuss a lot. We're still early on in trying to measure, trying to deploy, but we've really seen, particularly in the engineering area, really great strides. I think we'll continue to lean in, but it has been meaningful for us.
We're about at the end of the session. I wanted to see if there were any questions. All right. Anything else you want to leave for the group?
No. I think you covered it.
All right, Patti. Thank you so much for joining us. Really appreciate it.
Thank you for having me.