The financial payments investing landscape is about to get more dense. Equity investors will soon be able to get a slice of a company providing the architecture for payment card issuance like Marqeta alongside broader payments companies like Affirm Holdings (Nasdaq: AFRM) and Square (NYSE: SQ). A look at recent capital deployment in the sector begs the question: how far behind will M&A lag?
Marqeta provides card issuers with tailored issuance and transaction processing, earning fees based on card usage. Customers span traditional financial institutions, whose legacy card creation businesses tend to be “inflexible and complicated,” to more recent startup payment processors, according to the IPO filing. It’s a market with substantial upside for the 2010-vintage firm. “In 2020, the Marqeta Platform processed $60.1 billion of volume,” the company’s IPO filing reads. “This is less than 1% of the annual $6.7 trillion of transaction volume conducted through U.S. issuers in 2020, as estimated by The Nilson Report.”
The listing could be a nudge for erstwhile acquirers in the fintech landscape. Strategics and private equity firms are jostling for assets in a sector that’s seen mutable M&A combinations. Tech-heavy platforms can seek legacy assets like banking charters, as LendingClub’s (NYSE: LC) $188 million acquisition of Radius Bancorp in February showed. And more traditionally, established payments players can acquire upstart technology platforms.
A blockbuster trading debut for Marqeta could provide further confidence that middle market private equity have scope to build platforms of their own for a solid exit. Many payments deals have hovered in a range accessible to middle market funds, and Marqeta’s upcoming capital infusion will array it among industry players with deep pockets and incentives to remain technologically relevant.
Will a new buyer be born? Marqeta competes directly with companies that don’t shy away from dealmaking. Fidelity National Information Services (NYSE: FIS) purchased Worldpay in 2019 for $35 billion. Another rival, Fiserv (Nasdaq: FISV), acquired First Data for $22 billion the same year. Should public markets award Marqeta with its reportedly sought after $10 billion valuation, fintech portfolio companies could get another solid valuation comparable and potential buyer.
The S-1 filing includes boilerplate language on use of proceeds from a listing, but given the premium this sector places on innovation and the acquisitive track record of rivals, future “investment” could be on the horizon.