Transcription:
Kate Fitzgerald: (
I know that Buy Now Pay Later has been a theme. A lot of people have been talking about, but through the lens of Marqeta, it's gonna be a very interesting perspective given the fact of Marqeta. So Salman Syed, tell us a little bit about how Marqueta fits into Buy Now Pay Later and a short history.
Salman Syed: (
So for those of you who are not familiar with Marqeta, we are a NextGen modern card issuing platform. You effectively go to Marqeta to build a credit card, debit card or a prepaid card. Specifically in terms of how we fit in with Buy Now Pay Later, so effectively there are a range of products that the Buy Now Pay Later have already put out in market, whether it's their in-store solution, whether it's a card in folk's wallets, in folk's hands, we are essentially powering those cards. There's a series of capabilities that we have had, but, what I really wanna highlight here is that if you look at a lot of the new next gen BNPL's that have come out, that are all we call Fintech's. They have a developer-centric approach in terms of how they build their products. So what they find in Marqueta is a very valuable platform, which enables them to really have access to the metal. So that's the first thing. The second thing I'd say in terms of what we're doing for BNPL was that we're actually helping them with the constructs that they want to put into place that help them bring these types of, new credit type products into market.
Kate Fitzgerald: (
Marqueta has partner to multiple different players in this ecosystem. Who are some of your key partners where you feel like you have especially large role?
Salman Syed: (
Specifically in the Buy Now Pay Later space, the folks we've been public about is a lot of brands that have become household names. So whether it's an After pay firm, Klarna, etc, they're all, Marqueta customers and partners. We also work with large financial institutions who are looking to similar types of services, in this space.
Kate Fitzgerald: (
Is there a problem in the fact that you're working with competitors? I mean, Klarna, After pay these guys are competitors.
Salman Syed: (
We don't see it as a problem. The fact of the matter is we're providing a best in class platform and depend on an effectively type of services that they want to put into market. They're looking for the best platform that's available to them. So, we're pretty horizontal in terms of what we provide. We have a lot of companies who are in the same space that are using our services.
Kate Fitzgerald: (
The ones you mentioned are FinTech's, what about traditional legacy players?
Salman Syed: (
We're not publicly talking about any of them at this time, but of course they're in very similar conversations. The reason, what's important to really highlight there is the fact that the new basis of competition as a lot of people have been talking about is really on experience, And how quickly they can innovate and provide, different types of services. So the type of stack that you need to be able to do that is fundamentally different than what's been available to them to this point. So that's effectively why they're all coming to us, for these types of services.
Kate Fitzgerald: (
But they're not all coming to you, as there's more competition. In fact, Marqueta, hasn't been around now since for 10 years, and there are some people who have said that Marqueta technology is no longer the latest cutting edge. What would you say to that?
Salman Syed: (
There's a lot of people saying a lot of different things. When you look at folks who are defining the future of financial services or who are operating in the future or financial services, and you can largely put them into two categories. You can say, it's the Fintech's that have reached some scale. There's always new ones that are being born on a monthly basis. Of course, you've got the large financial institutions who are also modernizing. The fact of the matter is they're all finding the value proposition compelling in terms of what we provide from a platform standpoint. So whether it's just ease of start, or it's the fact that, if you go talk to a large financial institution while it's really interesting that you have modern APIs, can you operate at scale? So when we're running programs that are arguably equivalent to some of the larger debit programs in the United States, that gives a lot of people assurances and makes them feel comfortable in terms of running their programs on our platform as well.
Kate Fitzgerald: (
I'm gonna have to put you in the position of speaking for the industry. As you represent sort of the FinTech side of things, do you see that you're coming to take to eat the lunch of the traditional credit card issuers?
Kate Fitzgerald: (
You're the emerging, FinTech Buy Now Pay Later. End of things.
Salman Syed: (
There's are lot of shifts, which I'm sure everybody's aware of that's happening in the credit space now. First and foremost, there's a new generation that's coming of age and is used to have using different types of credit products. The fact of the matter is they've historically felt like they weren't getting, the services that they wanted from traditional banks. What's important to them is also fundamentally different. The level of experience how they interact with their issuers is also completely unique. So what we are essentially doing is providing them the tools and infrastructure so they can provide those types of experiences, for those new consumers now, whether or not that means those customers end up leaving large financial institutions and start moving to FinTech. I mean, that will figure that out over time. That being said, what we're also clearly seeing is that large financial institutions see this opportunity and are also gonna deliver better products as a result of it.
Kate Fitzgerald: (
Given the fact that a lot of the momentum that we have now in Buy Now Pay Later has grown up over the last, during the pandemic. In US, the vast majority of the momentum occurred during the pandemic, it could be because there was an awful lot of unexpected liquidity, there were uncertain, there were people in pockets of the economy that, were spending differently is a lot of your success due to that. Or do you see that, it's more of a long term, trend shift and why would that be from the Fintech Buy Now Pay Later Support?
Salman Syed: (
If you look at the Buy Now Pay Later, one thing to keep in mind is, many of them have been online first, And so there's been a natural spike in online over the last couple of years and it's a model that's worked, that's been beneficial for them for the most part.
Kate Fitzgerald: (
In terms of coexisting with legacy systems, on one hand, it seems as if Buy Now Pay Later could be morphing into all new name for all types of lending, or it could start to fade away as legacy systems themselves expand and start to do more and borrow more of the tools that the Fintech's are providing.
Salman Syed: (
Will there be other credit products that come from Buy Now Pay Later possibly? One thing to say about a lot of the modern Fintech's who are calling themselves Buy Now Pay Later, their whole objective has been to be the anti credit card. If they start just putting out very similar products, then they're just doing a modern version of something that's already been there. Their objective is always going to be different in some way. If you look at some recent examples, like the Klarna card or the affirmed debit plus card, that's clear examples of that. So I don't think their objective is to do the same thing.
Salman Syed: (
The other thing that you should also keep in mind is a lot of these Fintech's, see their business having multiple different avenues in terms of growing. I don't think it's only going to be about, potentially credit or providing pay and force service. There's an opportunity to be able to provide more value to the merchants because they can do more things around, advertising spend, for example, because they have more insight into these customers, because they have a better digital footprint of them, etc. So that's just two examples. This is purely a lending play. I just think it was something that just fits into their arsenal amongst one of many things that they're gonna do over time.
Kate Fitzgerald: (
Do you think the government and regulation is going to play a big role in reshaping Buy Now Pay Later? The CFPB is doing an inquiry and there might be additional questions? Some new products that are coming into a play that may actually raise concern among some consumer advocates Buy Now Pay Later solutions for grocery. My thought is you have a person who is tempted by the idea of, to buy groceries and I won't have to pay for six weeks, but really doesn't, isn't gonna have that money in six weeks, which is automatically gonna put them into the, another version of the lending solutions that affirm or after pay offers. Is that something you think that we're basically seeing a new form of, payday lending emerge?
Salman Syed: (
I don't know if I'd call it payday lending.
Kate Fitzgerald: (
Taking an extreme view of what some might say that you're using this wonderful Buy Now Pay Later concept, and dangling it in front of people in an easier way than ever to use at a time when the economy is very uncertain and inflation is spiking and people are just trying to feed their families.
Salman Syed: (
Let's unpack. Why is it easier to use, because the experience is just so much better?
Kate Fitzgerald: (
It's available. Whereas someone who didn't have access to credit before now can immediately get into potentially into debt.
Salman Syed: (
To take a step back, one of the things that we all have an accountability and responsibility for is that we continue to educate consumers in terms of what is possible for them from a credit standpoint. That's the first thing I'd say, number two, look, it's a debate that's gonna continue to go on for quite some time in terms of whose responsibility is what, in terms of being able to manage your credit. What I can tell you from, conversations that we get into is that, whether you're a large financial institution, whether you're a traditional bank or you're a FinTech, you're thinking very much about, okay, how do I solve this problem? I don't think there's anybody who feels like anyone wins. If we're seeing more consumers go into debt or in some sort of troublesome situation. Now look, the fact of the matter is there are more tools in front of people, in terms of being able to manage some of these types of things. Conversation that I've heard of recently is, there's always been this mindset, which is never decline a customer at the point of sale, but what if the person can't really afford what they're trying to buy in that moment? Is it okay to decline them at that point?
Kate Fitzgerald: (
Isn't that we hear about all the time, the conversion factor, the abandoned, shopping cart?
Salman Syed: (
Yes, from the merchant's perspective, but from, somebody who's extending credit or for the consumer's financial wellbeing, it's a different perspective on that problem.
Kate Fitzgerald: (
So what does Buy Now Pay Later bring that's an improvement, if there's anything to that model, the responsible lending side of things?
Salman Syed: (
They're probably in a better position, to be honest versus Marqueta to answer a responsible lending, question there. But they have more insight in terms of, payment history, a lot of things probably that has existed for quite some time.
Kate Fitzgerald: (
So I'm thinking about the availability of the, Buy Now Pay Later to an immigrant, someone who's never, maybe has had no credit history before, now is Buy Now Pay Later, does it create the opportunity for that person to establish, access to credit where the traditional model might not have offered that?
Salman Syed: (
There's plenty of startups that we've spoken to, or I've met personally, or that, we know of, that we read about in the press who are solving for a lot of these specific use cases where you may be somebody who is new to the country, you may be a student and you don't have access to credit, Buy Now Pay Later, is providing an alternative mechanism in terms of being able to get that now.
Kate Fitzgerald: (
One of our panelists, that didn't make it was from Equifax. The credit reporting bureaus have previously had no visibility into, Buy Now Pay Later loans. So there's a two-sided problem or opportunity. On the one hand, this unknown borrower can now get a couple of different loans going, but on the other hand, a traditional lender doesn't know how many Buy Now Pay Later loans, that same person might have. So, as I understand it, the three major credit reporting agencies are now starting to gather or prepare to report on these and gather this data to it in some reportable format that vantage score and FICO, will eventually be able to, present or make available to lenders, but it won't be considered the same type of data coz we're moving into a fast growing new area. Have you gotten any insight on how that's gonna affect anything you do?
Salman Syed: (
I don't think it really has any implications on us, but two immediate reactions I'd give you, which is one, they need to do that because quite frankly, this is how credit is now being used. So we're not gonna account for it. We're obviously missing on something. The other effect would be if Equifax, TransUnion, etc, don't get to this, somebody else will. And so the fact of the matter is it's incumbent on them to probably solve for this problem before, somebody else decides to make a run at it.
Kate Fitzgerald: (
Can you talk a little more about how Marqueta operates in real time and the advantages that offers over legacy processes?
Salman Syed: (
From a real time standpoint, one of the primary advantages that we have is that we've built our tech stack from the ground up. We're not built on top of any other legacy infrastructure and we have native integrations into payment networks. Why that matters is so take, for example, payment authorization, when the payment authorization is happening, because we have direct access, to these messages, it gives us the ability to actually do a lot of different things with them. One clear example, which is very important for Buy Now Pay Later, for example, is that they see the transaction occurring. They get access to the transaction as it's occurring without having to do that tech work that we've had to do in the past. As a result of that, it helps them control fraud. It ensures that the person is spending the amount at the location that they're expected to etc. Those have been major advantages for them to really scale up and move really quickly, which we've seen them do in the last couple of years.
Kate Fitzgerald: (
Real time is a new direction, especially valuable in these sort of economic uncertainty that we're in. So speaking of which, fraud is something that has come up, I don't know whether they're just a lot of fraud solution vendors that are trying to build a market for Buy Now Pay Later fraud or if that's something we're really gonna start to see? We've seen over and over that fraudsters always find a way to hack into and break the best solutions. But what are some of the built-in limitations that exist in Buy Now Pay Later that protect against fraud?
Salman Syed: (
One of the things that we should take into account, when Buy Now Pay Later happens in the online flow or in the merchant or in the in-store flow. Imagine the general experience, which is you go into a big box retailer, you say, you wanna buy a TV and you sign up with name that Buy Now Pay Later, whether it's your bank, whether it's a FinTech. What they're doing is they're often generating a card on the back end and paying specifically that merchant, the good news associated with that is that you're not really opening up that line of credit to eco, to be spent anywhere you want. It's really being spent. It was authorized for that one merchant and it is being used specifically at that merchant for the amount that you've wanted.
Salman Syed: (
That's great because if you actually just look at B2B payments and you look at supplier payments, the level of fraud that you see in that space, isn't typically too high. So that's a good news for Buy Now Pay Later. As that model has continued to scale, fraud has stayed relatively low. Now there's a new set of challenges though, when Buy Now Pay Later becomes a card that's in your wallet and you're walking around and you may choose to go to either a retailer or like the grocery store or whatever. Then, you're gonna start seeing more everyday spend type fraud trends.
Kate Fitzgerald: (
But is it something that would be relatively limited compared with an open ended credit card?
Salman Syed: (
It all depends in terms of how the card's designed. If you limit the number of, the specific MCCs that somebody or the specific merchants that somebody can actually shop at then I do think, you're gonna have that advantage. Again, that is actually one of those things. There's been a lot of forms of Buy Now Pay Later. One of them is probably lease to own, for example, now lease to own, at least from what I remember is very much around, you can only put a lease on something that's adorable good. So you can't really do it on groceries, for example. Those are natural ways that you can kind of protect against some of the fraud that could happen in different areas.
Kate Fitzgerald: (
It's easy to generalize about Buy Now Pay Later because as we've heard today, there's this huge spectrum that people are targeting consumers at these different ages and income levels. But to what degree do you think that Buy Now Pay Later is gonna redefine traditional credit lending?
Salman Syed: (
That's a great question because there's a lot of layers to this one. The first one that we have to talk about is just what the experience is like in terms of interacting with getting that credit product, servicing that credit product and how you use that credit product. First and foremost, now that we're in an environment, which is very experience driven, these solutions are driven by with the developers having access to the metal. Ultimately we all, as consumers benefit quite a bit, there's design first thinking, etc. I don't think that's necessarily been the watermark on credit products, historically. If you go talk to most lenders who aren't a big bank or even a FinTech, their whole focus was well, what's the yield I get in terms of being able to put out, lend some money out and what am I gonna go back, get back in return.
Salman Syed: (
That's all it's really been. What Buy Now Pay Later and Fintech's have done in general is just actually put experience at the forefront and that really matters to a lot of people. That's the first thing. Secondarily for example, the Klarna card that's coming out or the affirmed debit plus card. Now these folks are continuing to be pioneers on different types of credit solutions or hybrid combo solutions that we see in other markets we haven't seen yet in the US that potentially are going to really become something that consumers want to use and become something that maybe actually get further mass adoption. More and more banks and other players are gonna want to, put out into market as well.
Kate Fitzgerald: (
How do you think the role that data plays, what's the Buy Now Pay Later opportunity with data versus the legacy credit card issuer?
Salman Syed: (
There's a massive opportunity for data, for the modern Buy Now Pay Later ? So one, first of all, it's a whole digital experience in terms of how you came to the website, how you're checking out what you put in your cart, etc. Now what I can turn around and tell the merchant in terms of how this demographic shops, what they buy when they buy all those types of details. That's at a level of granularity, quite frankly, that's much more specific than , most traditional credit providers are able to provide. That's a massive advantage for them over time. That's why I go back to the point, which is to look at Buy Now Pay Later and say, okay, they're really just about extending credit. That's one line of business, but they're all in the business of creating something that's much more powerful than that.
Kate Fitzgerald: (
Is data immediately available or does it still require a lot of backend work to access?
Salman Syed: (
It's probably a combination of both and those are the problems that probably a lot of Fintech's are probably working through now.
Kate Fitzgerald: (
Now you mentioned your first thought was online website. What about the brick and mortar side of Buy Now Pay Later? Where do you think we are now and what is the potential for that?
Salman Syed: (
Online is the place that they've gone in the early days and has been pretty easy and pretty, not easy, but it has been pretty fast for them to scale in that space, in store it just takes a lot longer, because you're actually talking about physically changing, retail stores, what is the checkout flow going to look like, etc. All those types of things. At some point, it's gonna be equivalent to, you're gonna see an apple pay mark on there. You might see a pay with Klarna mark on there, etc. this really could continue to evolve over time. Somebody in the last panel set made the comment that how many wallets do we really use? I do think we're probably walking into a version of that with some of the Buy Now Pay Later as well.
Kate Fitzgerald: (
How far along are we in the evolution of this? Because I get in my car and it tells me it thinks I'm going here or it thinks I'm gonna buy that, it's not always right, but it's trying to get there. It's trying to anticipate where I might go. Google just announced the equivalent of the apple wallet last week. The capabilities are going to continue to converge. Google's working on a lot of things that are gonna tie in with the connected commerce we've heard about. So you could say you're driving long, or even maybe thinking where's the nearest, such and such. That's open near me. Now that lets me pay with this model. Now consider where we are today. How far out is all of that, given the fact that we've heard for years about how everything's gonna be seamless. But in some ways now we're adding two factor authentication. We're worrying about fraud. Give me some reality about how some of these futuristic things, how long is it gonna take before my car can order all the stuff that I'm thinking I want immediately?
Salman Syed: (
If you look at e-commerce historically, it's been somewhere around 16% of all commerce that occurs and obviously that number is somewhat close to double during the pandemic because we just became much more online first. But interestingly enough, the early data on 22 is we're trending back towards, the historical number, which is really interesting. So how far out is the future in terms of something that's so seamless along those lines? Our buying patterns don't necessarily shift, that easily. There'll be segments of the population that, pick this stuff up, but I don't know if it'll ever become the most ubiquitous way of doing things to this day.
Salman Syed: (
Marqueta's in the business of doing card programs and a lot of folks will work with, will start off saying, Hey, I just wanna do a virtual card, or then let's just add it into apple pay. It's interesting if you watch the real inflection point, a lot of comes when you do a physical card. So what does that really tell you that even to this day, we still love our plastic. We still pull it out. I'm sure apple pay usage has gone up quite a bit over the last couple of years, but we're still in a place today where pulling out your plastic is actually the most common way people choose to pay.
Kate Fitzgerald: (
It's certainly the last resort when they don't have it, when everything else doesn't work. Does anybody have any questions, you are here with the expert, Marqueta is this company that has evolved rapidly? I remember in 2012, I met Jason. His CEO biggest IPO ever and he was like at one 25% of a pole wearing these high top tennis shoes and the Marqueta's business model was completely different than what it is today in five years. What do you think Marqueta is gonna be? You think, it will look a lot like what it's doing now, consolidation ahead?
Salman Syed: (
Marqueta is in it's early days now, in terms of, what we're planning to accomplish. Ultimately we think, there is a massive opportunity in terms of just defining the future of money movement and, card issuing is where we've been focused, but we think there's gonna be a lot of other places for us to go over time. So we're gonna keep going.
Kate Fitzgerald: (
We should call it a day. Thank you very much.