Marqeta, the modern card issuing platform powering giants like Cash App and Klarna, just released its Q1 2024 earnings. On the surface, the numbers paint a picture of a company struggling to regain its footing after a tumultuous period. Net revenue contracted a hefty 46% year-over-year, a figure likely to make investors wary. But peel back the layers, and a fascinating counter-narrative emerges, one of strategic repositioning and a quiet revolution that could catapult Marqeta to unexpected heights.

The decline in net revenue, as highlighted by CFO Mike Milotich, is primarily a result of accounting changes related to the Cash App contract renewal. These changes, affecting the way bank and network fees are presented, don't reflect the actual value Marqeta delivers. Strip away the accounting noise, and the story becomes one of burgeoning growth. TPV, a key indicator of platform usage, soared 33% year-over-year, hitting an impressive $67 billion. On a single day, the platform processed over $1 billion in TPV, a testament to Marqeta's robust infrastructure and its growing appeal to disruptors in the payments landscape.

But the real intrigue lies in Marqeta's strategic shift, one subtly revealed in the call's details. The company is quietly leaning into its "Powered by Marqeta" model, a nuanced change with massive implications. This model, often associated with a lower net revenue take rate, allows customers like Trade Republic, Europe's largest broker with 4 million customers, to manage certain aspects of their card programs while leveraging Marqeta's core infrastructure. While this may depress net revenue in the short term, it opens doors to a wider range of customers, particularly in the exploding embedded finance space.

Think about it. Companies like ITS, a travel management company, and Affinipay, a leader in online payment solutions for professionals, are now turning to Marqeta for embedded credit card programs. These aren't your typical fintech startups. They're established players with vast customer bases, seeking to integrate seamless payment experiences into their existing workflows. This is the essence of embedded finance, a market projected to be worth a staggering $7.2 trillion by 2030.

And Marqeta, with its flexible, modular platform and growing suite of services, is perfectly positioned to ride this wave. The company's acquisition of Power, a credit program management specialist, bolsters its capabilities, enabling it to offer a comprehensive suite of credit solutions. In addition, Marqeta is shrewdly building a moat around its platform, offering value-added services like compliance, dispute management, and 3D Secure. These offerings not only increase customer stickiness but also improve Marqeta's profitability.

Consider this: around 20 existing customers in Q1 alone opted for Marqeta's program management services, a trend CEO Simon Khalaf believes will only accelerate. These customers, tired of the complexities and regulatory burdens of managing these services in-house, are increasingly turning to Marqeta's expertise. This, coupled with Marqeta's success in flipping volumes from competitors (at least 10% of bookings in each quarter of 2023), suggests a growing recognition of the company's differentiated value proposition.

Marqeta's foray into the $2 trillion accelerated wage access (AWA) market provides another intriguing glimpse into its future. Its partnership with Rain, a financial wellness benefits provider serving McDonald's, Taco Bell, and others, demonstrates Marqeta's ability to tap into a vast network of employers. But it's not just about AWA. As Khalaf astutely observed, for many customers, AWA is just the first step. They envision a world where AWA integrates seamlessly with broader neobanking solutions, offering their workforce a comprehensive suite of financial tools.

Here's the key hypothesis: Marqeta is intentionally sacrificing some short-term net revenue growth to capture a dominant share of the long-term embedded finance opportunity. By focusing on gross profit, a more accurate metric of its core value delivery, and by embracing the "Powered by Marqeta" model, the company is opening its platform to a wider array of customers. This strategy, coupled with its relentless focus on operational efficiency and a burgeoning credit offering, positions Marqeta to become the backbone of the embedded finance revolution.

Key Performance Indicators

Bookings Growth in 2023: 50%

Projected Revenue from New Cohorts in 2024: $20 Million

Projected Revenue from New Cohorts in 2025: $60 Million

Projected Revenue from New Cohorts in 2026: $150 Million

TPV Generated from AWA (Q1 2024): 3%

Projected Revenue Growth from New Customer Cohorts

The market, fixated on the headline net revenue figure, may be missing the forest for the trees. Marqeta's quiet revolution, powered by its strategic shift and relentless focus on delivering tangible value, could well be Wall Street's next big miss. And those who recognize the true potential of this modern card issuing giant stand to reap the rewards.

"Fun Facts about Marqeta: Marqeta processes billions of dollars in transactions annually, supporting millions of cards worldwide. The company has a global presence, with offices in North America, Europe, and Asia-Pacific. Marqeta's platform is built on a modern, cloud-based architecture, allowing for scalability and flexibility."