Starbucks has had some amazing success with its pre-paid loyalty cards, which account for more than 25 percent of its sales. It’s not easy for other merchants to recreate that success but Marqeta, a Greylock-backed startup, is trying to give businesses a similar tool with its recently introduced loyalty card system.
Marqeta works by giving consumers one pre-paid card that can hold offers from a variety of merchants. The offers come in the form of bonus cash applied when a user loads up money on to the card to be used at a specific merchant. For example, a user who puts $100 on their Marqeta card to be used at a local supermarket can get up to 7 percent in additional cash. A restaurant typically adds 10-15 percent when a users loads up cash for future meals.
Users can find participating merchants and load up their card from Marqeta’s website or through a mobile app, which also keeps track of spending. For first time users, the card takes up to a week to arrive in the mail. Loading cash can be done through a bank account or existing debit or credit cards, so users can still take advantage of credit card miles and points.
The system differs from other loyalty services that require users to visit or spend repeatedly to get a reward. And unlike other offer systems that connect specific offers to buy a product or spend a certain amount to an existing payment card, Marqeta’s offers can be applied to any purchase with no time limit. Marqeta merchants, can also, push out limited time offers adding cash to a user’s account if they act within a certain time.
Marqeta is just getting underway in the Bay Area with 250 businesses signed up, covering more than 700 locations. The advantages of Marqeta are that employees don’t have to be trained to use the system and a business doesn’t have to buy any new hardware, something some loyalty startups require. And since Marqeta is based on a card, user’s don’t have to have a smartphone or a device outfitted with technology like near field communication. For consumers, as long as they don’t mind one more card, they can continue to work in a way that’s natural to them while instantly earning back significant savings.
Jason Gardner, Marqeta’s CEO, said the system works because consumers, once they’ve committed to pre-paying some amount, are loyal to their money and will use it, something Starbucks has proven. And that appeals to merchants, who are willing to spend a little to attract new and loyal users.
Omri Dahan, Marqeta’s chief revenue officer said consumers typically spend more than the amount pre-loaded to their card. And many sign up for automatic reloading on their card to replenish funds. He said the most popular automatic reload case is for people who put $500 toward a supermarket to get $35 in extra cash.
Marqeta, which was founded in 2010, has raised $7.3 million from Greylock, Granite Ventures and angel investors. It has also partnered with Discover to connect to its payment network. The company makes its money by charging merchants 5-10 percent of the transactions depending on volume.
Marqeta is looking to not just appeal to consumers and merchants but also to enterprise customers and member organization, who would like to offer Marqeta as part of their benefit program. That can also help spur on adoption for Marqeta as employees sign-up through their employers. In the future, Marqeta is also looking to get into the gift card market, which could pit it against companies like Wrapp, which launched in the U.S. in the spring.
I think Marqeta will face challenges as it tries to go national. There are all kinds of startups and larger companies playing in the loyalty and payments games, everything from Foursquare, LevelUp and Square to smaller loyalty plays like Belly and card-synced offer systems like Cardify, LocalBonus, and Mirth. Consumers also have to be comfortable with pre-paying, sometimes large sums, through a new startup. And some merchants might not be ready to ditch their own loyalty programs in favor of a new system.
But Marqeta is appealing in that once you get past the actual shipping of the card, it’s a pretty simple and familiar way to handle loyalty. I like that it can be a good win for both consumers and merchants. For consumers willing to commit some cash up front, they can earn some real tangible savings up front. And merchants can feel good about offering some cash incentives because consumers are opening up their wallets first. Also, this fits into my larger feeling that loyalty works best when closely tied to payments.