Marqeta acquires Power Finance for up to $275 million

Publicly traded card issuer and payment processor Marqeta (Nasdaq: MQ) has agreed to acquire Power Finance, a New York-based startup that enables brands to easily spin up customized credit cards and card-based rewards programs.

Why it’s important: Economic headwinds drive consolidation in the fintech market, but it also creates opportunities for certain players to expand their product offering.

Details: Marqeta agreed to buy Power for $223 million in cash, one-third of which will be paid over a two-year period subject to certain conditions.

• The firm could be on the hook for an additional $52 million in cash if Power hits an undisclosed milestone in the next 12 months.
• The agreement is expected to close in the first quarter, subject to customary conditions.

What it does: Power Finance built a full-stack card issuance platform that brands could use to create white-label credit card programs.

• It also built an SDK that could be used to embed custom rewards programs into existing mobile or web applications.

What they say: “If you look at the credit card, it’s the most used technology ever, with cards in the hands of 3-4 billion consumers globally, but there’s been very little innovation since the introduction of rewards,” Simon Khalaf, who was just announced as Marqeta’s new CEO last week, Ryan says.

• He says demand for the offering Power provides has come from three of Marqeta’s segments in particular: new retail markets, creator marketplaces and new job marketplaces that offer gigs or shift work.

Flashback: Power was founded by Randy Fernando and Andrew Dust, who met while working for savings and investment app startup Acorns.

• Last fall, Power raised $16.1 million in seed funding led by Anthemis and Fin Capital. CRV, Restive Ventures, Dash Fund and Plug & Play also participated in the round.

• Fernando will take over the management of all Marqeta’s credit products.
• Fernando previously founded retirement savings app Vault, which Acorns acquired in 2017,

Between the lines: Marqeta went public in mid-2021, and like many fintech companies that went public during that time, it has seen its share price collapse in the wake of a broader market selloff.

• Once trading as high as $33 a share, Marqeta shares were at $6.76 at Friday’s close.
• “Recessions are the best time to build … We are very well capitalized and we are not afraid to deploy a capital, as this shows,” says Khalaf. “We’re also one of the few companies that hasn’t had a reduction in force, and we’re actually hiring.”
• Khalaf will step in as CEO and Todd Pollak will step in as chief revenue officer after founder Jason Gardner announced his retirement as CEO in August.