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JP Morgan To Launch ‘Virtual’ Credit Cards in Partnership with Marqeta

The Wall Street giant’s commercial cards team is partnering with Bay Area start-up Marqeta to launch digital-only credit cards. The new function will allow JPMorgan corporate cards to work in mobile wallets such as Apple Pay or Samsung Pay immediately — without having to wait for a physical version in the mail.

“This is another way of getting virtual company cards into the hands of those who need them very quickly,” John Skinner, head of commercial cards at JPMorgan, told CNBC in a phone interview. “We know there’s a need for this product — what Covid has taught us is that there’s more use cases for this than we imagined.” 

Virtual Credit Cards

This type of immediate, “virtual” card has historically been used for gig-economy, or contract workers who may need to pay expenses but wouldn’t qualify for a corporate card. The digital version can also put certain spending parameters and per Diem totals, as well as restrictions on where an employee can spend.

But as many Americans work from home during the pandemic, Skinner said it might also help those who don’t have access to their offices, or primary address where a corporate card might normally arrive. Plus, the pandemic has accelerated the adoption of digital payments and contactless payments, upping the appeal for digital cards. 

Skinner said the feature will be available in early 2021, and only for commercial cards. He did not say if the bank has plans to expand to its Chase, consumer side.

Marqeta’s push to wallet functionality will add a new dimension to virtual card payments,” John Skinner, head of commercial cards at JPMorgan Chase, said in a statement. “With Marqeta, our virtual cards can be expanded to new use cases like facilitating payments to disaster relief volunteers or for recruitment spend where interview candidates can be issued a card into their mobile wallets for travel expenses.”

Fintech Start-up Marqeta

Marqeta provides the same technology for DoorDash and Instacart, which issue virtual cards to delivery workers to pay for groceries or takeout orders in person. Square also uses Marqeta for a virtual and physical debit card launched through Square Cash, and for a plastic business debit card it unveiled in January 2019.

Why we invested in Marqeta

JPMorgan has a history of partnering with, and buying up fintech companies. It acquired Silicon Valley-based start-up WePay in December 2017. In this case, Marqeta chief revenue officer Omri Dahan said it would have taken years for the Wall Street giant to build a similar product in-house. 

“These big financial institutions are tied to the legacy systems that they’ve built on top of for years, it’s hard for them to access modern technology,” Dahan told CNBC. “We are able to give them access to that, without a massive lift on their part.” 

Marqeta makes money in a similar way to incumbents Mastercard and Visa — by taking a percentage cut of every transaction from customers, and some software fees. The company would not comment on the financial details of the JPMorgan agreement. 

Marqeta recently raised $150 million from an undisclosed investor in May, doubling its valuation to $4.3 billion in just a few months. Other high-profile backers include Goldman Sachs, Visa Ventures, and PayPal alumni Max Levchin, according to PitchBook. The card company is reportedly seeking to hire investment bankers to advise on an IPO, (Reuters reported earlier in July). A spokesperson for Marqeta declined to comment on plans to go public. 

Additional Commentary

This opens up huge new possibilities for companies looking to streamline payments and provide innovative services to their people,” Omri Dahan, chief revenue officer at Marqeta, said in a statement. “To bring this product to a company of J.P. Morgan’s scale and have it utilized in a new way is tremendously validating of its market potential.”

The partnership will expedite the process of getting company cards into the hands of those who need them, (Skinner told CNBC).

“We know there’s a need for this product — what COVID has taught us is that there’s more use cases for this than we imagined,” he said. 

In general, virtual cards and contactless payments have seen a spike in use during the coronavirus pandemic.

About 31 million Americans tapped a Visa contactless card or digital wallet in March, up from 25 million in November, the payment network reported at the end of April. Overall use of contactless payments in the U.S. has grown 150% since March 2019, Visa added. 

Mastercard reported contactless transactions were up 40% worldwide in the first quarter of 2020. 

On a call with analysts in April, Mastercard CEO Ajay Banga attributed the trend to consumers “looking for a quick way to get in and out of stores without exchanging cash, touching terminals, or anything else.”

Greg Mahnken, a credit industry analyst at Credit Card Insider, predicts 65% of cards on the market will be contactless by the end of the year, (according to Business Insider). 

“Going contactless in this environment, if there’s ever been a time to do so, that’s now,” Upgrade co-founder and CEO, Renaud Laplanche told Banking Dive in April, following the launch of the challenger bank’s new contactless card.

Laplanche said the pandemic led the fintech to roll out the card months ahead of schedule.

Also Read : News Highlights From July 2020

Shaheer Ansari

Shaheer is passionate about living a life seeking un-ending knowledge, philomath, as you may think of him. He's a student of Finance and a keen observer of Business and Indian-Political scenario who takes pleasure to pen down his views and opinions on the same. As his guiding mantra to life, ‘Come what may , life goes on’ helps.

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