Simon Khalaf: Yes. It’s actually a very important segment for us, and we will discuss it specifically at Investor Day since this an area of growth. But let me kind of give you a preview. So, the Comstock that Marqeta has built is actually very unique to us. So, a lot of time, you have – if somebody wants their wages earlier than their employer or labor marketplace delivers, usually, you have a lendor that comes in and steps in and offers effectively a loan to an employee. That’s not how we implemented it. So, we actually have done something unique in which the balance sheet of the employer or the marketplace is deployed. And what happens when, let’s say, an employee checks out or clocks out, then the ledger move. The money does not move until the consumer or the employee goes and spend.
So, we are effectively deploying the working capital of large employers on behalf of the employees without incurring significant or increasing their debt stack. That’s why we are seeing kind of like many some large employers adopt our solution because you are not actually bringing in a lender at high interest rates. So, it’s good for the employer because they are getting the loyalty of the employee, good for the employees because they get paid immediately. And I think it’s good for the ecosystem because you are not actually pulling in expensive working capital.
Ramsey El-Assal: Fantastic and good luck.
Simon Khalaf: It is very good for Marqeta, that’s right.
Mike Milotich: Essentially, the employer doesn’t have to essentially continue to earn interest on the funds until they are spent. And then of course, as the issuer of the card, then there is economics for them when the employee spend. So, it’s a really elegant solution. And we have a few customers live on it and it’s – the adoption has been impressive.
Simon Khalaf: The last thing I would say is you are effectively converting an expense, which is paid into income, into revenue because they guess the – the employer participates in the interchange economics.
Ramsey El-Assal: I see. It’s super helpful. Thank you.
Operator: Thank you. Our next question comes from the line of Sanjay Sakhrani with KBW. Please proceed with your question.
Sanjay Sakhrani: Thank you. Mike, sorry if I missed this, but how much of gross profit was Block in the third quarter? And also, should we think – how should we think about the Block contribution as a result of the Square seller renewal? Is there any impact there?
Mike Milotich: So, on your first question, so the gross profit concentration from Block did go down about 5 percentage points. And so it’s now in the 40s. So, it is lower than our revenue concentration as it’s been in the past. So, that’s the impact of that. The Block concentration post the Square debit card deal. Yes, I mean it will go down a little bit as we gave them a little bit of a better pricing. But we think that the combination of obviously extending the relationship for 5 years, but also being named as their default provider for additional programs that could come in the future positions us well to work together to drive growth.
Sanjay Sakhrani: Absolutely and congrats on that.
Mike Milotich: I think – yes, sorry, Sanjay, just one more thing. I mean I think I have said before, as much as we of course won our concentrate – Block concentration to go down, we do think there is incredible opportunities that the two companies can do together. So, we will see how it plays out in the coming years.
Sanjay Sakhrani: Great. Just a follow-up on this Reg II discussion, but how should we think about the impact to Marqeta as a whole from Reg II, right? Like I mean, is volume moving away to a secondary network mean isn’t that dilutive, or do you make up for it somewhere? I am just trying to think about if it could happen more over the course of the next few quarters.
Mike Milotich: Yes. So, I think – so one is at our Investor Day, I have a kind of a slide specific about this, about our different revenue models. I think you all will be surprised to see now how much of our revenue is really tied to revenue models that are influenced by interchange. The majority of our revenue no longer is impacted by interchange, where we are pricing our offering as a pure fee-for-service. And so for the most part, we don’t feel the impact of that shift, Sanjay, because it typically is not going to affect the revenue that we are making with some of the evolution in the way we have been moving our pricing structure with customers.
Sanjay Sakhrani: Okay. That’s good to know. Thank you.
Operator: Thank you. Our next question comes from the line of Ashwin Shirvaikar with Citi. Please proceed with your question.
Ashwin Shirvaikar: Thank you. Hey. Mike, I want to pick up on that last comment, the fee-for-service comment with regards to revenue models. Does that basically imply you are moving more and more to transaction based, not really volume-based and kind of where I was going with that was to connect that comment with what you indicated with regards to TPV? And should there be an economic slowdown, slower volumes that’s going to affect you maybe less than it might have previously. Is that sort of a right way to think of it?
Mike Milotich: Yes, I would say – yes, thanks for the question, Ashwin. I would say that just because its fee-for-service doesn’t necessarily mean it’s per transaction. There is still a lot of our customers that we are charging them bps on volume. It’s just that we say we are going to charge you bps on volume, and we will essentially give you all the interchange. And then we have the costs that we have to pay the bank in the network. So, it can be per transaction or bps on volume, I would say the per transaction is a more common structure in Europe, for example, and in some of our powered by Marqeta customers. But I would say that particularly on the managed by Marqeta customers that use this revenue model, it’s almost always still bps on volume. So, we have, I guess the upside that comes with growth in spending.
