CompoSecure: Heavy Metal

“If you take an American Express cardholder or a Chase Sapphire cardholder, these cardholders will spend $30,000 to $60,000 per year. On some of that spend, interchange is as high as 2.5%. So the card issuer can get $750 or $1,500 annually in interchange revenue. They provide rewards to customers, so they give about half of the interchange back. You add on your annual fee, and you're looking at $1,200 or $1,600 annual profit. The cost to the issuers for the CompoSecure card is $12 per card.”— Parsa Kiai

Strategy & Decision Making · Economics & Markets · Business & Entrepreneurship

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$12 input → $1,200 profit = 100x ROI

“American Express does $75 billion of annual revenues. The largest component, $40 billion, is interchange fees. They make about $20 billion of pretax, pre-provision profits. The biggest cost structure is $18-19 billion in card member rewards. This $20 billion of pretax, pre-provision profit is facilitated by providing that valuable customer experience, and a $10 card cost of goods sold is 0.2% of their cost base.”— Parsa Kiai

Strategy & Decision Making · Economics & Markets

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0.2% of cost base, enables entire model

“Finding overlooked and not well-understood businesses that are actually mission-critical to large, entrenched, and growing customers with a cost that is minuscule compared to the ROI that the customer has. Selling a $12 premium metal card to Chase and American Express is an incredibly powerful tool. You've had businesses on the podcast like TransDigm that will sell a proprietary $200 widget that goes on a $100 million Boeing, or industrial gas businesses like Air Products that provide a small ke...”— Parsa Kiai

Strategy & Decision Making · Business & Entrepreneurship

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Pattern: mission-critical + tiny % of cost

“Research shows that 10% of cardholders are responsible for nearly 50% of all consumer spending. Cardholders with credit cards that have an annual fee greater than $500 spend $3,000 per month on their credit cards. Those with cards below that as an annual fee spend only $1,000. The difference of $2,000 a month is $24,000 in annual spend, and that is a huge prize for credit card issuers, not only because of the interchange revenue that it brings, but all the ancillary service fees and cross-sellin...”— Parsa Kiai

Economics & Markets · Strategy & Decision Making · Business & Entrepreneurship

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10% of customers = 50% of value

“CompoSecure has 80% market share in premium metal cards. The market share, that penetration of premium metal cards, goes from 1% to 2% or 3%. Even if you lose a little bit of market share, you're still getting so much growth in terms of units and dollars that there's a long runway for organic growth even as your market share goes from virtually being the only player at 90% market share to 80 and 75.”— Parsa Kiai

Strategy & Decision Making · Economics & Markets

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Lose share in exploding category = still win

“Dave Cote's approach to M&A is very similar to Brad Jacobs, and it comes with a few guiding principles. Build a robust internal pipeline of potential deals so you're not wedded or desperate on any single deal. Date a lot of people and have a lot of options. Focus on good businesses with strong competitive positions that have not been run to their full potential, either because of underinvestment or lack of focus.”— Parsa Kiai

Strategy & Decision Making · Leadership & Management · Business & Entrepreneurship

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Cote M&A: optionality, good not broken, early integration

“You compare that to your generic plastic card, the one that has no fee, it costs less than a tenth of a premium metal card at $1.25 per card. But given how much less a customer spends and generally the higher cost for credit provisions and churn, we estimate that the return on investment on a generic plastic card is less than a fifth of what it is on a premium metal card.”— Parsa Kiai

Strategy & Decision Making · Economics & Markets

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Public margins, zero defection = real moat

“If that metal card, that premium feel is that important, we think it's very important to have that quality card so that you're not going to switch to go to a new upstart competitor to save a dollar per card when you're making $1,000 or $1,500 in annual profit. Now you compare that to your generic plastic card. It costs less than a tenth of a premium metal card, $1.25 per card.”— Parsa Kiai

Economics & Markets · Strategy & Decision Making

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10x cost, 5x better ROI

“Take a look at American Express. When they did one of their first big product refreshes back in 2016 and introduced the brand new shiny American Express card with a higher annual fee, net new accounts acquired went up by 50% over the pre-refresh period. When American Express introduced the new product refresh earlier this year in 2025, net new account acquisition went up by 2x.”— Parsa Kiai

Psychology & Behavior · Business & Entrepreneurship

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Digital rise = stronger physical demand

“About 4 billion new cards are issued annually. If you look at net new accounts, it's actually a fraction of the cards issued. Most cards issued actually come because of card expiration or lost and stolen cards, and these happen with regular frequency. So there's a solid core of recurring card issuance per year and then an interesting, nice little amount of new accounts.”— Parsa Kiai

Business & Entrepreneurship · Economics & Markets

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Replacements > net new = recurring base

“Even digitally native companies that have some aversion to physical assets like Coinbase, Robinhood, Gemini, all of them are coming out with brand new premium cards that are physical metal cards. As a customer acquisition tool, they are all CompoSecure customers. Even these companies at the leading edge of everything digital are manufacturing and distributing cards to their customers. Instead of giving you 4% cash back, they'll give you 4% in Bitcoin back.”— Parsa Kiai

Business & Entrepreneurship · Psychology & Behavior

DUR_CONTEXTUAL

Crypto companies use physical cards

“When you think about what they provide, this is all about the pursuit of the high-end credit card customer. You really want to go after that high-end customer because they spend, on average, customers with credit cards that have an annual fee greater than $500 spend $3,000 per month on their credit cards. Those with cards below that spend only $1,000.”— Parsa Kiai

Economics & Markets · Business & Entrepreneurship

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Premium customers: 3x spend, lower risk

“Our first fear was when the company came public, everyone's going to see that you have 50% gross margins, 40% EBITDA margins. American Express and Chase are going to see this and all of this is going to go down. When you really dig into their competitive position and the advantages from the technology, the manufacturing, and the customer relationships, they've been able to maintain those margins even as all the competitors see it, even as the customers see it and renew contracts.”— Parsa Kiai

Strategy & Decision Making · Economics & Markets

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Margin visibility did not erode moat

“The third most frequently used form of payment even today is cash, not mobile wallets. Credit cards are number one at 35%, debit cards are at 30%, and 17% of transactions are still done with cash. There's plenty of places that forget about accepting metal or plastic, they don't accept anything but cash. The tail for physical credit cards is going to be longer than expected rather than shorter.”— Parsa Kiai

Economics & Markets · Culture & Society

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Cash still 17% after digital revolution