Discover more from Margins by Ranjan Roy and Can Duruk
Venmo Robberies and the Apple Credit Card
Customer service and security as your competitive advantage
Can's newsletter earlier this week got me thinking about the idea of data as a liability, especially in the context of Apple's big event this week and the launch of the Apple Credit Card.
But first, a quick story about the time I was Venmo-robbed.
It was a Saturday night in April 2015. I was standing outside in the West Village near the Christopher Street subway entrance, texting someone. There were two of them and it was over pretty quickly. One guy bumped me from the right side, while the other yanked my iPhone out of my hand and they ran into the subway station.
I was pissed off, but had insurance on my phone. It didn't seem that bad. That is, until Monday morning when I checked my bank account. 3 transactions from my Chase checking to Venmo, $800, $500, and $800. It instantly clicked: the phone was unlocked, and while Venmo had just launched two-factor authentication (18 days before this robbery), I hadn't added a separate password for the app. The phone was out in my hand and I was using it, meaning it was unlocked. Clever idea, fellas.
Up until that point I was as tech utopian as they come. The less friction, the sleeker the UX, I'd sign up, connecting whatever account you asked me to and agreeing to whatever terms I needed to. The way this played out kind of changed that.
I searched all over the Venmo website, and there was no phone number. I submitted an email and after a few hours got the following response indicating they would "follow-up within 48 hours". I emailed a business acquaintance who was fairly senior at the company and no response. There were no people you could contact, anywhere. But that cost structure was the competitive advantage, right?
So I called Chase and in less than a minute was connected to someone. They assured me I could file a fraud report on the transactions and they would be reversed. The process began immediately and I felt secure that the situation would be resolved properly. It was, and I will forever give Chase loyalty points for how they handled it.
When the duo of Goldman Sachs and Apple announced the launch of a new credit card, the innovation in the air felt a bit different than the "disrupt the evil banks" ethos of the early 2010s (#Nothing2Hide!) Titanium-etched cards are fun, but constantly changing card numbers are important. Customer service and data security are now where companies can really differentiate themselves.
It's why the data-as-a-liability insight kept ringing in my head. The Facebooks and Googles have been built off of sucking up as much data as possible, while the money spent in securing and managing that data is thought of as an expense to be managed rather than an investment. It's worked pretty well so far.
Ben Thompson's Aggregation Theory argues that providing the best user experience is how companies win. It brings in the most consumers, which attracts the most suppliers, which adds in the most data, and creates a virtuous cycle. I always thought of UX here as a sleeker, faster experience. The easier you made things and the more friction removed was how you won. A cool website and app are now table stakes, and a key element for a great user experience will be helping customers feel safe.
The Verge aptly pointed out Apple's strategic gambit here is to become "the only tech company you trust". It's not a bad one. A customer service ethos is built into a company's DNA, and Apple's been at serving customers well for a while, Genius Bar FTW. Facebook and leading fintechs, not so much.
And what kind of customer “deserves” that feeling of security? I'm not exactly a highly valuable customer to Chase. I have a checking and savings account, and one of their credit cards, but that's it. Yet, when the shit hit the fan, I could talk to a person. Meanwhile, my firm has spent in the tens of thousands over the years in Facebook and Google advertising, far more than my assumed value to Chase, but that’s not enough where we can easily speak to a real person. It's just not how they’re built.
Opportunities, Big and Small
This represents a real opportunity for traditional banks to fight back. Now, I never would've thought of them as the "good guys". I worked at a large bank for seven years, and was a "Wall Street" trader through the financial crisis. I get these companies are not angels. But, through a combination of regulation and customer expectation, they were forced to build up their systems with old-fashioned notions of security and service in place. Everyone has a clean UI and a neat app, but most fintechs were not built with a telephone line.
It also represents an opportunity for the small. Fintech startups, rather than competing on the removal of friction and rapid growth, are better positioned than anyone to build systems from the ground up that are focused around providing security as well as helping customers navigate through problems. Customer-first can mean something more than just the fastest user flow. But if you say the answer to all this is an AI-chatbot, you’re missing the point.
How to be Hacked 101
Getting hacked sucks (I oddly view the Venmo robbery as some physical-digital hybrid hack) but it's becoming a rite of digital passage. There are two major trends here that could change the way businesses compete:
We can assume everyone will be hacked in some capacity. The ability for a company to help their users manage the process becomes a significant differentiator. A secure data infrastructure is not one that necessarily assumes no breaches. It’s one that is able to provide some control over knowing what is at risk.
On the magnitude of risk. A few years ago I only got scared when it was my bank account. Now, we’ve reached a point with so many passwords and so much personal data strewn about, everything feels scary. Could that unknown charge on your card be from the Yahoo 3 billion account hack, or Marriott’s 500 million, or Equifax, or Target? Was it a stolen credit card or just a password you re-used?
Imagine a world where privacy and security are your competitive advantages. Less data that’s properly managed is better than more. Customer service that involves real people is your edge.
Apple has a fighting chance to be the big tech company that does this. Goldman Sachs and other traditional banks could be too. Maybe even the next great startup is built around these elements. Whichever companies build in the tools and systems to help us navigate these challenges will begin to find themselves in a significantly better position than those that look at this as a problem to be minimized rather than an opportunity to be capitalized.
End Note 1: Newsletters bring people closer together, and during the writing of this edition, I learned something new about my co-host Can. In 2009 he was mugged and had his iPhone stolen, and using MobileMe helped the police track his assailants. There was even a Jeopardy question about the incident (Dumb Criminals for $800, Alex)!!
What I'm reading:
1) For any fellow football mad folks, I loved this Financial Times piece on how FC Barcelona are preparing for the future of football. One of the details that jumped out was how Messi doesn't actively play at the beginning of a match just studies the opposition:
Then he corrects himself: “Instead of analysing, I’d say they interpret play. It’s different. On the field, you can’t think, you must play.” Messi is an extreme case: he reserves the “first minutes” of each match for interpretation, says Valverde. During that time, the player ignores the ball and takes a reconnaissance walk around the opposition defence, fixing each man’s position in his head. Valverde says: “Then, as the game advances, he gets in little by little. But he knows perfectly where the rivals’ weaknesses are.”
Note: This is an FT “Gift” article so the first 3 non-subscribers that click it get to read it in full
2) Hidden in the headlines of US-China geopolitical strife is this utterly fascinating story - the U.S. recycling system is breaking because China is no longer taking our waste. The story hits on so many important topics (U.S. income inequality, global warming, shifting regional power, global trade). From WIRED:
The loss of this overseas dumping ground means that plastics, paper, and glass set aside for recycling by Americans is being stuffed into domestic landfills or is simply burned in vast volumes. This new reality risks an increase of plumes of toxic pollution that threaten the largely black and Latino communities who live near heavy industry and dumping sites in the US.
3) Finally, for any fellow parents of young children, you may have encountered the Baby Bjorn bib. It turns out it was designed by McKinsey Design, and they just won a Red Dot award for it (the entire list of winners is a fantastic design rabbit hole):