September 24, 2024 • 51 mins
What if you thought you found a loophole to get free money from ATMs, only to end up with a negative balance? Join us as we dissect a viral TikTok trend that had Chase Bank customers depositing fraudulent checks for quick withdrawals. Maia dives into how Chase later corrects these transactions, emphasizing the crucial role of identity verification and KYC (Know Your Customer) in online banking. We also tackle the unique challenges non-US residents face in accessing US-based bank accounts and the relentless efforts of banks to combat international fraud.
Our conversation takes a nostalgic turn as we explore the transformation of human banking behavior over the years. From amusing misconceptions about ATM and teller services to the early days of credit card usage, we highlight how technological advancements have altered our financial interactions. Discover personal anecdotes that reveal the stark contrasts between high-trust and low-trust societies, setting the stage for a deeper look into a supposed glitch at Chase ATMs.
In our final segment, we demystify the complexities of check fraud and the measures banks take to prevent it. Learn about the provisional access to funds, the stringent underwriting process, and the severe consequences of committing check fraud. We delve into how viral TikTok videos have influenced consumer behavior and the alarming rise in check fraud-related Suspicious Activity Reports since 2021. To wrap up, we explore the future of banking with AI, the concept of Net Interest Margin (NIM), and essential fintech metrics like LTV and churn rate. Tune in for an insightful discussion that spans from fraud prevention to customer acquisition strategies in the ever-evolving world of banking.
Hosts: Sam Maule & Maia Bittner
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Sam Maule (00:00):
Hey everybody, welcome to another episode of
Artificially Intelligent.
I am perpetual intern Sam Maul,based in oh my god rainy
Florida right now, and I amjoined by my co-perpetual intern
, maa Bittner.
Maya, how you doing?
Maia Bittner (00:18):
What's up, guys?
I'm in beautiful, sunny bluesky, pacific Northwest, right
now.
Sam Maule (00:26):
It's just upside down , isn't it?
The world is upside down.
Maia Bittner (00:30):
Climate change man , it's been good to this part of
the country.
Sam Maule (00:34):
Yeah, it's been great for my home insurance.
Everybody.
That's another show for anotherday.
But talking about the worldbeing upside down, we were
laughing before the show talkingabout a TikTok trend there's
always so many of these Whereasmy wife would say the TikTok
Because we're old.
Maia Bittner (00:53):
The TikTok?
What are they talking about onthe TikTok?
Sam Maule (00:55):
Oh my God, it's the viral glitch at Chase Bank.
Maia, do you want to give somebackground on this, because this
is rather funny, I love it.
Maia Bittner (01:02):
Yes, so TikTok, trend people, people.
They say glitch at the chaseATM.
You know, I didn't even lookinto it that closely, but here's
my guess is what they areclaiming is a glitch?
It's that they can deposit acheck.
Um, and maybe I I don't knowthe details maybe they're saying
that a hundred dollar check isactually for $1,000 or $10,000.
(01:25):
Or maybe they're writing acheck from an account that
doesn't have any funds in it andisn't going to clear.
But one way or another they aredepositing checks that don't
have any money behind them intothe Chase ATM and Chase is
saying like increasing thebalance on their account by that
amount.
(01:45):
And so they're like everybodyshould go do this, you get free
money.
Sam Maule (01:51):
Yeah, it's hilarious right, there's, there's and, as
is usual on TikTok, once there'sone video, there's a million
around this, but there's a bunchof these that went viral where
people thought they were more orless getting free cash out of
specifically.
Maia Bittner (02:03):
People are lined up at the Chase ATM to take
advantage of this quote-unquoteglitch.
Sam Maule (02:08):
Yeah, specifically Chase, right, which, by the way,
everybody, when it comes totechnology, I think Maia, and I
have said it a few times it'sChase.
Come on man.
Maia Bittner (02:16):
Chase is like best in class and their ATMs are
very good.
Sam Maule (02:25):
Yeah, the videos would show people.
They'd basically be depositingchecks for large sums of money
at a Chase ATM and then takingout a withdrawal for a smaller
yet still substantial amount,thinking they discovered a bug.
That was in there.
And, my favorite thing, on NBCNews, the very first line in the
article says Chase Bank isurging its customers not to
commit check fraud.
Maia Bittner (02:42):
Yes, actually don't do this, oh my God.
So what's happening?
Of course, after theyquote-unquote deposit the check
right, have a really highbalance, they take some of that
balance out of the ATM.
It's like free cash, okay.
Well, when Chase figures outwhat has happened, you know, the
next day or a week later theyadjust the amount of that check
(03:06):
deposit at the ATM to be correct, and everyone who followed this
glitch now has a deeplynegative bank account.
Sam Maule (03:16):
You know what's fascinating.
You know where this is going totake us.
Besides talking about thestupidity of some people on
TikTok, which we could do awhole show on, I think we're
going to end up talking aboutATMs, Maia, because ATMs as a
whole.
You've said this on a previousshow.
I listened to it a lot while Iwas working out.
Folks, I need to get a life,because I actually go back and
(03:36):
listen to our shows when I workout at my YMCA.
And you actually said it in myear this morning on one of our
previous shows, where you lovethe concept of an ATM around
identity.
Maia Bittner (03:47):
Love ATMs.
Sam Maule (03:48):
Would you expand what you mean by that?
Maia Bittner (03:50):
Oh yeah, well, I think ATMs so when we think
about banking, right.
So, in particular, us-basedbank accounts are incredibly
valuable.
You can use them to accessparts of the financial system
that most countries don't haveaccess to.
You get to do all this coolstuff in the US dollar, which is
a very valuable global currency.
(04:11):
I think a lot of Americans sortof underestimate how great it is
to have a US-based bank account, because they're not in a
position where they don't.
But because of that and due tothe rising popularity of online
banking, there are a lot ofpeople who are not located in
the US and do not have access toa US-based bank account that
want one, and they think thatonline banking is their
(04:34):
opportunity to get one.
So they're like, oh wow, youcould create an account just
from the internet and they'retrying to do that right.
And so there is sort of thisconstant battle between the
online banking providers andpeople in other countries that
shouldn't have access to aUS-based bank account around
(04:55):
whether they can open an accountor not.
Establishing identity, kyc, allthat good stuff.
The reason I love ATMs foridentity is because if somebody
has access to an ATM based inthe United States, that is not
definitive proof that they areentitled to a US-based bank
account by any means, but it's away stronger signal than most
(05:24):
of the attributes we haveavailable in, like, a digital or
online way.
Right Like there are not.
I mean, there are incrediblyskilled hackers in Ukraine, in
Africa, in a bunch of places inthe world.
That, like hacking US banks, isjust one of the most profitable
(05:47):
ways that you, as a smartperson, can spend your time in
the Ukraine.
If you're a smart person in theUS, then you can just make more
money doing things other thanhacking bank accounts, but if
you're in the Ukraine, you'relimited on your options.
Hacking US-based bank accountsis a great way to do it, but
you're never in the US, younever fly here, you never visit,
so it but you're never in theUS, you never fly here, you
(06:07):
never visit, so you're neverable to like visit those ATMs
and things.
And so I just feel like it'sgood for everyone, like it's not
as big of a hurdle for peoplein the US to be able to go to an
ATM or scan their driver'slicense or do something like
that.
They want to do things thatpeople love ATMs.
They want to do things withoutinteracting with a teller,
without being limited to bankinghours, things like that.
They want to do things thatpeople love ATMs.
They want to do things withoutinteracting with a teller,
without being limited to bankinghours, things like that.
(06:28):
And it is an incredibly strongdata point for the online
banking providers that theydon't have access to in any
other way, which is, this personcan be in the United States,
and so that's what I'm excitedabout.
You know, I'm not as required,but particularly in those edge
cases where an online bankingprovider might say like, hey, we
(06:51):
just can't prove that we knowwho you are and so we're not
able to offer you an account atthis time, if that person could
appeal and say what if I go,bring my driver's license to an
ATM, I think it could open upaccess to even more people.
Sam Maule (07:04):
Yeah, it's funny when we talk about ATMs, Just you
know, remember Paul Volcker wayback when.
Oh yeah, and that was one ofhis famous quotes, and this was
after the financial crash, wherehe said probably the only good
invention we've had in bankingin the past 20 years has been
the ATM.
And that was after the internet.
By the way, everybody, I stillfind that- funny yeah.
(07:26):
I mean, I've used that in talksa few times right when it
actually is something that itsomewhat did bring banking to
the masses.
Because, believe it or not andI'm doing a little bit of
reading on this the number ofATMs in the US has been
declining over the past fewyears.
Atms in the US has beendeclining over the past few
(07:48):
years.
Right around when COVID hit, wehad, I think, 540,000 ATMs in
the US.
The last number I saw was adecline to about 450,000 in 2003
.
That's about a 4% drop year onyear, essentially for the reason
that we're moving more and moreaway from cash.
So physical paper mile right.
But again and you've talkedabout this and I tend to agree
(08:12):
with you the functionality anATM can provide, right similar
to what your phone can do.
But again, that interactionwhen it comes to fraud.
You were just telling me astory about this right when it
was about using your voice at anATM as a source of identity.
I think you mentioned that,that there was a story that just
came out about that.
Maia Bittner (08:33):
Yes, and one was I mean, people love ATMs, so one
funny I just saw a tweet wheresomebody said they went to the
bank and they asked them if theyhad an ATM and the bank said,
yeah, we have a drive-thru ATM.
Sam Maule (08:43):
I saw that.
Maia Bittner (08:45):
And she said, oh, but I walked here and he was
like, no, no, worries, that'sfine, and so she waited in line
behind a car and had to gothrough the ATM.
So I think it's funny and here'swhat I really think is funny
about that.
I said, wait, you went to abank and you talked to someone
and you ask them if you had anATM, why didn't you just do your
(09:08):
transaction with that teller?
And a bunch of people yelled atme.
They were like, oh well, sheprobably didn't have a bank
account at that bank.
And I think that's a reallycommon misconception.
People think that if you go toan ATM, like any ATM works with
any debit card, but that youhave to have a bank account with
that bank to talk to the teller.
But that's not even true.
(09:29):
You can kind of do like quoteunquote ATM I mean, it's not an
ATM but teller withdrawals.
They call them over-the-countercash withdrawals from basically
any bank.
If you're there talking to ateller and your bank will
probably treat it the same as,uh, out of network atm, um.
So yeah, I thought it was funnythat she went in, maybe waited
(09:50):
in line, talked to a teller,asked them if they had an atm
left, waited in line behind acar to go through a
drive-through atm, when I'm likeyou probably just have talked
to that teller to get yourwhatever you needed cash.
Sam Maule (10:03):
Whatever, man, my think about how our behaviors
have changed, and actually in anincredibly short period of time
.
Meaning I can remember my momwalking me through how you
interact at a bank.
Meaning this is where you goget the withdrawal slip or the
deposit slip, this is how youfill it out, this is where you
go stand in line.
You know what I mean.
This is how you engage withthem.
(10:24):
You know, you see that, youknow in movies that we used to
watch, and then it migrated,like you said, to the window and
the pneumatic tubes, and thenit migrated to our phones.
And you know it is funny, wherewe've moved farther and farther
away from actual physicalinteraction with the human being
.
Maia Bittner (10:44):
Yes, and to bring it back to fraud in these ATMs,
I actually think the farther youget like it's easier to commit
fraud, the farther away you getfrom interacting with people,
and this is proven out in thedata.
You know, I used to run ane-commerce company and the
heuristic I always had with thee-commerce company is that 90%
of your customers are likebasically good 9%.
(11:08):
You know, if you have agenerous return policy or
something they might see if theycan take advantage of it, and
then if you slap them on thewrist, they'll stop.
1% are competent, deeplymalicious and actively trying to
drive your business into theground, and so the trick is
correctly putting people intoeach buckets so that you can
(11:29):
apply different policies to themand things like that, and so I
think that.
But that 9% is reallyinteresting, right?
People who like maybe try to getaway with something, but I'll
stop if they get slapped on thewrist.
When Bank of America did thefamous Fresno drop, which was
the first credit card, theyassumed that giving people
credit on this card would be thesame as giving them a loan at a
(11:53):
bank, and what they found isthat people were much less
likely to pay back their creditcard because it was so
impersonal.
When you go, you talk to yourcommunity banker, the guy you
see at the grocery store, andyou're like, yep, I'm going to
pay you back.
That has much.
It creates much more likewillingness to pay in consumers
than signing a slip that saysyou're going to pay it back.
(12:15):
Never talking to anyone, younever see them in the grocery
store and just making thosecharges.
Sam Maule (12:20):
Yeah, human behavior is fascinating, Believe it or
not.
Maia, when I moved to the UKback around 2006, I lived in a
tiny village in Yorkshire,outside Stanford Bridge, and it
was so funny when you went tothe hardware store, there was no
POS, there was no cash register.
It was a guy with a notepad anda pencil who would manually
(12:46):
calculate the tax and write outa receipt for you, and you could
literally do IOUs.
Can you imagine?
Maia Bittner (12:52):
No, that's how I grew up.
Our local store they had a boxwith it kind of looked like card
catalog cards, but it was a boxwith all these note cards by
people's name.
Then you would write your nameand how much you owed and then
once a month or so my parentswould come by and settle up.
So that's how I used to go getcheese and ice cream from our
little local convenience storethe farmers in the village where
(13:14):
I lived.
Sam Maule (13:14):
they would have their eggs sitting in a cooler and
you would just drive by takeyour eggs and drop money off,
and I remember when we firstmoved there because I grew up in
Detroit everyone where weliterally would have stole the
whole damn farm, me doing thattoo, by the way, everybody Just
understand this concept of trustin human behavior.
Maia Bittner (13:34):
High-trust society versus low-trust.
Sam Maule (13:36):
Yeah, but it also comes to when you're building
out a bank, whether it be purelydigital or, you know, having a
physical footprint,understanding human behavior and
that component of it stillmatters right.
I mean, how you engage, whatyou look for is a massive part
of your strategic growth.
Maia Bittner (13:56):
So let's get into this, this Chase ATM bank glitch
.
So I actually feel like I havethis conversation relatively
often.
A lot of people ask mequestions.
I most recently was talking toa startup founder about, you
know he's got some trouble.
He's trying to cash thesechecks and specific things, and
so I'll explain to them how itworks and quite often, after I
(14:18):
explain to them, someone willsay to me like wait, I could
just steal $30,000 or somethinglike that, which is basically
what the TikToks say.
They're like wait, once youknow, you kind of see it.
You're like I could just steala bunch of money and you kind of
can.
Because here's how it workswhen the bank gives you access
to those funds from depositing acheck before they've really
(14:40):
verified that the check canclear and that it's real, it's
basically a loan.
I mean, it's not regulated as aloan, mostly because they don't
charge interest, which issomething that they do as a
courtesy to you, but it'sbasically a loan.
And when I say it's a loan,what I mean is that they are
underwriting both you and thatcheck.
So they are underwriting you asa person.
How long have you had an accountwith them?
(15:01):
What kinds of transactions doyou do?
What is your balance in theaccount?
Like all of that stuff.
They underwrite you and theyunderwrite the check.
Where's the check from?
How much is the check for?
Is it a printed payroll checkor is it a handwritten person?
All of that.
They take all of this data andthey decide how much of that
they want to let you accessbefore the check has cleared.
(15:22):
So and like that's like, howmuch risk do they want to take?
Sometimes it's zero and you'lldeposit a check and you don't
get any access to funds untilthe check is cleared.
Sometimes, like in the case ofthese TikTok videos and things
like that, people are gettingthousands of dollars, but that's
just.
The bank is just like yeah, wethink you're going to pay this
back.
And here's the other thing youdon't have to pay it back.
So all of these people who havenegative $30,000 bank accounts,
(15:46):
they don't need to pay thatback.
Here's what will happen,probably right.
So, amongst other things, soChase could close your account
due to check fraud.
Very importantly, they willreport you to check systems,
which is a database that'ssimilar to the credit bureaus,
(16:06):
but it is used for US-basedchecking accounts.
It's how all of the bankscommunicate with each other.
By the way, we've got acustomer that defrauded us and
committed check fraud, so wedon't recommend that you let
them access a checking account,otherwise they might defraud you
too.
So you will find yourself lockedout of the US-based banking
system, which I just did a wholespiel on how valuable that is,
(16:27):
and I've talked to people it'sso funny, talked to people who
are like you know, I don't thinkI mind that, like I would like.
I'm okay being locked out of theUS-based banking system if I
get, you know, $30,000 or enoughmoney for that to be worth it.
Honestly, like in general, youknow, I don't think I'm smarter
than anyone or anything likethat, but when you say this, it
makes it very clear that you donot understand how good you have
(16:52):
it as a banked person and howmuch you want to be able to have
that bank account.
So, yeah, it's like you cankind of you, like most people
can, commit check fraud,particularly people that the
bank doesn't think are likely todo.
That, um, and you just lose outon access to this bank is what
you probably want, and the banksknow that you want that and
(17:13):
that's why you're probably goingto pay it back and it's why
you're probably not going tocommit check fraud.
So that's that's kind of how itworks, is it's like?
It's just it's not.
It's not really a bank.
As a courtesy, they're loaningyou the money before they have
it because they're going to askfor it back and they think that
you're going to pay it becauseyou want to maintain access to
your bank account and youprobably do and probably will.
Sam Maule (17:32):
Yeah, I'm always fascinated how, in this case,
tiktok a viral TikTok drivingthis behavior.
But what drives consumerbehavior for some of this
activity?
Because, like you were talkingabout, with check fraud, I'm
just reading a report by FinCENthat goes back to the beginning
of last year saying that withcheck fraud going back to 2021,
(17:53):
they've seen a 23% increase oncheck fraud-related SARs that
have been filed.
So there's been a consistentuptick around check fraud, right
.
Maia Bittner (18:06):
Um, as we move more and more into this digital
age and as we move more and moreinto where we're at, yeah, well
, like I said, right, like Ithink people are more likely to
commit fraud when they're nottalking to their local banker.
Um, and we're a bit like banksare a bit more susceptible to
fraud.
It's not like they don't haveany fraud losses but, like I say
, it's an arms race.
It's pretty easy to commitcheck fraud, but the
(18:27):
consequences are so severe thatyou probably don't want to.
Sam Maule (18:32):
Yeah, and when I say a SARS everybody, again we throw
acronyms around like they'rejust candy.
Maia Bittner (18:39):
The acronym everything Suspicious Activity
Report everybody.
Yes, suspicious Activity Reporteverybody.
Sam Maule (18:44):
Sorry, yes, suspicious Activity Report Yep.
Maia Bittner (18:45):
Compliancing.
Sam Maule (18:46):
Welcome to banking everybody.
We love a good acronym.
Maia Bittner (18:50):
I was talking to Dave.
Well, I had so I have the Venmocard and I went and I bought
like a $1,000 money order thisis actually a while ago, I
forget and I think like then Itransferred the thousand dollars
or I transferred the money outof my Venmo account or I think
maybe I didn't even have anymoney in my Venmo account and or
(19:13):
in any of the linked bankaccounts and I bought a thousand
dollar money order and my Venmoaccount then went negative.
Or I had like three dollars, itwas like negative nine hundred
ninety seven thousand dollars,and I paid went negative.
Or I had like $3.
It was like negative $997,000.
And I paid it back and I waslike, wow, it's really
interesting to me that Venmo letthat happen.
And Dave, my partner here, hewas like I'm going to do that
(19:36):
and I was like, well, I think itwould burn your Venmo, like
you'd never be able to use Venmoagain, and it would burn your
ability to have Venmo account.
And he was like I'm not thatinto having a Venmo account,
like I would burn it for athousand dollars, like I'm just
not that into it and I don'tknow.
I mean, my guess is that Venmoprobably doesn't report to check
systems.
It's a little bit outside ofthat, so it could be contained
(19:57):
to just Venmo and he was.
He was like, yeah, he's likeI'm I'm not that into it, I
would take the thousand bucks.
Sam Maule (20:03):
Yeah, I'm not that bothered.
It's okay, we'll do it.
Yeah, it's funny how,especially I think when you move
(20:30):
more, a more valued source oftruth as we've moved farther and
farther away from traditionalmedia.
There's a whole other show,right, Maia?
When we talk about this, thisis the gray-haired guy just
scratching his head going oh myGod, right.
I always go back to a termwe've said on other shows zero
trust.
When I see something or hear astory, I research like crazy and
(20:51):
try to get as many you know Itry to teach my kids that too.
By the way, right, TikTok, not agreat source for truth on how
to live your financial lives.
You know, maybe pretty good onplumbing, but then again you
might blow that sink up or thatdrain up with whatever the hell
you're watching on that, becauseyou have no clue who that
subject matter expert is.
You know, I mean, you can'tmake this stuff up.
(21:15):
So here's our source of truth.
Everybody TikTok's great forwatching funny videos of
squirrels and dogs and catsrunning around.
Maybe don't take it financialadvice and get a headline where
chase has to please advise itscustomers not to commit check
fraud over the weekend, which weall should know better right.
Maia Bittner (21:36):
I mean, like I said, you know, I'm like you're
welcome to uh commit whateverfraud you want, but I do think
it's like understand theconsequences, yes please, and
the risks that you're taking.
Right, it is unfortunately nota free money glitch.
There are very few of those inthe world and very unlikely that
Chase would have thatvulnerability.
Sam Maule (21:56):
So there you are, everybody Yet again.
Don't get advice from TikTok,please, and don't commit fraud.
That's the name of the show.
Please don't commit.
Maia Bittner (22:06):
I don't commit fraud.
Sam Maule (22:07):
Everybody, whatever you do.
All right, that's it for theshow today.
Everyone, I'm going to go backto my rainy day in Florida Just
beautiful and Maia's going to goback to an incredibly sunny day
in the Northwest.
Who would have thought?
Hey, reach out to us, reach outto us on LinkedIn, twitter.
You take your pick, not onTikTok, but tell us about topics
you'd like us to talk about.
Give us some feedback.
Maia Bittner (22:28):
We welcome it, Maia man enjoy your afternoon,
enjoy the day.
Thanks for listening to me ranton check clearing and would
love to hear from anybody youknow you can reach me on Twitter
at Maia B.
Otherwise, tune in for our nextepisode.
Make sure to leave us a review.
(22:49):
Rate us five stars.
Five stars All those greatthings we love being a part of
the Money 2020 Network.
Sam Maule (22:58):
See you next time, everybody.
Maia Bittner (23:00):
Bye.
Sam Maule (23:02):
And we're just going to pause because I'm assuming
you can cut this and do the nextone, rachel, or whoever does
this stuff, sorry for droppingyour T up on the voice thing.
Maia Bittner (23:12):
I don't know, it's not at ATMs.
And then, if I don't know, butwe'll just have to put that, out
Makes me laugh.
Sam Maule (23:16):
I love it.
Maia Bittner (23:18):
So this next one.
Sam Maule (23:19):
Yeah, Let me tell you where this next one came from.
So we had our conferenceFinTech DEF CON in.
Austin and Matt Harris from BainCapital got up and talked and
it was fascinating becausehere's the I'm going to.
Can I share my screen with you?
I can't.
Anyways, he talked about wherehe thought we were moving,
especially with AI and bankingand the gender of AI, and he
(23:40):
said, basically, what he thinksAI is going to do for banking is
going to kill inertia.
Because, he said, inertia isthe greatest thing in the world
for bankers, because peoplegenerally are lazy and the
highest percentage of them justdon't do what they should do,
which is move their money aroundas they need to.
And so he shared a slide wherehe talked about NIM and he was
(24:02):
showing it.
And he broke about NIM and youknow he was showing it and he
broke it down from banks over 50billion all the way down to
banks under 500 million right,and he was showing the aggregate
when it comes to NIM, whereeverybody operates, and he goes
what's fascinating is really,for the most part, the smaller
you get, the higher NIM is whenyou look at it, because under
(24:23):
500 million it's running about5.19 percent, whereas you know,
if you were to take the average,it's down around three and a
half for for the net interestmargin and he, in his opinion,
he thinks that ai is going toslap that around, as you're
going to have a personalized AIthat, if you use it right, will
(24:45):
kind of drive your money around.
And it made me laugh becausethere's all these terms that we
throw around, like NIM and CAC,right, yep, that are constantly
talked around, but I don't knowhow well people understand it
and why not that we'll highlightChime, but why, for example, a
lot of these neobanks?
Their cost per customer tendsto be such a shit ton lower than
(25:08):
a lot of the traditionalplayers or as out there.
And what's driving that?
What's some of your favoriteacronyms when it comes to
financial services?
I'm probably going to startthere, Maia.
Maia Bittner (25:21):
No, my favorite acronyms are uh, not specific to
financial services.
It is ltv, it is roi those aregood though nps is one I love
there we go.
Sam Maule (25:36):
So I you know they're ones that we talk about all the
time, so I'll lead into becausethat gives me a shout out for
fintech devcon, um, and talkabout that.
But where he talked about netinterest income and it and how,
it just made me smile because,looking out the room of a room
full of people that are in thebusiness, and I could see a
couple of them going taking apicture of the definition and me
(25:57):
going, hmm, all right, that'sinteresting, we're all doing
this, do?
Maia Bittner (26:02):
we actually understand.
Well, yeah, I wonder if I meanthat's how that's, that's,
that's, that's the bankingbusiness model.
But if you think about fintech,there's very few banks right
like their column, I think, is abank they're not doing lending,
(26:23):
they're not taking depositsright.
So the components, so Column isa bank, and then I think
there's maybe that second oneout of.
Sam Maule (26:35):
I mean, Varo has a charter, a license.
Oh, Varo is a bank yeah.
Varo has a banking charter.
They have a banking license.
Maia Bittner (26:41):
So Varo is a bank Column is a bank yeah, borrow
has a banking charter.
They have a big license, soborrow is a bank, column is a
bank.
Then we're sort of likeexpanding the definition of
fintech, but we get to someother people like that yeah, um
so it'd be interesting there'svery few banks, so it's not that
surprising to me that peopledidn't know the banking business
model, because it's not mostlynot the business model of
fintech so why don't we go thereand use that and we can talk
(27:03):
about some of the componentsthat make it up, especially you
as an investor.
I love it.
Sam Maule (27:07):
All right, so there you go.
Maia Bittner (27:07):
Yes, well, you know me as an investor.
I always want to know what'sthe business model?
Sam Maule (27:12):
Yep?
How's this?
Maia Bittner (27:13):
going to make money.
Sam Maule (27:15):
So I'll let you open this one up.
So here we go.
Rachel, this is show number two.
Maia Bittner (27:22):
Hey everyone, Welcome back.
Welcome back to another episodeof Artificially Intelligent.
I am one of your co-hosts, theperpetual fintech intern, Maia
Bittner, and I am joined herewith my co-host, Sam Maul.
We are so excited to jump in.
Today.
We are going to deacronym abunch of fun business concepts
(27:45):
which is one of my personalfavorite things to do in a
corporate setting and dive intobusiness models.
Sam Maule (27:54):
Yeah, sam, it's funny .
Yeah, Maia, it's funny, isn'tit?
The longer you're in thisbusiness, the more you adapt to
the lexicon, if you will, of anindustry.
Maia Bittner (28:03):
Yes, the jargon yeah.
Sam Maule (28:05):
Man alive and that is so dang important Because it's
what is?
The movie the Princess Bride,where the phrase is I don't
think that word means what youthink it means or whatever.
Right, one of my favorite lines, right, and I do find that
funny because I've had a careeras a banker and then as a
consultant and then as on theprocessing side and a couple
startups now, and honestlythat's one of my as the older
(28:32):
guy in the room.
I think it's incrediblyimportant that everyone
understands the terminologyyou're using and don't assume
that everybody understands theterminology that you're using.
Maia Bittner (28:40):
Yes, I'm a big prop of like explaining things,
um, and I, I also, so I always Ilike tell people, you know,
don't use acronyms, because itis jargon, it locks people out,
it isn't inclusive.
But I will have to say there'sa little caveat on that, which
is sometimes an acronym existsfor, you know, whatever two or
(29:02):
three word phrase, and then itgrows, the definition grows
beyond just what those wordsmean, like it means something
more and different and specific.
The acronym is almost, itbecomes a word in and of itself
and it's funny I um, I got shitat work recently for not
(29:23):
defining uh, the acronym, ach,oh really because right and I
acronym ACH, oh, really Right.
And I was kind of like I don'tknow man.
I mean, like I said, I feellike I'm the number one champion
of not using acronyms at work,but I got to say ACH stands for
automated clearinghouse and Idon't think that using those
(29:48):
words is helpful.
I believe, like when I use wordACH, I use it as even an
abbreviation for ACH, transfer,which like as a concept of the
specific money movement instance, and I think ACH is now.
It now means something.
I mean, I don't know, it comesfrom automated clearinghouse,
(30:12):
but I guess I feel likeautomated clearinghouse is not
sufficient to define, you know,and is maybe not even helpful.
Sam Maule (30:19):
Yeah, like if I told you automated clearinghouse.
Maia Bittner (30:21):
Like most people I feel like most people are more
familiar with the term ACH thanautomated clearinghouse Like
most people, don't know howclearinghouse works.
That's not gonna, it's nothelpful and it's and it's not
sufficient, so I don't know.
Sam Maule (30:32):
I, like I said, I'd love that you started with
clearinghouse, because this is atrue story.
I got out of the Navy in 1994,everybody and my very first job
was with Northern Trust as aauditor.
Everybody should be terrified ASAS 70 auditor, but my first
project was to help map outclearing accounts and how we
were using those.
(30:52):
And I remember I flew toChicago and sat down with my
banking friend His name is ChrisLorenzo, he's still in industry
in Atlanta and Chris took anhour to explain to me what
clearing accounts were and whatfloat was.
And I remember looking at himgoing is this legal, really?
This, you know, it's this basicconcept of banking right and
float everybody, greatestinvention in the history of
(31:14):
mankind.
But understanding that so I'mwith you it's incredibly
important to understand howcomplex some of these concepts
are as you start drilling downinto a three-letter word that
you're throwing out there.
I'll give you an example ofthat and why this came up Maia.
So I was at Moo's FinTechDevCon conference down in Austin
(31:39):
a few weeks back and MattHarris, the OG, everybody.
Maia Bittner (31:43):
Which Matt Harris.
Sam Maule (31:44):
Oh, the Bain Capital, matt Harris.
There are like 20 Matt Harris'sfloating around there really
are.
It's hilarious, but there areParticularly in fintech.
And all geniuses too, by theway.
Maia Bittner (31:55):
They're all like.
Sam Maule (31:56):
OGs.
So the Matt Harris OG from BainCapital that's been doing this
since 1994.
But Matt gave a keynote at ourconference down in Austin where
he started talking about bankingmodels and he talked about NIM.
So for those that you knowagain the term that gets thrown
(32:16):
out there all the time.
But here we're talking aboutnet interest income.
This is a measure of banks'profitability and growth and
banking is fairly common.
But I remember looking out ofthe room and the room was full
of a lot of fintech engineersand developers and somewhat a
puzzled look when he startedtalking about Nimmin going down
that route and the importance ofit.
(32:36):
But, Maia, you brought up agreat point, which is that is an
incredibly important bankingterm.
But in the fintech world.
Maia Bittner (32:44):
There's not a lot of fintechs who like it is the
business model for banks but notthe business model for most
fintechs, who like it is thebusiness model for banks but not
the business model for mostfintechs.
I mean, like, how many, howmany fintechs have that as a
business model?
How many fintechs are banksright?
Yeah, I mean because when youthink about nim.
Sam Maule (32:59):
It's a great indicator, right of the money
the bank is earning frominterest on loans.
Right compared to interest ispaying on deposits, loans and
deposits.
We're talking about fintech,you're right.
I mean, how many US fintechsactually have a break-in charter
?
I mean Varo comes to mind.
Maia Bittner (33:16):
Varo famously.
Sam Maule (33:18):
Yeah, famously they were the first one right man,
I'm stumped yeah.
Maia Bittner (33:26):
Does SoFi?
Sam Maule (33:28):
Yeah, I think SoFi does, and there was the one that
bought a bank.
I'm trying to remember LendingTree or Lending Club.
Maia Bittner (33:36):
Oh.
Sam Maule (33:37):
Bought a bank, Rhode Island-based bank or
Massachusetts Bank.
Maia Bittner (33:39):
Yeah, lending Club bought a bank and then they
shut down a bunch of thebusiness and they rebranded it.
Yeah, it was a whole otherthing.
Sam Maule (33:50):
There was this period of time for about five years
where everybody thought allthese fintechs were going to go
out and get a charter or get alicense, which several like in
the UK have done right Monzo,well done, starling and several
others but here in the US not somuch.
That hasn't been the route thatfintechs have gone, and so this
led to another fascinatingconversation with Maia earlier,
which was what's your favoriteacronyms when it comes to
(34:11):
fintech, and I love that Maiastarted with ROI.
You want to know who theinvestor is on this podcast.
Maia Bittner (34:17):
Not a fintech specific, but one of my favorite
acronyms.
Sam Maule (34:21):
Yeah right, our ROI incredibly important.
What are some of the othersthat you just like to grab?
I also?
Maia Bittner (34:26):
love LTV, that's a good one.
Cac one of my favoritescustomer acquisition costs, and
you know we often talk about theLTV to CAC ratio as well.
And then NPS right, I'm, as areally customer-centric person,
I love NPS.
(34:46):
I love seeing how often the NPSscore of FinTechs rises above
incumbent banks and, yeah, justlooking at customer satisfaction
.
Sam Maule (34:55):
So we just did it just now, because we blew by
this we talked about.
Cac right the customeracquisition costs.
We talked about LTV, whichwould be the lifetime value of
your customer.
Right these terms that we, justwhen you've been in this space
for a while and you're talkingabout, you know folks that are
just starting their business.
Maia Bittner (35:11):
Yeah, you just drop them back and forth
free-flowing but again can locka lot of people out.
Sam Maule (35:15):
Yeah, you're just assuming.
Oh, you know that, you know.
But let's take customeracquisition costs, right,
because even that you can sliceand dice a million different
ways, because it gets to how youknow what process are you going
by to promote or try to bringin the business.
(35:36):
Because there can be emails,there can be organic social
media, there can be lord googleads, seo mailing, direct mailing
, hello capital one which stillworks great, by the way still,
you know direct mail box.
Maia Bittner (35:48):
oh my Dark horse of the customer acquisition
methods.
Sam Maule (35:52):
As it should not be, though I'm always shocked when
people find out you know whatCAC looks like around those
direct mailers and how they work.
And then there's, you knowalways my personal favorite,
which is we're going to go outand get the celebrity.
Maia Bittner (36:06):
Celebrity yeah, good God.
Sam Maule (36:13):
Or we're going to remember super bowl.
A couple years ago, when it wasuh lord, it was the uh crypto
super bowl, if you'll recallsofi stadium right so fine.
Yeah, actually one of the beststadiums in the us there you go,
it looks beautiful it doesright.
Well, um, oh, my god, I'mblanking out.
Who is the?
Uh?
Um, what's his name?
Crypto guy thrown in jail.
Sam, sam Bickman, freed right,didn't they put their name on a
(36:35):
on a stadium?
Maia Bittner (36:36):
Oh, that sounds right An FTX stadium.
Sam Maule (36:39):
Yeah, we've all lived through that, oh my God.
So I'm curious, as an as aninvestor, when you sit down, if
I'm coming to you with an ideafor a fintech right.
Maia Bittner (36:52):
Yes, here's my first piece of feedback.
Sam Maule (36:54):
Who cares?
Maia Bittner (36:55):
Here's my first thing Fintech.
You pitch me, your, and you'relike it would be so cool and
it's such a great idea andda-da-da-da-da and it's going to
make the money.
Right, this is a pitcheverybody has and I say, look,
you know, I wish you best ofluck building your business.
(37:16):
I'm not going to invest, andhere's why I don't think you're
going to be able to acquirecustomers for this business at a
cost that's low enough to stillbe able to make money on the
product experience.
And they're like, no, no, no,people really want this Customer
acquisition cost is going to beso cheap.
This is particularly true, I gotto say, for product managers
who have never been in charge ofcustomer acquisition before and
have just worked at a companywhere, frankly, it was kind of
served up to them on a plate andthey're like, no, we'll get
(37:39):
10,000 people, like we'll get100,000 people just by like
putting it out there.
Or if they work for a bigcompany where people you know
are like anything that Twitterlaunches the tech is going to
talk about, because it's Twitter.
You've got a small startup.
Nobody is talking about yourproduct launches.
Techcrunch is not talking aboutit.
You get no publicity.
Sam Maule (38:00):
So that's my first piece of feedback.
I'm so glad you went thereright.
Hey, techcrunch is writingabout us, congratulations.
That means it's good, well done.
But yeah, if that's your,that's your go-to-market
strategy.
Maia Bittner (38:16):
Well, and it's not scalable even if tech crunch
does write about you, which isgreat.
Uh, you can't like they're notgoing to do that every week,
that you need to be acquiringcustomers to keep fueling growth
for your business and you gotto have that growth if you want
people to value you like.
Often people look at they'relike oh, these multiples, you
know, like software gets a 10xrevenue multiple, or 100x, and
(38:39):
that is only true if you've gotgrowth behind it.
Otherwise, people are not thatexcited about valuing your
company so highly excited aboutvaluing your company so highly.
Sam Maule (38:52):
Yeah, 100% right.
I mean we've seen some thathave been fascinating, that,
have you know, drove up interest.
I'll give a great example.
It was Monzo in the UK, right,incredible neobank that's taken
off on an actual bank got theirlicense that is profitable now
where they did the waiting listapproach.
Remember, everybody now doesthe waiting list.
Maia Bittner (39:12):
But back in the that idea of wait a minute, what
I'm gonna sign up and be on awaiting list, um, you know we've
seen some of those take off, um, but you know, if you're trying
to repeat the successes ofthose other companies, good luck
doesn't work well, or you can'tassume, like a lot of these
teams there's a lot of teams infintech that have incredible
(39:33):
customer acquisition teams anddepartments right, like monzo,
um, you, that might be, you, um,but it doesn't really happen by
accident right, you can't, or,like by default, you cannot
count on that happening.
You have to really deliberatelybe like here's how I'm going to
get distribution and customeracquisition.
Here are the things I'minvesting in, the people.
(39:54):
I'm bringing on board mystrategy to get this.
Sam Maule (39:58):
Yeah, I mean it's very good to understand and
understand all those differentmodels that folks have done, but
on that flip side, it's verygood to understand every single
one of these acronyms that we'retalking about, because when you
go in front of an investor andthey ask you, you know the
(40:19):
running joke is you know you cango watch Shark Tank right and
watch people bomb on theirpitches.
That's made for televisioneverybody I think three quarters
of that you actually don't seewhat's going on.
But when they're coming to youand asking you know what are you
projecting the LTV to be foryour customers?
What churn rate are you lookingat right?
What is your customeracquisition strategy?
(40:42):
You better be tight and havethese at hand and ready to go
and ready to be challenged Downpat.
Maia Bittner (40:51):
Well here's.
So.
Talk about banks right and netinterest income or whatever.
What I think a lot of peopledon't realize is that bank
branches primarily exist to dofor customer acquisition.
Yeah, and so that's.
Sam Maule (41:10):
The baby agrees um.
And so that's the baby agreeseverybody.
Yes, the baby says so cute.
Maia Bittner (41:14):
that's why we have bank branches, so we can
acquire customers cheaply.
Um, and so when people talkabout like the neobanks and
they're like, oh cool, theydon't have to pay rent well,
yeah, there's a common phrasethat customer acquisition cost
is the new rent.
Like, yes, you save a lot ofmoney by not owning real estate
and having to staff that, butyou end up paying all that money
(41:37):
you save to Facebook to serveyou up new customers, and so
that's one of the things I mean.
To me, I feel like I'm sayingthe most obvious stuff, but I
honestly like, dude Sam, I heara lot of pitches.
People do not get this.
They're like cool, we're goingto make a bank and we're going
to save money by not havingbranches and customers are going
to come to us as cheaply asthey come to a bank with a bunch
of branches.
Sam Maule (42:00):
And we're going to be billionaires and it just does
not work like that.
And we've as an industry andI'm talking generally speaking
have failed a bit there.
Right, because the customerservice levels you talked about
NPS, right?
So net promoter scores, butwe're talking about you know
we're getting in here.
You know your customerengagement scores, nps, how you
(42:22):
do customer servicing.
If you really want to enjoyyourself, you know, go online
and read, people just ripping.
I'm not going to name names,but you know we can sit here and
talk about neobanks orinvestment.
Oh my God, take any day wherethe market's crashing and go out
and look at any one of thesesites where you can buy stocks
online.
Enjoy that everybody.
Maia Bittner (42:43):
Well, totally, and I also saw recently an article
in SFGate that said that Tally,which is a fintech company that
recently died, said they weretaken down by customer
complaints.
I actually don't think that wasthe case.
I think they were taken down bya changing interest rate market
and that a consequence of thatwas bad customer complaints.
(43:07):
But I got to say tech ingeneral as an industry has
horrible customer support.
My mom's locked up.
My mom just makes a new Googleaccount anytime.
She loses access to her oldGmail account because it's
impossible to get any customersupport to get a new one, so she
just makes a new Google account.
(43:27):
It's horrifying to me.
That is her strategy Just keepmaking new Gmail accounts Gmail,
probably loves the growth it'seasier.
Sam Maule (43:33):
It is easier, it's way easier, yeah.
Maia Bittner (43:36):
And Google has no customer service.
Sam Maule (43:37):
Yeah, I mean, and it's Google.
I'm an ex-Googler, everybody.
It's Google, for God's sakes.
But I'm with you on thatUnderstand your product,
understand how your product'sgetting hacked, understand how
users are actually using yourproduct and hacking your product
, and that's probably where someof your growth is and, by the
(44:00):
way, this is making me laugh sohard.
Maia Bittner (44:01):
I get the baby.
So normally when we record withthe baby, she was a newborn and
just chill.
Now she's like, ooh, is there amic?
I can grab these headphones arefun to play with.
Sam Maule (44:15):
Like look at all these cool toys.
Oh my God, think about what herworld's going to look like when
it comes to financial services20 years from now.
Oh God, I get excited.
I have a new grandson everybodyso I get excited about this
probably I know.
How is he?
It just makes me so happy.
But I also look at them and go,oh my God, what's it going to
be like when they're in business?
(44:35):
And, by the way, I guaranteewe're still going to be talking
about NIM and Net PromoterScores and CAC, because I
remember everyone telling methat NPS was going to die.
And guess what hasn't died.
Maia Bittner (44:43):
I know NPS also has a lot of flaws, but it's
really simple and there's a lotto be said for something that's
really simple and provides somevalue, you know it's still here,
everybody.
Sam Maule (44:55):
I can go back about 15 years ago when everyone was
telling me it was going to dieout.
I'm like, yeah, guess what?
Still around, still around,still drives that.
And you know, I have a questionfor you as somebody who's built
a couple companies now and helpand ramp these up up.
I'm really curious out of these, which ones do you feel like
(45:15):
are really the gold standard,the ones that you just embrace
more than anything?
Would it be LTV or ROI?
Would you stay there in CAC Ifyou had to do a pyramid right,
the hierarchy of needs pyramidwhen it comes to these?
And I think it depends on whoyou're supposed to.
Maia Bittner (45:29):
So, sam, there's actually a new metric the
hierarchy of needs pyramid whenit comes to these In terms of
metrics.
So, sam, there's actually a newmetric Well, not a new metric,
but I feel like there's a metricthat has kind of gained steam
in.
Give me another 15 minutes,yeah.
Sam Maule (45:47):
I like it personally because it's like hand-to-hand
combat while talking.
Maia Bittner (45:51):
Yes, I feel like that you know every time I go
out to dinner for sure.
Sam Maule (45:54):
Oh my God, yeah, I feel you.
Maia Bittner (45:58):
Okay, so there's a metric that's recently grown in
popularity amongst investorsthat I really like, and that is
actually revenue per employee.
Sam Maule (46:11):
Ooh, mm-hmm that's a good one.
Maia Bittner (46:14):
Because it gets at that measure of efficiency
which, in today's age, whenmoney is not as free-flowing for
fast-growing startups andthere's an emphasis on stuff
profitability-like metricsrevenue per head is one that I
really like because it's likeyou know, you're not not as
constrained by.
It's like like I think you knowit's very hard to build a
(46:36):
billion dollar business that iscash flow positive early.
So I get that.
I get the need for investment,um, but not having a ton of
people on board is somethingthat I get excited about so I
love that.
Sam Maule (46:50):
Metric rpe is a fantastic one, and it also gives
me a chance to do dad trivia.
We haven't done that um nearenough, which is making me laugh
, because Maia's holding thebaby that wants to eat this
microphone so bad so for oncefor once.
I want to stump Maia.
I'm going to give you 2022revenue per employee.
So, rpe, can you name?
(47:10):
Maybe I'll give you, if you canname, five out of the top 10
when it comes to tech companiesglobally.
Maia Bittner (47:18):
Global tech companies revenue per employee.
Sam Maule (47:21):
And this was 2022 during the pandemic.
But here you go.
Maia Bittner (47:23):
I was going to say 2022, this is like pre-meta
layoffs.
Sam Maule (47:27):
Yep, yep, yep.
So when you think about that,oh yeah, actually way to caveat
that because we've had somemassive hits pre-twitter layoffs
yep in us dollars in 2022.
What do you think can you name?
Maybe five of the top?
Maia Bittner (47:41):
I'm gonna guess, so I'm gonna go.
So only public companies, orpublic and private public,
public okay, yeah, it's gonna bethe big guys google should be
yeah, so google meta definitelymeta.
Sam Maule (47:53):
Yep, meta was four number four cool.
Maia Bittner (47:56):
What's google?
Sam Maule (47:58):
um, oh, actually they didn't make the top 10 in 2022
too many employees, everybody 10.
Maia Bittner (48:02):
I know too many damn employees google got huge
everybody.
Sam Maule (48:08):
So not Google, but Meta.
Yeah, Meta was number four.
Maia Bittner (48:11):
NVIDIA no.
Sam Maule (48:13):
No, too soon.
Too soon, it was 2022.
I'm sure they're doing greatnow I got to go back in time.
Yeah, a little bit.
All right, there's the obviousone.
Come on, you know it.
Apple yeah there you go.
Apple number two Apple is theobvious, not number one.
I really thought Apple would benumber one, so is it behind
Microsoft?
Microsoft was behind Meta.
Maia Bittner (48:35):
Microsoft came in fifth.
Microsoft is behind Meta.
Sam Maule (48:37):
Number one is a banger.
You got to kind of stretch yourmind a little bit for number
one.
Maia Bittner (48:42):
Ooh, I like this Okay number one.
Sam Maule (48:43):
It's not who you think.
Maia Bittner (48:44):
Revenue per employee.
Yeah per employee.
Yeah, let's go.
Sam Maule (48:59):
It's not what I think is it um?
No, this isn't gonna be on thelist I was gonna say tiktok, no,
no, no, no.
Yeah, I will give you theamazon was number 10, I thought
amazon would be higher, butamazon does have a ton of
employees they hire too manypeople.
Maia Bittner (49:09):
I could tell you that they got like 4 000 people
working on alexa or whatever youknow they got way too many
people yeah, that's true.
Sam Maule (49:16):
Uh, so so you will be surprised two old school um
fintechs on here all right,paypal paypal made the list, man
I like paypal efficient.
Yeah, paypal uh, right behindmicrosoft ebay right under
paypal.
Maia Bittner (49:28):
Give me number one .
Sam Maule (49:30):
Netflix.
Maia Bittner (49:32):
I wasn't saying Netflix, over and over and over
again with the FANG acronym.
I wasn't saying Netflix Really.
Sam Maule (49:39):
Netflix number one Edged out Apple in 2022, revenue
per employee Way to go Netflix.
Maia Bittner (49:45):
That's because they make so much money on those
Netflix shows but the peoplewho make the shows aren't
employees, they're contractors.
I feel like that's cheating.
Sam Maule (49:53):
Hey, you're arguing with Statista, so we're going to
say Statista knows what they'redoing.
I'll give you my other favoritearound this as a Google
employee.
If you track Google stock andDomino's Pizza going back 20
years since they both wentpublic, domino's Pizza going
back 20 years since they bothwent public.
Maia Bittner (50:12):
Domino's rocks man .
Domino's rocks everybody.
Dude, domino's is a crazysuccess story.
Sam Maule (50:17):
See, you learned something new.
I love that you went revenueper employee, especially in 2024
.
Maia, you win.
When we are talking aboutacronyms and their importance, I
would 100% say you are in withthe trend that goes through
business right now because thenumber of cuts we are seeing
because of the massive growth wehad when everything shifted to
(50:38):
digital, whether it be Google orMeta or Microsoft or Amazon,
you take your pick right.
Any of these companies.
I do think I'm right with you.
I think RPE floats to the topright now.
It is how efficient are you?
Maia Bittner (50:51):
at your business.
Efficiency is everything, Sam.
On that note, I got to go feeda baby.
Yay so let's wrap this one up.
Thank you for listening as wedive into acronyms and how
startups make money.
It's always my favoriteconversation.
Please reach out to us and letme know what you thought of the
(51:13):
show.
You can always reach me onTwitter.
I am at Maia B.
I have open DMs there, sam.
What about you?
Linkedin LinkedIn becoming moreand more man.
Sam Maule (51:23):
ROI on LinkedIn.
Everybody, I'm telling you it'sa good spot to be.
Let us know your favoriteacronym, let us know if you
agree with us, but we're justgoing to say RPE is king, it won
the day.
It won the day.
Everybody, Maia, the littlebaby and I, I'll say have a
great, great day.
See you later.
Hey everybody, welcome to another episode of
Artificially Intelligent.
I am perpetual intern Sam Maul,based in oh my god rainy
Florida right now, and I amjoined by my co-perpetual intern
, maa Bittner.
Maya, how you doing?
Maia Bittner (00:18):
What's up, guys?
I'm in beautiful, sunny bluesky, pacific Northwest, right
now.
Sam Maule (00:26):
It's just upside down , isn't it?
The world is upside down.
Maia Bittner (00:30):
Climate change man , it's been good to this part of
the country.
Sam Maule (00:34):
Yeah, it's been great for my home insurance.
Everybody.
That's another show for anotherday.
But talking about the worldbeing upside down, we were
laughing before the show talkingabout a TikTok trend there's
always so many of these Whereasmy wife would say the TikTok
Because we're old.
Maia Bittner (00:53):
The TikTok?
What are they talking about onthe TikTok?
Sam Maule (00:55):
Oh my God, it's the viral glitch at Chase Bank.
Maia, do you want to give somebackground on this, because this
is rather funny, I love it.
Maia Bittner (01:02):
Yes, so TikTok, trend people, people.
They say glitch at the chaseATM.
You know, I didn't even lookinto it that closely, but here's
my guess is what they areclaiming is a glitch?
It's that they can deposit acheck.
Um, and maybe I I don't knowthe details maybe they're saying
that a hundred dollar check isactually for $1,000 or $10,000.
(01:25):
Or maybe they're writing acheck from an account that
doesn't have any funds in it andisn't going to clear.
But one way or another they aredepositing checks that don't
have any money behind them intothe Chase ATM and Chase is
saying like increasing thebalance on their account by that
amount.
(01:45):
And so they're like everybodyshould go do this, you get free
money.
Sam Maule (01:51):
Yeah, it's hilarious right, there's, there's and, as
is usual on TikTok, once there'sone video, there's a million
around this, but there's a bunchof these that went viral where
people thought they were more orless getting free cash out of
specifically.
Maia Bittner (02:03):
People are lined up at the Chase ATM to take
advantage of this quote-unquoteglitch.
Sam Maule (02:08):
Yeah, specifically Chase, right, which, by the way,
everybody, when it comes totechnology, I think Maia, and I
have said it a few times it'sChase.
Come on man.
Maia Bittner (02:16):
Chase is like best in class and their ATMs are
very good.
Sam Maule (02:25):
Yeah, the videos would show people.
They'd basically be depositingchecks for large sums of money
at a Chase ATM and then takingout a withdrawal for a smaller
yet still substantial amount,thinking they discovered a bug.
That was in there.
And, my favorite thing, on NBCNews, the very first line in the
article says Chase Bank isurging its customers not to
commit check fraud.
Maia Bittner (02:42):
Yes, actually don't do this, oh my God.
So what's happening?
Of course, after theyquote-unquote deposit the check
right, have a really highbalance, they take some of that
balance out of the ATM.
It's like free cash, okay.
Well, when Chase figures outwhat has happened, you know, the
next day or a week later theyadjust the amount of that check
(03:06):
deposit at the ATM to be correct, and everyone who followed this
glitch now has a deeplynegative bank account.
Sam Maule (03:16):
You know what's fascinating.
You know where this is going totake us.
Besides talking about thestupidity of some people on
TikTok, which we could do awhole show on, I think we're
going to end up talking aboutATMs, Maia, because ATMs as a
whole.
You've said this on a previousshow.
I listened to it a lot while Iwas working out.
Folks, I need to get a life,because I actually go back and
(03:36):
listen to our shows when I workout at my YMCA.
And you actually said it in myear this morning on one of our
previous shows, where you lovethe concept of an ATM around
identity.
Maia Bittner (03:47):
Love ATMs.
Sam Maule (03:48):
Would you expand what you mean by that?
Maia Bittner (03:50):
Oh yeah, well, I think ATMs so when we think
about banking, right.
So, in particular, us-basedbank accounts are incredibly
valuable.
You can use them to accessparts of the financial system
that most countries don't haveaccess to.
You get to do all this coolstuff in the US dollar, which is
a very valuable global currency.
(04:11):
I think a lot of Americans sortof underestimate how great it is
to have a US-based bank account, because they're not in a
position where they don't.
But because of that and due tothe rising popularity of online
banking, there are a lot ofpeople who are not located in
the US and do not have access toa US-based bank account that
want one, and they think thatonline banking is their
(04:34):
opportunity to get one.
So they're like, oh wow, youcould create an account just
from the internet and they'retrying to do that right.
And so there is sort of thisconstant battle between the
online banking providers andpeople in other countries that
shouldn't have access to aUS-based bank account around
(04:55):
whether they can open an accountor not.
Establishing identity, kyc, allthat good stuff.
The reason I love ATMs foridentity is because if somebody
has access to an ATM based inthe United States, that is not
definitive proof that they areentitled to a US-based bank
account by any means, but it's away stronger signal than most
(05:24):
of the attributes we haveavailable in, like, a digital or
online way.
Right Like there are not.
I mean, there are incrediblyskilled hackers in Ukraine, in
Africa, in a bunch of places inthe world.
That, like hacking US banks, isjust one of the most profitable
(05:47):
ways that you, as a smartperson, can spend your time in
the Ukraine.
If you're a smart person in theUS, then you can just make more
money doing things other thanhacking bank accounts, but if
you're in the Ukraine, you'relimited on your options.
Hacking US-based bank accountsis a great way to do it, but
you're never in the US, younever fly here, you never visit,
so it but you're never in theUS, you never fly here, you
(06:07):
never visit, so you're neverable to like visit those ATMs
and things.
And so I just feel like it'sgood for everyone, like it's not
as big of a hurdle for peoplein the US to be able to go to an
ATM or scan their driver'slicense or do something like
that.
They want to do things thatpeople love ATMs.
They want to do things withoutinteracting with a teller,
without being limited to bankinghours, things like that.
They want to do things thatpeople love ATMs.
They want to do things withoutinteracting with a teller,
without being limited to bankinghours, things like that.
(06:28):
And it is an incredibly strongdata point for the online
banking providers that theydon't have access to in any
other way, which is, this personcan be in the United States,
and so that's what I'm excitedabout.
You know, I'm not as required,but particularly in those edge
cases where an online bankingprovider might say like, hey, we
(06:51):
just can't prove that we knowwho you are and so we're not
able to offer you an account atthis time, if that person could
appeal and say what if I go,bring my driver's license to an
ATM, I think it could open upaccess to even more people.
Sam Maule (07:04):
Yeah, it's funny when we talk about ATMs, Just you
know, remember Paul Volcker wayback when.
Oh yeah, and that was one ofhis famous quotes, and this was
after the financial crash, wherehe said probably the only good
invention we've had in bankingin the past 20 years has been
the ATM.
And that was after the internet.
By the way, everybody, I stillfind that- funny yeah.
(07:26):
I mean, I've used that in talksa few times right when it
actually is something that itsomewhat did bring banking to
the masses.
Because, believe it or not andI'm doing a little bit of
reading on this the number ofATMs in the US has been
declining over the past fewyears.
Atms in the US has beendeclining over the past few
(07:48):
years.
Right around when COVID hit, wehad, I think, 540,000 ATMs in
the US.
The last number I saw was adecline to about 450,000 in 2003
.
That's about a 4% drop year onyear, essentially for the reason
that we're moving more and moreaway from cash.
So physical paper mile right.
But again and you've talkedabout this and I tend to agree
(08:12):
with you the functionality anATM can provide, right similar
to what your phone can do.
But again, that interactionwhen it comes to fraud.
You were just telling me astory about this right when it
was about using your voice at anATM as a source of identity.
I think you mentioned that,that there was a story that just
came out about that.
Maia Bittner (08:33):
Yes, and one was I mean, people love ATMs, so one
funny I just saw a tweet wheresomebody said they went to the
bank and they asked them if theyhad an ATM and the bank said,
yeah, we have a drive-thru ATM.
Sam Maule (08:43):
I saw that.
Maia Bittner (08:45):
And she said, oh, but I walked here and he was
like, no, no, worries, that'sfine, and so she waited in line
behind a car and had to gothrough the ATM.
So I think it's funny and here'swhat I really think is funny
about that.
I said, wait, you went to abank and you talked to someone
and you ask them if you had anATM, why didn't you just do your
(09:08):
transaction with that teller?
And a bunch of people yelled atme.
They were like, oh well, sheprobably didn't have a bank
account at that bank.
And I think that's a reallycommon misconception.
People think that if you go toan ATM, like any ATM works with
any debit card, but that youhave to have a bank account with
that bank to talk to the teller.
But that's not even true.
(09:29):
You can kind of do like quoteunquote ATM I mean, it's not an
ATM but teller withdrawals.
They call them over-the-countercash withdrawals from basically
any bank.
If you're there talking to ateller and your bank will
probably treat it the same as,uh, out of network atm, um.
So yeah, I thought it was funnythat she went in, maybe waited
(09:50):
in line, talked to a teller,asked them if they had an atm
left, waited in line behind acar to go through a
drive-through atm, when I'm likeyou probably just have talked
to that teller to get yourwhatever you needed cash.
Sam Maule (10:03):
Whatever, man, my think about how our behaviors
have changed, and actually in anincredibly short period of time
.
Meaning I can remember my momwalking me through how you
interact at a bank.
Meaning this is where you goget the withdrawal slip or the
deposit slip, this is how youfill it out, this is where you
go stand in line.
You know what I mean.
This is how you engage withthem.
(10:24):
You know, you see that, youknow in movies that we used to
watch, and then it migrated,like you said, to the window and
the pneumatic tubes, and thenit migrated to our phones.
And you know it is funny, wherewe've moved farther and farther
away from actual physicalinteraction with the human being
.
Maia Bittner (10:44):
Yes, and to bring it back to fraud in these ATMs,
I actually think the farther youget like it's easier to commit
fraud, the farther away you getfrom interacting with people,
and this is proven out in thedata.
You know, I used to run ane-commerce company and the
heuristic I always had with thee-commerce company is that 90%
of your customers are likebasically good 9%.
(11:08):
You know, if you have agenerous return policy or
something they might see if theycan take advantage of it, and
then if you slap them on thewrist, they'll stop.
1% are competent, deeplymalicious and actively trying to
drive your business into theground, and so the trick is
correctly putting people intoeach buckets so that you can
(11:29):
apply different policies to themand things like that, and so I
think that.
But that 9% is reallyinteresting, right?
People who like maybe try to getaway with something, but I'll
stop if they get slapped on thewrist.
When Bank of America did thefamous Fresno drop, which was
the first credit card, theyassumed that giving people
credit on this card would be thesame as giving them a loan at a
(11:53):
bank, and what they found isthat people were much less
likely to pay back their creditcard because it was so
impersonal.
When you go, you talk to yourcommunity banker, the guy you
see at the grocery store, andyou're like, yep, I'm going to
pay you back.
That has much.
It creates much more likewillingness to pay in consumers
than signing a slip that saysyou're going to pay it back.
(12:15):
Never talking to anyone, younever see them in the grocery
store and just making thosecharges.
Sam Maule (12:20):
Yeah, human behavior is fascinating, Believe it or
not.
Maia, when I moved to the UKback around 2006, I lived in a
tiny village in Yorkshire,outside Stanford Bridge, and it
was so funny when you went tothe hardware store, there was no
POS, there was no cash register.
It was a guy with a notepad anda pencil who would manually
(12:46):
calculate the tax and write outa receipt for you, and you could
literally do IOUs.
Can you imagine?
Maia Bittner (12:52):
No, that's how I grew up.
Our local store they had a boxwith it kind of looked like card
catalog cards, but it was a boxwith all these note cards by
people's name.
Then you would write your nameand how much you owed and then
once a month or so my parentswould come by and settle up.
So that's how I used to go getcheese and ice cream from our
little local convenience storethe farmers in the village where
(13:14):
I lived.
Sam Maule (13:14):
they would have their eggs sitting in a cooler and
you would just drive by takeyour eggs and drop money off,
and I remember when we firstmoved there because I grew up in
Detroit everyone where weliterally would have stole the
whole damn farm, me doing thattoo, by the way, everybody Just
understand this concept of trustin human behavior.
Maia Bittner (13:34):
High-trust society versus low-trust.
Sam Maule (13:36):
Yeah, but it also comes to when you're building
out a bank, whether it be purelydigital or, you know, having a
physical footprint,understanding human behavior and
that component of it stillmatters right.
I mean, how you engage, whatyou look for is a massive part
of your strategic growth.
Maia Bittner (13:56):
So let's get into this, this Chase ATM bank glitch
.
So I actually feel like I havethis conversation relatively
often.
A lot of people ask mequestions.
I most recently was talking toa startup founder about, you
know he's got some trouble.
He's trying to cash thesechecks and specific things, and
so I'll explain to them how itworks and quite often, after I
(14:18):
explain to them, someone willsay to me like wait, I could
just steal $30,000 or somethinglike that, which is basically
what the TikToks say.
They're like wait, once youknow, you kind of see it.
You're like I could just steala bunch of money and you kind of
can.
Because here's how it workswhen the bank gives you access
to those funds from depositing acheck before they've really
(14:40):
verified that the check canclear and that it's real, it's
basically a loan.
I mean, it's not regulated as aloan, mostly because they don't
charge interest, which issomething that they do as a
courtesy to you, but it'sbasically a loan.
And when I say it's a loan,what I mean is that they are
underwriting both you and thatcheck.
So they are underwriting you asa person.
How long have you had an accountwith them?
(15:01):
What kinds of transactions doyou do?
What is your balance in theaccount?
Like all of that stuff.
They underwrite you and theyunderwrite the check.
Where's the check from?
How much is the check for?
Is it a printed payroll checkor is it a handwritten person?
All of that.
They take all of this data andthey decide how much of that
they want to let you accessbefore the check has cleared.
(15:22):
So and like that's like, howmuch risk do they want to take?
Sometimes it's zero and you'lldeposit a check and you don't
get any access to funds untilthe check is cleared.
Sometimes, like in the case ofthese TikTok videos and things
like that, people are gettingthousands of dollars, but that's
just.
The bank is just like yeah, wethink you're going to pay this
back.
And here's the other thing youdon't have to pay it back.
So all of these people who havenegative $30,000 bank accounts,
(15:46):
they don't need to pay thatback.
Here's what will happen,probably right.
So, amongst other things, soChase could close your account
due to check fraud.
Very importantly, they willreport you to check systems,
which is a database that'ssimilar to the credit bureaus,
(16:06):
but it is used for US-basedchecking accounts.
It's how all of the bankscommunicate with each other.
By the way, we've got acustomer that defrauded us and
committed check fraud, so wedon't recommend that you let
them access a checking account,otherwise they might defraud you
too.
So you will find yourself lockedout of the US-based banking
system, which I just did a wholespiel on how valuable that is,
(16:27):
and I've talked to people it'sso funny, talked to people who
are like you know, I don't thinkI mind that, like I would like.
I'm okay being locked out of theUS-based banking system if I
get, you know, $30,000 or enoughmoney for that to be worth it.
Honestly, like in general, youknow, I don't think I'm smarter
than anyone or anything likethat, but when you say this, it
makes it very clear that you donot understand how good you have
(16:52):
it as a banked person and howmuch you want to be able to have
that bank account.
So, yeah, it's like you cankind of you, like most people
can, commit check fraud,particularly people that the
bank doesn't think are likely todo.
That, um, and you just lose outon access to this bank is what
you probably want, and the banksknow that you want that and
(17:13):
that's why you're probably goingto pay it back and it's why
you're probably not going tocommit check fraud.
So that's that's kind of how itworks, is it's like?
It's just it's not.
It's not really a bank.
As a courtesy, they're loaningyou the money before they have
it because they're going to askfor it back and they think that
you're going to pay it becauseyou want to maintain access to
your bank account and youprobably do and probably will.
Sam Maule (17:32):
Yeah, I'm always fascinated how, in this case,
tiktok a viral TikTok drivingthis behavior.
But what drives consumerbehavior for some of this
activity?
Because, like you were talkingabout, with check fraud, I'm
just reading a report by FinCENthat goes back to the beginning
of last year saying that withcheck fraud going back to 2021,
(17:53):
they've seen a 23% increase oncheck fraud-related SARs that
have been filed.
So there's been a consistentuptick around check fraud, right
.
Maia Bittner (18:06):
Um, as we move more and more into this digital
age and as we move more and moreinto where we're at, yeah, well
, like I said, right, like Ithink people are more likely to
commit fraud when they're nottalking to their local banker.
Um, and we're a bit like banksare a bit more susceptible to
fraud.
It's not like they don't haveany fraud losses but, like I say
, it's an arms race.
It's pretty easy to commitcheck fraud, but the
(18:27):
consequences are so severe thatyou probably don't want to.
Sam Maule (18:32):
Yeah, and when I say a SARS everybody, again we throw
acronyms around like they'rejust candy.
Maia Bittner (18:39):
The acronym everything Suspicious Activity
Report everybody.
Yes, suspicious Activity Reporteverybody.
Sam Maule (18:44):
Sorry, yes, suspicious Activity Report Yep.
Maia Bittner (18:45):
Compliancing.
Sam Maule (18:46):
Welcome to banking everybody.
We love a good acronym.
Maia Bittner (18:50):
I was talking to Dave.
Well, I had so I have the Venmocard and I went and I bought
like a $1,000 money order thisis actually a while ago, I
forget and I think like then Itransferred the thousand dollars
or I transferred the money outof my Venmo account or I think
maybe I didn't even have anymoney in my Venmo account and or
(19:13):
in any of the linked bankaccounts and I bought a thousand
dollar money order and my Venmoaccount then went negative.
Or I had like three dollars, itwas like negative nine hundred
ninety seven thousand dollars,and I paid went negative.
Or I had like $3.
It was like negative $997,000.
And I paid it back and I waslike, wow, it's really
interesting to me that Venmo letthat happen.
And Dave, my partner here, hewas like I'm going to do that
(19:36):
and I was like, well, I think itwould burn your Venmo, like
you'd never be able to use Venmoagain, and it would burn your
ability to have Venmo account.
And he was like I'm not thatinto having a Venmo account,
like I would burn it for athousand dollars, like I'm just
not that into it and I don'tknow.
I mean, my guess is that Venmoprobably doesn't report to check
systems.
It's a little bit outside ofthat, so it could be contained
(19:57):
to just Venmo and he was.
He was like, yeah, he's likeI'm I'm not that into it, I
would take the thousand bucks.
Sam Maule (20:03):
Yeah, I'm not that bothered.
It's okay, we'll do it.
Yeah, it's funny how,especially I think when you move
(20:30):
more, a more valued source oftruth as we've moved farther and
farther away from traditionalmedia.
There's a whole other show,right, Maia?
When we talk about this, thisis the gray-haired guy just
scratching his head going oh myGod, right.
I always go back to a termwe've said on other shows zero
trust.
When I see something or hear astory, I research like crazy and
(20:51):
try to get as many you know Itry to teach my kids that too.
By the way, right, TikTok, not agreat source for truth on how
to live your financial lives.
You know, maybe pretty good onplumbing, but then again you
might blow that sink up or thatdrain up with whatever the hell
you're watching on that, becauseyou have no clue who that
subject matter expert is.
You know, I mean, you can'tmake this stuff up.
(21:15):
So here's our source of truth.
Everybody TikTok's great forwatching funny videos of
squirrels and dogs and catsrunning around.
Maybe don't take it financialadvice and get a headline where
chase has to please advise itscustomers not to commit check
fraud over the weekend, which weall should know better right.
Maia Bittner (21:36):
I mean, like I said, you know, I'm like you're
welcome to uh commit whateverfraud you want, but I do think
it's like understand theconsequences, yes please, and
the risks that you're taking.
Right, it is unfortunately nota free money glitch.
There are very few of those inthe world and very unlikely that
Chase would have thatvulnerability.
Sam Maule (21:56):
So there you are, everybody Yet again.
Don't get advice from TikTok,please, and don't commit fraud.
That's the name of the show.
Please don't commit.
Maia Bittner (22:06):
I don't commit fraud.
Sam Maule (22:07):
Everybody, whatever you do.
All right, that's it for theshow today.
Everyone, I'm going to go backto my rainy day in Florida Just
beautiful and Maia's going to goback to an incredibly sunny day
in the Northwest.
Who would have thought?
Hey, reach out to us, reach outto us on LinkedIn, twitter.
You take your pick, not onTikTok, but tell us about topics
you'd like us to talk about.
Give us some feedback.
Maia Bittner (22:28):
We welcome it, Maia man enjoy your afternoon,
enjoy the day.
Thanks for listening to me ranton check clearing and would
love to hear from anybody youknow you can reach me on Twitter
at Maia B.
Otherwise, tune in for our nextepisode.
Make sure to leave us a review.
(22:49):
Rate us five stars.
Five stars All those greatthings we love being a part of
the Money 2020 Network.
Sam Maule (22:58):
See you next time, everybody.
Maia Bittner (23:00):
Bye.
Sam Maule (23:02):
And we're just going to pause because I'm assuming
you can cut this and do the nextone, rachel, or whoever does
this stuff, sorry for droppingyour T up on the voice thing.
Maia Bittner (23:12):
I don't know, it's not at ATMs.
And then, if I don't know, butwe'll just have to put that, out
Makes me laugh.
Sam Maule (23:16):
I love it.
Maia Bittner (23:18):
So this next one.
Sam Maule (23:19):
Yeah, Let me tell you where this next one came from.
So we had our conferenceFinTech DEF CON in.
Austin and Matt Harris from BainCapital got up and talked and
it was fascinating becausehere's the I'm going to.
Can I share my screen with you?
I can't.
Anyways, he talked about wherehe thought we were moving,
especially with AI and bankingand the gender of AI, and he
(23:40):
said, basically, what he thinksAI is going to do for banking is
going to kill inertia.
Because, he said, inertia isthe greatest thing in the world
for bankers, because peoplegenerally are lazy and the
highest percentage of them justdon't do what they should do,
which is move their money aroundas they need to.
And so he shared a slide wherehe talked about NIM and he was
(24:02):
showing it.
And he broke about NIM and youknow he was showing it and he
broke it down from banks over 50billion all the way down to
banks under 500 million right,and he was showing the aggregate
when it comes to NIM, whereeverybody operates, and he goes
what's fascinating is really,for the most part, the smaller
you get, the higher NIM is whenyou look at it, because under
(24:23):
500 million it's running about5.19 percent, whereas you know,
if you were to take the average,it's down around three and a
half for for the net interestmargin and he, in his opinion,
he thinks that ai is going toslap that around, as you're
going to have a personalized AIthat, if you use it right, will
(24:45):
kind of drive your money around.
And it made me laugh becausethere's all these terms that we
throw around, like NIM and CAC,right, yep, that are constantly
talked around, but I don't knowhow well people understand it
and why not that we'll highlightChime, but why, for example, a
lot of these neobanks?
Their cost per customer tendsto be such a shit ton lower than
(25:08):
a lot of the traditionalplayers or as out there.
And what's driving that?
What's some of your favoriteacronyms when it comes to
financial services?
I'm probably going to startthere, Maia.
Maia Bittner (25:21):
No, my favorite acronyms are uh, not specific to
financial services.
It is ltv, it is roi those aregood though nps is one I love
there we go.
Sam Maule (25:36):
So I you know they're ones that we talk about all the
time, so I'll lead into becausethat gives me a shout out for
fintech devcon, um, and talkabout that.
But where he talked about netinterest income and it and how,
it just made me smile because,looking out the room of a room
full of people that are in thebusiness, and I could see a
couple of them going taking apicture of the definition and me
(25:57):
going, hmm, all right, that'sinteresting, we're all doing
this, do?
Maia Bittner (26:02):
we actually understand.
Well, yeah, I wonder if I meanthat's how that's, that's,
that's, that's the bankingbusiness model.
But if you think about fintech,there's very few banks right
like their column, I think, is abank they're not doing lending,
(26:23):
they're not taking depositsright.
So the components, so Column isa bank, and then I think
there's maybe that second oneout of.
Sam Maule (26:35):
I mean, Varo has a charter, a license.
Oh, Varo is a bank yeah.
Varo has a banking charter.
They have a banking license.
Maia Bittner (26:41):
So Varo is a bank Column is a bank yeah, borrow
has a banking charter.
They have a big license, soborrow is a bank, column is a
bank.
Then we're sort of likeexpanding the definition of
fintech, but we get to someother people like that yeah, um
so it'd be interesting there'svery few banks, so it's not that
surprising to me that peopledidn't know the banking business
model, because it's not mostlynot the business model of
fintech so why don't we go thereand use that and we can talk
(27:03):
about some of the componentsthat make it up, especially you
as an investor.
I love it.
Sam Maule (27:07):
All right, so there you go.
Maia Bittner (27:07):
Yes, well, you know me as an investor.
I always want to know what'sthe business model?
Sam Maule (27:12):
Yep?
How's this?
Maia Bittner (27:13):
going to make money.
Sam Maule (27:15):
So I'll let you open this one up.
So here we go.
Rachel, this is show number two.
Maia Bittner (27:22):
Hey everyone, Welcome back.
Welcome back to another episodeof Artificially Intelligent.
I am one of your co-hosts, theperpetual fintech intern, Maia
Bittner, and I am joined herewith my co-host, Sam Maul.
We are so excited to jump in.
Today.
We are going to deacronym abunch of fun business concepts
(27:45):
which is one of my personalfavorite things to do in a
corporate setting and dive intobusiness models.
Sam Maule (27:54):
Yeah, sam, it's funny .
Yeah, Maia, it's funny, isn'tit?
The longer you're in thisbusiness, the more you adapt to
the lexicon, if you will, of anindustry.
Maia Bittner (28:03):
Yes, the jargon yeah.
Sam Maule (28:05):
Man alive and that is so dang important Because it's
what is?
The movie the Princess Bride,where the phrase is I don't
think that word means what youthink it means or whatever.
Right, one of my favorite lines, right, and I do find that
funny because I've had a careeras a banker and then as a
consultant and then as on theprocessing side and a couple
startups now, and honestlythat's one of my as the older
(28:32):
guy in the room.
I think it's incrediblyimportant that everyone
understands the terminologyyou're using and don't assume
that everybody understands theterminology that you're using.
Maia Bittner (28:40):
Yes, I'm a big prop of like explaining things,
um, and I, I also, so I always Ilike tell people, you know,
don't use acronyms, because itis jargon, it locks people out,
it isn't inclusive.
But I will have to say there'sa little caveat on that, which
is sometimes an acronym existsfor, you know, whatever two or
(29:02):
three word phrase, and then itgrows, the definition grows
beyond just what those wordsmean, like it means something
more and different and specific.
The acronym is almost, itbecomes a word in and of itself
and it's funny I um, I got shitat work recently for not
(29:23):
defining uh, the acronym, ach,oh really because right and I
acronym ACH, oh, really Right.
And I was kind of like I don'tknow man.
I mean, like I said, I feellike I'm the number one champion
of not using acronyms at work,but I got to say ACH stands for
automated clearinghouse and Idon't think that using those
(29:48):
words is helpful.
I believe, like when I use wordACH, I use it as even an
abbreviation for ACH, transfer,which like as a concept of the
specific money movement instance, and I think ACH is now.
It now means something.
I mean, I don't know, it comesfrom automated clearinghouse,
(30:12):
but I guess I feel likeautomated clearinghouse is not
sufficient to define, you know,and is maybe not even helpful.
Sam Maule (30:19):
Yeah, like if I told you automated clearinghouse.
Maia Bittner (30:21):
Like most people I feel like most people are more
familiar with the term ACH thanautomated clearinghouse Like
most people, don't know howclearinghouse works.
That's not gonna, it's nothelpful and it's and it's not
sufficient, so I don't know.
Sam Maule (30:32):
I, like I said, I'd love that you started with
clearinghouse, because this is atrue story.
I got out of the Navy in 1994,everybody and my very first job
was with Northern Trust as aauditor.
Everybody should be terrified ASAS 70 auditor, but my first
project was to help map outclearing accounts and how we
were using those.
(30:52):
And I remember I flew toChicago and sat down with my
banking friend His name is ChrisLorenzo, he's still in industry
in Atlanta and Chris took anhour to explain to me what
clearing accounts were and whatfloat was.
And I remember looking at himgoing is this legal, really?
This, you know, it's this basicconcept of banking right and
float everybody, greatestinvention in the history of
(31:14):
mankind.
But understanding that so I'mwith you it's incredibly
important to understand howcomplex some of these concepts
are as you start drilling downinto a three-letter word that
you're throwing out there.
I'll give you an example ofthat and why this came up Maia.
So I was at Moo's FinTechDevCon conference down in Austin
(31:39):
a few weeks back and MattHarris, the OG, everybody.
Maia Bittner (31:43):
Which Matt Harris.
Sam Maule (31:44):
Oh, the Bain Capital, matt Harris.
There are like 20 Matt Harris'sfloating around there really
are.
It's hilarious, but there areParticularly in fintech.
And all geniuses too, by theway.
Maia Bittner (31:55):
They're all like.
Sam Maule (31:56):
OGs.
So the Matt Harris OG from BainCapital that's been doing this
since 1994.
But Matt gave a keynote at ourconference down in Austin where
he started talking about bankingmodels and he talked about NIM.
So for those that you knowagain the term that gets thrown
(32:16):
out there all the time.
But here we're talking aboutnet interest income.
This is a measure of banks'profitability and growth and
banking is fairly common.
But I remember looking out ofthe room and the room was full
of a lot of fintech engineersand developers and somewhat a
puzzled look when he startedtalking about Nimmin going down
that route and the importance ofit.
(32:36):
But, Maia, you brought up agreat point, which is that is an
incredibly important bankingterm.
But in the fintech world.
Maia Bittner (32:44):
There's not a lot of fintechs who like it is the
business model for banks but notthe business model for most
fintechs, who like it is thebusiness model for banks but not
the business model for mostfintechs.
I mean, like, how many, howmany fintechs have that as a
business model?
How many fintechs are banksright?
Yeah, I mean because when youthink about nim.
Sam Maule (32:59):
It's a great indicator, right of the money
the bank is earning frominterest on loans.
Right compared to interest ispaying on deposits, loans and
deposits.
We're talking about fintech,you're right.
I mean, how many US fintechsactually have a break-in charter
?
I mean Varo comes to mind.
Maia Bittner (33:16):
Varo famously.
Sam Maule (33:18):
Yeah, famously they were the first one right man,
I'm stumped yeah.
Maia Bittner (33:26):
Does SoFi?
Sam Maule (33:28):
Yeah, I think SoFi does, and there was the one that
bought a bank.
I'm trying to remember LendingTree or Lending Club.
Maia Bittner (33:36):
Oh.
Sam Maule (33:37):
Bought a bank, Rhode Island-based bank or
Massachusetts Bank.
Maia Bittner (33:39):
Yeah, lending Club bought a bank and then they
shut down a bunch of thebusiness and they rebranded it.
Yeah, it was a whole otherthing.
Sam Maule (33:50):
There was this period of time for about five years
where everybody thought allthese fintechs were going to go
out and get a charter or get alicense, which several like in
the UK have done right Monzo,well done, starling and several
others but here in the US not somuch.
That hasn't been the route thatfintechs have gone, and so this
led to another fascinatingconversation with Maia earlier,
which was what's your favoriteacronyms when it comes to
(34:11):
fintech, and I love that Maiastarted with ROI.
You want to know who theinvestor is on this podcast.
Maia Bittner (34:17):
Not a fintech specific, but one of my favorite
acronyms.
Sam Maule (34:21):
Yeah right, our ROI incredibly important.
What are some of the othersthat you just like to grab?
I also?
Maia Bittner (34:26):
love LTV, that's a good one.
Cac one of my favoritescustomer acquisition costs, and
you know we often talk about theLTV to CAC ratio as well.
And then NPS right, I'm, as areally customer-centric person,
I love NPS.
(34:46):
I love seeing how often the NPSscore of FinTechs rises above
incumbent banks and, yeah, justlooking at customer satisfaction
.
Sam Maule (34:55):
So we just did it just now, because we blew by
this we talked about.
Cac right the customeracquisition costs.
We talked about LTV, whichwould be the lifetime value of
your customer.
Right these terms that we, justwhen you've been in this space
for a while and you're talkingabout, you know folks that are
just starting their business.
Maia Bittner (35:11):
Yeah, you just drop them back and forth
free-flowing but again can locka lot of people out.
Sam Maule (35:15):
Yeah, you're just assuming.
Oh, you know that, you know.
But let's take customeracquisition costs, right,
because even that you can sliceand dice a million different
ways, because it gets to how youknow what process are you going
by to promote or try to bringin the business.
(35:36):
Because there can be emails,there can be organic social
media, there can be lord googleads, seo mailing, direct mailing
, hello capital one which stillworks great, by the way still,
you know direct mail box.
Maia Bittner (35:48):
oh my Dark horse of the customer acquisition
methods.
Sam Maule (35:52):
As it should not be, though I'm always shocked when
people find out you know whatCAC looks like around those
direct mailers and how they work.
And then there's, you knowalways my personal favorite,
which is we're going to go outand get the celebrity.
Maia Bittner (36:06):
Celebrity yeah, good God.
Sam Maule (36:13):
Or we're going to remember super bowl.
A couple years ago, when it wasuh lord, it was the uh crypto
super bowl, if you'll recallsofi stadium right so fine.
Yeah, actually one of the beststadiums in the us there you go,
it looks beautiful it doesright.
Well, um, oh, my god, I'mblanking out.
Who is the?
Uh?
Um, what's his name?
Crypto guy thrown in jail.
Sam, sam Bickman, freed right,didn't they put their name on a
(36:35):
on a stadium?
Maia Bittner (36:36):
Oh, that sounds right An FTX stadium.
Sam Maule (36:39):
Yeah, we've all lived through that, oh my God.
So I'm curious, as an as aninvestor, when you sit down, if
I'm coming to you with an ideafor a fintech right.
Maia Bittner (36:52):
Yes, here's my first piece of feedback.
Sam Maule (36:54):
Who cares?
Maia Bittner (36:55):
Here's my first thing Fintech.
You pitch me, your, and you'relike it would be so cool and
it's such a great idea andda-da-da-da-da and it's going to
make the money.
Right, this is a pitcheverybody has and I say, look,
you know, I wish you best ofluck building your business.
(37:16):
I'm not going to invest, andhere's why I don't think you're
going to be able to acquirecustomers for this business at a
cost that's low enough to stillbe able to make money on the
product experience.
And they're like, no, no, no,people really want this Customer
acquisition cost is going to beso cheap.
This is particularly true, I gotto say, for product managers
who have never been in charge ofcustomer acquisition before and
have just worked at a companywhere, frankly, it was kind of
served up to them on a plate andthey're like, no, we'll get
(37:39):
10,000 people, like we'll get100,000 people just by like
putting it out there.
Or if they work for a bigcompany where people you know
are like anything that Twitterlaunches the tech is going to
talk about, because it's Twitter.
You've got a small startup.
Nobody is talking about yourproduct launches.
Techcrunch is not talking aboutit.
You get no publicity.
Sam Maule (38:00):
So that's my first piece of feedback.
I'm so glad you went thereright.
Hey, techcrunch is writingabout us, congratulations.
That means it's good, well done.
But yeah, if that's your,that's your go-to-market
strategy.
Maia Bittner (38:16):
Well, and it's not scalable even if tech crunch
does write about you, which isgreat.
Uh, you can't like they're notgoing to do that every week,
that you need to be acquiringcustomers to keep fueling growth
for your business and you gotto have that growth if you want
people to value you like.
Often people look at they'relike oh, these multiples, you
know, like software gets a 10xrevenue multiple, or 100x, and
(38:39):
that is only true if you've gotgrowth behind it.
Otherwise, people are not thatexcited about valuing your
company so highly excited aboutvaluing your company so highly.
Sam Maule (38:52):
Yeah, 100% right.
I mean we've seen some thathave been fascinating, that,
have you know, drove up interest.
I'll give a great example.
It was Monzo in the UK, right,incredible neobank that's taken
off on an actual bank got theirlicense that is profitable now
where they did the waiting listapproach.
Remember, everybody now doesthe waiting list.
Maia Bittner (39:12):
But back in the that idea of wait a minute, what
I'm gonna sign up and be on awaiting list, um, you know we've
seen some of those take off, um, but you know, if you're trying
to repeat the successes ofthose other companies, good luck
doesn't work well, or you can'tassume, like a lot of these
teams there's a lot of teams infintech that have incredible
(39:33):
customer acquisition teams anddepartments right, like monzo,
um, you, that might be, you, um,but it doesn't really happen by
accident right, you can't, or,like by default, you cannot
count on that happening.
You have to really deliberatelybe like here's how I'm going to
get distribution and customeracquisition.
Here are the things I'minvesting in, the people.
(39:54):
I'm bringing on board mystrategy to get this.
Sam Maule (39:58):
Yeah, I mean it's very good to understand and
understand all those differentmodels that folks have done, but
on that flip side, it's verygood to understand every single
one of these acronyms that we'retalking about, because when you
go in front of an investor andthey ask you, you know the
(40:19):
running joke is you know you cango watch Shark Tank right and
watch people bomb on theirpitches.
That's made for televisioneverybody I think three quarters
of that you actually don't seewhat's going on.
But when they're coming to youand asking you know what are you
projecting the LTV to be foryour customers?
What churn rate are you lookingat right?
What is your customeracquisition strategy?
(40:42):
You better be tight and havethese at hand and ready to go
and ready to be challenged Downpat.
Maia Bittner (40:51):
Well here's.
So.
Talk about banks right and netinterest income or whatever.
What I think a lot of peopledon't realize is that bank
branches primarily exist to dofor customer acquisition.
Yeah, and so that's.
Sam Maule (41:10):
The baby agrees um.
And so that's the baby agreeseverybody.
Yes, the baby says so cute.
Maia Bittner (41:14):
that's why we have bank branches, so we can
acquire customers cheaply.
Um, and so when people talkabout like the neobanks and
they're like, oh cool, theydon't have to pay rent well,
yeah, there's a common phrasethat customer acquisition cost
is the new rent.
Like, yes, you save a lot ofmoney by not owning real estate
and having to staff that, butyou end up paying all that money
(41:37):
you save to Facebook to serveyou up new customers, and so
that's one of the things I mean.
To me, I feel like I'm sayingthe most obvious stuff, but I
honestly like, dude Sam, I heara lot of pitches.
People do not get this.
They're like cool, we're goingto make a bank and we're going
to save money by not havingbranches and customers are going
to come to us as cheaply asthey come to a bank with a bunch
of branches.
Sam Maule (42:00):
And we're going to be billionaires and it just does
not work like that.
And we've as an industry andI'm talking generally speaking
have failed a bit there.
Right, because the customerservice levels you talked about
NPS, right?
So net promoter scores, butwe're talking about you know
we're getting in here.
You know your customerengagement scores, nps, how you
(42:22):
do customer servicing.
If you really want to enjoyyourself, you know, go online
and read, people just ripping.
I'm not going to name names,but you know we can sit here and
talk about neobanks orinvestment.
Oh my God, take any day wherethe market's crashing and go out
and look at any one of thesesites where you can buy stocks
online.
Enjoy that everybody.
Maia Bittner (42:43):
Well, totally, and I also saw recently an article
in SFGate that said that Tally,which is a fintech company that
recently died, said they weretaken down by customer
complaints.
I actually don't think that wasthe case.
I think they were taken down bya changing interest rate market
and that a consequence of thatwas bad customer complaints.
(43:07):
But I got to say tech ingeneral as an industry has
horrible customer support.
My mom's locked up.
My mom just makes a new Googleaccount anytime.
She loses access to her oldGmail account because it's
impossible to get any customersupport to get a new one, so she
just makes a new Google account.
(43:27):
It's horrifying to me.
That is her strategy Just keepmaking new Gmail accounts Gmail,
probably loves the growth it'seasier.
Sam Maule (43:33):
It is easier, it's way easier, yeah.
Maia Bittner (43:36):
And Google has no customer service.
Sam Maule (43:37):
Yeah, I mean, and it's Google.
I'm an ex-Googler, everybody.
It's Google, for God's sakes.
But I'm with you on thatUnderstand your product,
understand how your product'sgetting hacked, understand how
users are actually using yourproduct and hacking your product
, and that's probably where someof your growth is and, by the
(44:00):
way, this is making me laugh sohard.
Maia Bittner (44:01):
I get the baby.
So normally when we record withthe baby, she was a newborn and
just chill.
Now she's like, ooh, is there amic?
I can grab these headphones arefun to play with.
Sam Maule (44:15):
Like look at all these cool toys.
Oh my God, think about what herworld's going to look like when
it comes to financial services20 years from now.
Oh God, I get excited.
I have a new grandson everybodyso I get excited about this
probably I know.
How is he?
It just makes me so happy.
But I also look at them and go,oh my God, what's it going to
be like when they're in business?
(44:35):
And, by the way, I guaranteewe're still going to be talking
about NIM and Net PromoterScores and CAC, because I
remember everyone telling methat NPS was going to die.
And guess what hasn't died.
Maia Bittner (44:43):
I know NPS also has a lot of flaws, but it's
really simple and there's a lotto be said for something that's
really simple and provides somevalue, you know it's still here,
everybody.
Sam Maule (44:55):
I can go back about 15 years ago when everyone was
telling me it was going to dieout.
I'm like, yeah, guess what?
Still around, still around,still drives that.
And you know, I have a questionfor you as somebody who's built
a couple companies now and helpand ramp these up up.
I'm really curious out of these, which ones do you feel like
(45:15):
are really the gold standard,the ones that you just embrace
more than anything?
Would it be LTV or ROI?
Would you stay there in CAC Ifyou had to do a pyramid right,
the hierarchy of needs pyramidwhen it comes to these?
And I think it depends on whoyou're supposed to.
Maia Bittner (45:29):
So, sam, there's actually a new metric the
hierarchy of needs pyramid whenit comes to these In terms of
metrics.
So, sam, there's actually a newmetric Well, not a new metric,
but I feel like there's a metricthat has kind of gained steam
in.
Give me another 15 minutes,yeah.
Sam Maule (45:47):
I like it personally because it's like hand-to-hand
combat while talking.
Maia Bittner (45:51):
Yes, I feel like that you know every time I go
out to dinner for sure.
Sam Maule (45:54):
Oh my God, yeah, I feel you.
Maia Bittner (45:58):
Okay, so there's a metric that's recently grown in
popularity amongst investorsthat I really like, and that is
actually revenue per employee.
Sam Maule (46:11):
Ooh, mm-hmm that's a good one.
Maia Bittner (46:14):
Because it gets at that measure of efficiency
which, in today's age, whenmoney is not as free-flowing for
fast-growing startups andthere's an emphasis on stuff
profitability-like metricsrevenue per head is one that I
really like because it's likeyou know, you're not not as
constrained by.
It's like like I think you knowit's very hard to build a
(46:36):
billion dollar business that iscash flow positive early.
So I get that.
I get the need for investment,um, but not having a ton of
people on board is somethingthat I get excited about so I
love that.
Sam Maule (46:50):
Metric rpe is a fantastic one, and it also gives
me a chance to do dad trivia.
We haven't done that um nearenough, which is making me laugh
, because Maia's holding thebaby that wants to eat this
microphone so bad so for oncefor once.
I want to stump Maia.
I'm going to give you 2022revenue per employee.
So, rpe, can you name?
(47:10):
Maybe I'll give you, if you canname, five out of the top 10
when it comes to tech companiesglobally.
Maia Bittner (47:18):
Global tech companies revenue per employee.
Sam Maule (47:21):
And this was 2022 during the pandemic.
But here you go.
Maia Bittner (47:23):
I was going to say 2022, this is like pre-meta
layoffs.
Sam Maule (47:27):
Yep, yep, yep.
So when you think about that,oh yeah, actually way to caveat
that because we've had somemassive hits pre-twitter layoffs
yep in us dollars in 2022.
What do you think can you name?
Maybe five of the top?
Maia Bittner (47:41):
I'm gonna guess, so I'm gonna go.
So only public companies, orpublic and private public,
public okay, yeah, it's gonna bethe big guys google should be
yeah, so google meta definitelymeta.
Sam Maule (47:53):
Yep, meta was four number four cool.
Maia Bittner (47:56):
What's google?
Sam Maule (47:58):
um, oh, actually they didn't make the top 10 in 2022
too many employees, everybody 10.
Maia Bittner (48:02):
I know too many damn employees google got huge
everybody.
Sam Maule (48:08):
So not Google, but Meta.
Yeah, Meta was number four.
Maia Bittner (48:11):
NVIDIA no.
Sam Maule (48:13):
No, too soon.
Too soon, it was 2022.
I'm sure they're doing greatnow I got to go back in time.
Yeah, a little bit.
All right, there's the obviousone.
Come on, you know it.
Apple yeah there you go.
Apple number two Apple is theobvious, not number one.
I really thought Apple would benumber one, so is it behind
Microsoft?
Microsoft was behind Meta.
Maia Bittner (48:35):
Microsoft came in fifth.
Microsoft is behind Meta.
Sam Maule (48:37):
Number one is a banger.
You got to kind of stretch yourmind a little bit for number
one.
Maia Bittner (48:42):
Ooh, I like this Okay number one.
Sam Maule (48:43):
It's not who you think.
Maia Bittner (48:44):
Revenue per employee.
Yeah per employee.
Yeah, let's go.
Sam Maule (48:59):
It's not what I think is it um?
No, this isn't gonna be on thelist I was gonna say tiktok, no,
no, no, no.
Yeah, I will give you theamazon was number 10, I thought
amazon would be higher, butamazon does have a ton of
employees they hire too manypeople.
Maia Bittner (49:09):
I could tell you that they got like 4 000 people
working on alexa or whatever youknow they got way too many
people yeah, that's true.
Sam Maule (49:16):
Uh, so so you will be surprised two old school um
fintechs on here all right,paypal paypal made the list, man
I like paypal efficient.
Yeah, paypal uh, right behindmicrosoft ebay right under
paypal.
Maia Bittner (49:28):
Give me number one .
Sam Maule (49:30):
Netflix.
Maia Bittner (49:32):
I wasn't saying Netflix, over and over and over
again with the FANG acronym.
I wasn't saying Netflix Really.
Sam Maule (49:39):
Netflix number one Edged out Apple in 2022, revenue
per employee Way to go Netflix.
Maia Bittner (49:45):
That's because they make so much money on those
Netflix shows but the peoplewho make the shows aren't
employees, they're contractors.
I feel like that's cheating.
Sam Maule (49:53):
Hey, you're arguing with Statista, so we're going to
say Statista knows what they'redoing.
I'll give you my other favoritearound this as a Google
employee.
If you track Google stock andDomino's Pizza going back 20
years since they both wentpublic, domino's Pizza going
back 20 years since they bothwent public.
Maia Bittner (50:12):
Domino's rocks man .
Domino's rocks everybody.
Dude, domino's is a crazysuccess story.
Sam Maule (50:17):
See, you learned something new.
I love that you went revenueper employee, especially in 2024
.
Maia, you win.
When we are talking aboutacronyms and their importance, I
would 100% say you are in withthe trend that goes through
business right now because thenumber of cuts we are seeing
because of the massive growth wehad when everything shifted to
(50:38):
digital, whether it be Google orMeta or Microsoft or Amazon,
you take your pick right.
Any of these companies.
I do think I'm right with you.
I think RPE floats to the topright now.
It is how efficient are you?
Maia Bittner (50:51):
at your business.
Efficiency is everything, Sam.
On that note, I got to go feeda baby.
Yay so let's wrap this one up.
Thank you for listening as wedive into acronyms and how
startups make money.
It's always my favoriteconversation.
Please reach out to us and letme know what you thought of the
(51:13):
show.
You can always reach me onTwitter.
I am at Maia B.
I have open DMs there, sam.
What about you?
Linkedin LinkedIn becoming moreand more man.
Sam Maule (51:23):
ROI on LinkedIn.
Everybody, I'm telling you it'sa good spot to be.
Let us know your favoriteacronym, let us know if you
agree with us, but we're justgoing to say RPE is king, it won
the day.
It won the day.
Everybody, Maia, the littlebaby and I, I'll say have a
great, great day.
See you later.
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