Artificially Intelligent with Sam Maule and Maia Bittner
When it comes to fintech, Sam Maule. and Maia Bittner have definitely honed a few talents over the years. They've got over a decade each in banking and payments industry, so they've earned their stripes. Now, some in the industry like to dub them fintech thought leaders- but they prefer to see themselves as perpetual fintech interns. And that's precisely why they decided to launch the Artificially Intelligent podcast - to create a platform where they can learn and look about edge cases in fintech, those hidden corners that have been ignored far too often.
So hey! Come and join us on the quest to get a little bit more Artificially Intelligent.
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Artificially Intelligent with Sam Maule and Maia Bittner
Dissecting the Viral Chase ATM Glitch
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
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 am joined by my co-perpetual intern, maa Bittner. Maya, how you doing?
Maia Bittner:What's up, guys? I'm in beautiful, sunny blue sky, pacific Northwest, right now.
Sam Maule:It's just upside down, isn't it? The world is upside down.
Maia Bittner:Climate change man, it's been good to this part of the country.
Sam Maule:Yeah, it's been great for my home insurance. Everybody. That's another show for another day. But talking about the world being upside down, we were laughing before the show talking about a TikTok trend there's always so many of these Whereas my wife would say the TikTok Because we're old.
Maia Bittner:The TikTok? What are they talking about on the TikTok?
Sam Maule:Oh my God, it's the viral glitch at Chase Bank. Maia, do you want to give some background on this, because this is rather funny, I love it.
Maia Bittner:Yes, so TikTok, trend people, people. They say glitch at the chase ATM. You know, I didn't even look into it that closely, but here's my guess is what they are claiming is a glitch? It's that they can deposit a check. Um, and maybe I I don't know the details maybe they're saying that a hundred dollar check is actually for $1,000 or $10,000. Or maybe they're writing a check from an account that doesn't have any funds in it and isn't going to clear. But one way or another they are depositing checks that don't have any money behind them into the Chase ATM and Chase is saying like increasing the balance on their account by that amount. And so they're like everybody should go do this, you get free money.
Sam Maule:Yeah, it's hilarious right, there's, there's and, as is usual on TikTok, once there's one video, there's a million around this, but there's a bunch of these that went viral where people thought they were more or less getting free cash out of specifically.
Maia Bittner:People are lined up at the Chase ATM to take advantage of this quote-unquote glitch.
Sam Maule:Yeah, specifically Chase, right, which, by the way, everybody, when it comes to technology, I think Maia, and I have said it a few times it's Chase. Come on man.
Maia Bittner:Chase is like best in class and their ATMs are very good.
Sam Maule:Yeah, the videos would show people. They'd basically be depositing checks for large sums of money at a Chase ATM and then taking out a withdrawal for a smaller yet still substantial amount, thinking they discovered a bug. That was in there. And, my favorite thing, on NBC News, the very first line in the article says Chase Bank is urging its customers not to commit check fraud.
Maia Bittner:Yes, actually don't do this, oh my God. So what's happening? Of course, after they quote-unquote deposit the check right, have a really high balance, they take some of that balance out of the ATM. It's like free cash, okay. Well, when Chase figures out what has happened, you know, the next day or a week later they adjust the amount of that check deposit at the ATM to be correct, and everyone who followed this glitch now has a deeply negative bank account.
Sam Maule:You know what's fascinating. You know where this is going to take us. Besides talking about the stupidity of some people on TikTok, which we could do a whole show on, I think we're going to end up talking about ATMs, Maia, because ATMs as a whole. You've said this on a previous show. I listened to it a lot while I was working out. Folks, I need to get a life, because I actually go back and listen to our shows when I work out at my YMCA. And you actually said it in my ear this morning on one of our previous shows, where you love the concept of an ATM around identity.
Maia Bittner:Love ATMs.
Sam Maule:Would you expand what you mean by that?
Maia Bittner:Oh yeah, well, I think ATMs so when we think about banking, right. So, in particular, us-based bank accounts are incredibly valuable. You can use them to access parts of the financial system that most countries don't have access to. You get to do all this cool stuff in the US dollar, which is a very valuable global currency.
Maia Bittner:I think a lot of Americans sort of 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 to the rising popularity of online banking, there are a lot of people who are not located in the US and do not have access to a US-based bank account that want one, and they think that online banking is their opportunity to get one. So they're like, oh wow, you could create an account just from the internet and they're trying to do that right. And so there is sort of this constant battle between the online banking providers and people in other countries that shouldn't have access to a US-based bank account around whether they can open an account or not. Establishing identity, kyc, all that good stuff.
Maia Bittner:The reason I love ATMs for identity is because if somebody has access to an ATM based in the United States, that is not definitive proof that they are entitled to a US-based bank account by any means, but it's a way stronger signal than most of the attributes we have available in, like, a digital or online way. Right Like there are not. I mean, there are incredibly skilled hackers in Ukraine, in Africa, in a bunch of places in the world. That, like hacking US banks, is just one of the most profitable ways that you, as a smart person, can spend your time in the Ukraine. If you're a smart person in the US, then you can just make more money doing things other than hacking bank accounts, but if you're in the Ukraine, you're limited on your options. Hacking US-based bank accounts is a great way to do it, but you're never in the US, you never fly here, you never visit, so it but you're never in the US, you never fly here, you never visit, so you're never able to like visit those ATMs and things. And so I just feel like it's good for everyone, like it's not as big of a hurdle for people in the US to be able to go to an ATM or scan their driver's license or do something like that.
Maia Bittner:They want to do things that people love ATMs. They want to do things without interacting with a teller, without being limited to banking hours, things like that. They want to do things that people love ATMs. They want to do things without interacting with a teller, without being limited to banking hours, things like that. And it is an incredibly strong data point for the online banking providers that they don't have access to in any other way, which is, this person can be in the United States, and so that's what I'm excited about. You know, I'm not as required, but particularly in those edge cases where an online banking provider might say like, hey, we just can't prove that we know who you are and so we're not able to offer you an account at this 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 up access to even more people.
Sam Maule:Yeah, it's funny when we talk about ATMs, Just you know, remember Paul Volcker way back when. Oh yeah, and that was one of his famous quotes, and this was after the financial crash, where he said probably the only good invention we've had in banking in the past 20 years has been the ATM. And that was after the internet. By the way, everybody, I still find that- funny yeah.
Sam Maule:I mean, I've used that in talks a few times right when it actually is something that it somewhat did bring banking to the masses. Because, believe it or not and I'm doing a little bit of reading on this the number of ATMs in the US has been declining over the past few years. Atms in the US has been declining over the past few years. Right around when COVID hit, we had, I think, 540,000 ATMs in the US. The last number I saw was a decline to about 450,000 in 2003. That's about a 4% drop year on year, essentially for the reason that we're moving more and more away from cash. So physical paper mile right. But again and you've talked about this and I tend to agree with you the functionality an ATM can provide, right similar to what your phone can do. But again, that interaction when it comes to fraud. You were just telling me a story about this right when it was about using your voice at an ATM as a source of identity. I think you mentioned that, that there was a story that just came out about that.
Maia Bittner:Yes, and one was I mean, people love ATMs, so one funny I just saw a tweet where somebody said they went to the bank and they asked them if they had an ATM and the bank said, yeah, we have a drive-thru ATM.
Sam Maule:I saw that.
Maia Bittner:And she said, oh, but I walked here and he was like, no, no, worries, that's fine, and so she waited in line behind a car and had to go through the ATM.
Maia Bittner:So I think it's funny and here's what I really think is funny about that. I said, wait, you went to a bank and you talked to someone and you ask them if you had an ATM, why didn't you just do your transaction with that teller? And a bunch of people yelled at me. They were like, oh well, she probably didn't have a bank account at that bank. And I think that's a really common misconception.
Maia Bittner:People think that if you go to an ATM, like any ATM works with any debit card, but that you have to have a bank account with that bank to talk to the teller. But that's not even true. You can kind of do like quote unquote ATM I mean, it's not an ATM but teller withdrawals. They call them over-the-counter cash withdrawals from basically any bank. If you're there talking to a teller and your bank will probably treat it the same as, uh, out of network atm, um. So yeah, I thought it was funny that she went in, maybe waited in line, talked to a teller, asked them if they had an atm left, waited in line behind a car to go through a drive-through atm, when I'm like you probably just have talked to that teller to get your whatever you needed cash.
Sam Maule:Whatever, man, my think about how our behaviors have changed, and actually in an incredibly short period of time. Meaning I can remember my mom walking me through how you interact at a bank. Meaning this is where you go get the withdrawal slip or the deposit slip, this is how you fill it out, this is where you go stand in line. You know what I mean. This is how you engage with them. You know, you see that, you know in movies that we used to watch, and then it migrated, like you said, to the window and the pneumatic tubes, and then it migrated to our phones. And you know it is funny, where we've moved farther and farther away from actual physical interaction with the human being.
Maia Bittner:Yes, and to bring it back to fraud in these ATMs, I actually think the farther you get like it's easier to commit fraud, the farther away you get from interacting with people, and this is proven out in the data. You know, I used to run an e-commerce company and the heuristic I always had with the e-commerce company is that 90% of your customers are like basically good 9%. You know, if you have a generous return policy or something they might see if they can take advantage of it, and then if you slap them on the wrist, they'll stop. 1% are competent, deeply malicious and actively trying to drive your business into the ground, and so the trick is correctly putting people into each buckets so that you can apply different policies to them and things like that, and so I think that. But that 9% is really interesting, right?
Maia Bittner:People who like maybe try to get away with something, but I'll stop if they get slapped on the wrist. When Bank of America did the famous Fresno drop, which was the first credit card, they assumed that giving people credit on this card would be the same as giving them a loan at a bank, and what they found is that people were much less likely to pay back their credit card because it was so impersonal. When you go, you talk to your community banker, the guy you see at the grocery store, and you're like, yep, I'm going to pay you back. That has much. It creates much more like willingness to pay in consumers than signing a slip that says you're going to pay it back. Never talking to anyone, you never see them in the grocery store and just making those charges.
Sam Maule:Yeah, human behavior is fascinating, Believe it or not. Maia, when I moved to the UK back around 2006, I lived in a tiny village in Yorkshire, outside Stanford Bridge, and it was so funny when you went to the hardware store, there was no POS, there was no cash register. It was a guy with a notepad and a pencil who would manually calculate the tax and write out a receipt for you, and you could literally do IOUs. Can you imagine?
Maia Bittner:No, that's how I grew up. Our local store they had a box with it kind of looked like card catalog cards, but it was a box with all these note cards by people's name. Then you would write your name and how much you owed and then once a month or so my parents would come by and settle up. So that's how I used to go get cheese and ice cream from our little local convenience store the farmers in the village where I lived.
Sam Maule:they would have their eggs sitting in a cooler and you would just drive by take your eggs and drop money off, and I remember when we first moved there because I grew up in Detroit everyone where we literally would have stole the whole damn farm, me doing that too, by the way, everybody Just understand this concept of trust in human behavior.
Maia Bittner:High-trust society versus low-trust.
Sam Maule:Yeah, but it also comes to when you're building out a bank, whether it be purely digital or, you know, having a physical footprint, understanding human behavior and that component of it still matters right. I mean, how you engage, what you look for is a massive part of your strategic growth.
Maia Bittner:So let's get into this, this Chase ATM bank glitch. So I actually feel like I have this conversation relatively often. A lot of people ask me questions. I most recently was talking to a startup founder about, you know he's got some trouble. He's trying to cash these checks and specific things, and so I'll explain to them how it works and quite often, after I explain to them, someone will say to me like wait, I could just steal $30,000 or something like that, which is basically what the TikToks say. They're like wait, once you know, you kind of see it. You're like I could just steal a bunch of money and you kind of can. Because here's how it works when the bank gives you access to those funds from depositing a check before they've really verified that the check can clear and that it's real, it's basically a loan. I mean, it's not regulated as a loan, mostly because they don't charge interest, which is something that they do as a courtesy to you, but it's basically a loan. And when I say it's a loan, what I mean is that they are underwriting both you and that check. So they are underwriting you as a person.
Maia Bittner:How long have you had an account with them? What kinds of transactions do you do? What is your balance in the account? Like all of that stuff. They underwrite you and they underwrite the check. Where's the check from? How much is the check for? Is it a printed payroll check or is it a handwritten person? All of that.
Maia Bittner:They take all of this data and they decide how much of that they want to let you access before the check has cleared. So and like that's like, how much risk do they want to take? Sometimes it's zero and you'll deposit a check and you don't get any access to funds until the check is cleared. Sometimes, like in the case of these TikTok videos and things like that, people are getting thousands of dollars, but that's just. The bank is just like yeah, we think you're going to pay this back. And here's the other thing you don't have to pay it back. So all of these people who have negative $30,000 bank accounts, they don't need to pay that back. Here's what will happen, probably right. So, amongst other things, so Chase could close your account due to check fraud. Very importantly, they will report you to check systems, which is a database that's similar to the credit bureaus, but it is used for US-based checking accounts. It's how all of the banks communicate with each other. By the way, we've got a customer that defrauded us and committed check fraud, so we don't recommend that you let them access a checking account, otherwise they might defraud you too.
Maia Bittner:So you will find yourself locked out of the US-based banking system, which I just did a whole spiel on how valuable that is, and I've talked to people it's so funny, talked to people who are like you know, I don't think I mind that, like I would like.
Maia Bittner:I'm okay being locked out of the US-based banking system if I get, you know, $30,000 or enough money for that to be worth it.
Maia Bittner:Honestly, like in general, you know, I don't think I'm smarter than anyone or anything like that, but when you say this, it makes it very clear that you do not understand how good you have it as a banked person and how much you want to be able to have that bank account. So, yeah, it's like you can kind of you, like most people can, commit check fraud, particularly people that the bank doesn't think are likely to do. That, um, and you just lose out on access to this bank is what you probably want, and the banks know that you want that and that's why you're probably going to pay it back and it's why you're probably not going to commit check fraud. So that's that's kind of how it works, is it's like? It's just it's not. It's not really a bank. As a courtesy, they're loaning you the money before they have it because they're going to ask for it back and they think that you're going to pay it because you want to maintain access to your bank account and you probably do and probably will.
Sam Maule:Yeah, I'm always fascinated how, in this case, tiktok a viral TikTok driving this behavior. But what drives consumer behavior for some of this activity? Because, like you were talking about, with check fraud, I'm just reading a report by FinCEN that goes back to the beginning of last year saying that with check fraud going back to 2021, they've seen a 23% increase on check fraud-related SARs that have been filed. So there's been a consistent uptick around check fraud, right.
Maia Bittner:Um, as we move more and more into this digital age and as we move more and more into where we're at, yeah, well, like I said, right, like I think people are more likely to commit fraud when they're not talking to their local banker. Um, and we're a bit like banks are a bit more susceptible to fraud. It's not like they don't have any fraud losses but, like I say, it's an arms race. It's pretty easy to commit check fraud, but the consequences are so severe that you probably don't want to.
Sam Maule:Yeah, and when I say a SARS everybody, again we throw acronyms around like they're just candy.
Maia Bittner:The acronym everything Suspicious Activity Report everybody. Yes, suspicious Activity Report everybody.
Sam Maule:Sorry, yes, suspicious Activity Report Yep.
Maia Bittner:Compliancing.
Sam Maule:Welcome to banking everybody. We love a good acronym.
Maia Bittner:I was talking to Dave. Well, I had so I have the Venmo card and I went and I bought like a $1,000 money order this is actually a while ago, I forget and I think like then I transferred the thousand dollars or I transferred the money out of my Venmo account or I think maybe I didn't even have any money in my Venmo account and or in any of the linked bank accounts and I bought a thousand dollar money order and my Venmo account then went negative. Or I had like three dollars, it was 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 was like, wow, it's really interesting to me that Venmo let that happen.
Maia Bittner:And Dave, my partner here, he was like I'm going to do that and I was like, well, I think it would burn your Venmo, like you'd never be able to use Venmo again, and it would burn your ability to have Venmo account. And he was like I'm not that into having a Venmo account, like I would burn it for a thousand dollars, like I'm just not that into it and I don't know. I mean, my guess is that Venmo probably doesn't report to check systems. It's a little bit outside of that, so it could be contained to just Venmo and he was. He was like, yeah, he's like I'm I'm not that into it, I would take the thousand bucks.
Sam Maule:Yeah, I'm not that bothered. It's okay, we'll do it. Yeah, it's funny how, especially I think when you move more, a more valued source of truth as we've moved farther and farther away from traditional media. There's a whole other show, right, Maia? When we talk about this, this is the gray-haired guy just scratching his head going oh my God, right. I always go back to a term we've said on other shows zero trust. When I see something or hear a story, I research like crazy and try to get as many you know I try to teach my kids that too.
Sam Maule:By the way, right, TikTok, not a great source for truth on how to live your financial lives. You know, maybe pretty good on plumbing, but then again you might blow that sink up or that drain up with whatever the hell you're watching on that, because you have no clue who that subject matter expert is. You know, I mean, you can't make this stuff up. So here's our source of truth. Everybody TikTok's great for watching funny videos of squirrels and dogs and cats running around. Maybe don't take it financial advice and get a headline where chase has to please advise its customers not to commit check fraud over the weekend, which we all should know better right.
Maia Bittner:I mean, like I said, you know, I'm like you're welcome to uh commit whatever fraud you want, but I do think it's like understand the consequences, yes please, and the risks that you're taking. Right, it is unfortunately not a free money glitch. There are very few of those in the world and very unlikely that Chase would have that vulnerability.
Sam Maule: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:I don't commit fraud.
Sam Maule:Everybody, whatever you do. All right, that's it for the show today. Everyone, I'm going to go back to my rainy day in Florida Just beautiful and Maia's going to go back to an incredibly sunny day in the Northwest. Who would have thought? Hey, reach out to us, reach out to us on LinkedIn, twitter. You take your pick, not on TikTok, but tell us about topics you'd like us to talk about. Give us some feedback.
Maia Bittner:We welcome it, Maia man enjoy your afternoon, enjoy the day. Thanks for listening to me rant on check clearing and would love to hear from anybody you know you can reach me on Twitter at Maia B. Otherwise, tune in for our next episode. Make sure to leave us a review. Rate us five stars. Five stars All those great things we love being a part of the Money 2020 Network.
Sam Maule:See you next time, everybody.
Maia Bittner:Bye.
Sam Maule:And we're just going to pause because I'm assuming you can cut this and do the next one, rachel, or whoever does this stuff, sorry for dropping your T up on the voice thing.
Maia Bittner:I don't know, it's not at ATMs. And then, if I don't know, but we'll just have to put that, out Makes me laugh.
Sam Maule:I love it.
Maia Bittner:So this next one.
Sam Maule:Yeah, Let me tell you where this next one came from. So we had our conference FinTech DEF CON in.
Sam Maule:Austin and Matt Harris from Bain Capital got up and talked and it was fascinating because here's the I'm going to. Can I share my screen with you? I can't. Anyways, he talked about where he thought we were moving, especially with AI and banking and the gender of AI, and he said, basically, what he thinks AI is going to do for banking is going to kill inertia. Because, he said, inertia is the greatest thing in the world for bankers, because people generally are lazy and the highest percentage of them just don't do what they should do, which is move their money around as they need to.
Sam Maule:And so he shared a slide where he talked about NIM and he was showing it. And he broke about NIM and you know he was showing it and he broke it down from banks over 50 billion all the way down to banks under 500 million right, and he was showing the aggregate when it comes to NIM, where everybody operates, and he goes what's fascinating is really, for the most part, the smaller you get, the higher NIM is when you look at it, because under 500 million it's running about 5.19 percent, whereas you know, if you were to take the average, it's down around three and a half for for the net interest margin and he, in his opinion, he thinks that ai is going to slap that around, as you're going to have a personalized AI that, if you use it right, will kind of drive your money around. And it made me laugh because there's all these terms that we throw around, like NIM and CAC, right, yep, that are constantly talked around, but I don't know how well people understand it and why not that we'll highlight Chime, but why, for example, a lot of these neobanks? Their cost per customer tends to be such a shit ton lower than a lot of the traditional players or as out there. And what's driving that?
Sam Maule:What's some of your favorite acronyms when it comes to financial services? I'm probably going to start there, Maia.
Maia Bittner:No, my favorite acronyms are uh, not specific to financial services. It is ltv, it is roi those are good though nps is one I love there we go.
Sam Maule:So I you know they're ones that we talk about all the time, so I'll lead into because that gives me a shout out for fintech devcon, um, and talk about that. But where he talked about net interest income and it and how, it just made me smile because, looking out the room of a room full of people that are in the business, and I could see a couple of them going taking a picture of the definition and me going, hmm, all right, that's interesting, we're all doing this, do?
Maia Bittner:we actually understand. Well, yeah, I wonder if I mean that's how that's, that's, that's, that's the banking business model. But if you think about fintech, there's very few banks right like their column, I think, is a bank they're not doing lending, they're not taking deposits right. So the components, so Column is a bank, and then I think there's maybe that second one out of.
Sam Maule: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:So Varo is a bank Column is a bank yeah, borrow has a banking charter. They have a big license, so borrow is a bank, column is a bank.
Maia Bittner:Then we're sort of like expanding the definition of fintech, but we get to some other people like that yeah, um so it'd be interesting there's very few banks, so it's not that surprising to me that people didn't know the banking business model, because it's not mostly not the business model of fintech so why don't we go there and use that and we can talk about some of the components that make it up, especially you as an investor. I love it.
Sam Maule:All right, so there you go.
Maia Bittner:Yes, well, you know me as an investor. I always want to know what's the business model?
Sam Maule:Yep? How's this?
Maia Bittner:going to make money.
Sam Maule:So I'll let you open this one up. So here we go. Rachel, this is show number two.
Maia Bittner:Hey everyone, Welcome back. Welcome back to another episode of Artificially Intelligent. I am one of your co-hosts, the perpetual fintech intern, Maia Bittner, and I am joined here with my co-host, Sam Maul. We are so excited to jump in. Today. We are going to deacronym a bunch of fun business concepts which is one of my personal favorite things to do in a corporate setting and dive into business models.
Sam Maule:Yeah, sam, it's funny. Yeah, Maia, it's funny, isn't it? The longer you're in this business, the more you adapt to the lexicon, if you will, of an industry.
Maia Bittner:Yes, the jargon yeah.
Sam Maule: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 you think it means or whatever. Right, one of my favorite lines, right, and I do find that funny because I've had a career as a banker and then as a consultant and then as on the processing side and a couple startups now, and honestly that's one of my as the older guy in the room. I think it's incredibly important that everyone understands the terminology you're using and don't assume that everybody understands the terminology that you're using.
Maia Bittner:Yes, I'm a big prop of like explaining things, um, and I, I also, so I always I like tell people, you know, don't use acronyms, because it is jargon, it locks people out, it isn't inclusive. But I will have to say there's a little caveat on that, which is sometimes an acronym exists for, you know, whatever two or three word phrase, and then it grows, the definition grows beyond just what those words mean, like it means something more and different and specific. The acronym is almost, it becomes a word in and of itself and it's funny I um, I got shit at work recently for not defining uh, the acronym, ach, oh really because right and I acronym ACH, oh, really Right.
Maia Bittner:And I was kind of like I don't know man. I mean, like I said, I feel like I'm the number one champion of not using acronyms at work, but I got to say ACH stands for automated clearinghouse and I don't think that using those words is helpful. I believe, like when I use word ACH, 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 comes from automated clearinghouse, but I guess I feel like automated clearinghouse is not sufficient to define, you know, and is maybe not even helpful.
Sam Maule:Yeah, like if I told you automated clearinghouse.
Maia Bittner:Like most people I feel like most people are more familiar with the term ACH than automated clearinghouse Like most people, don't know how clearinghouse works. That's not gonna, it's not helpful and it's and it's not sufficient, so I don't know.
Sam Maule:I, like I said, I'd love that you started with clearinghouse, because this is a true story. I got out of the Navy in 1994, everybody and my very first job was with Northern Trust as a auditor.
Sam Maule:Everybody should be terrified A SAS 70 auditor, but my first project was to help map out clearing accounts and how we were using those. And I remember I flew to Chicago and sat down with my banking friend His name is Chris Lorenzo, he's still in industry in Atlanta and Chris took an hour to explain to me what clearing accounts were and what float was. And I remember looking at him going is this legal, really? This, you know, it's this basic concept of banking right and float everybody, greatest invention in the history of mankind. But understanding that so I'm with you it's incredibly important to understand how complex some of these concepts are as you start drilling down into a three-letter word that you're throwing out there. I'll give you an example of that and why this came up Maia. So I was at Moo's FinTech DevCon conference down in Austin a few weeks back and Matt Harris, the OG, everybody.
Maia Bittner:Which Matt Harris.
Sam Maule:Oh, the Bain Capital, matt Harris. There are like 20 Matt Harris's floating around there really are. It's hilarious, but there are Particularly in fintech. And all geniuses too, by the way.
Maia Bittner:They're all like.
Sam Maule:OGs. So the Matt Harris OG from Bain Capital that's been doing this since 1994. But Matt gave a keynote at our conference down in Austin where he started talking about banking models and he talked about NIM. So for those that you know again the term that gets thrown out there all the time. But here we're talking about net interest income. This is a measure of banks' profitability and growth and banking is fairly common. But I remember looking out of the room and the room was full of a lot of fintech engineers and developers and somewhat a puzzled look when he started talking about Nimmin going down that route and the importance of it. But, Maia, you brought up a great point, which is that is an incredibly important banking term. But in the fintech world.
Maia Bittner:There's not a lot of fintechs who like it is the business model for banks but not the business model for most fintechs, who like it is the business model for banks but not the business model for most fintechs. I mean, like, how many, how many fintechs have that as a business model? How many fintechs are banks right? Yeah, I mean because when you think about nim.
Sam Maule:It's a great indicator, right of the money the bank is earning from interest on loans. Right compared to interest is paying on deposits, loans and deposits. We're talking about fintech, you're right. I mean, how many US fintechs actually have a break-in charter? I mean Varo comes to mind.
Maia Bittner:Varo famously.
Sam Maule:Yeah, famously they were the first one right man, I'm stumped yeah.
Maia Bittner:Does SoFi?
Sam Maule:Yeah, I think SoFi does, and there was the one that bought a bank. I'm trying to remember Lending Tree or Lending Club.
Maia Bittner:Oh.
Sam Maule:Bought a bank, Rhode Island-based bank or Massachusetts Bank.
Maia Bittner:Yeah, lending Club bought a bank and then they shut down a bunch of the business and they rebranded it. Yeah, it was a whole other thing.
Sam Maule:There was this period of time for about five years where everybody thought all these fintechs were going to go out and get a charter or get a license, which several like in the UK have done right Monzo, well done, starling and several others but here in the US not so much. That hasn't been the route that fintechs have gone, and so this led to another fascinating conversation with Maia earlier, which was what's your favorite acronyms when it comes to fintech, and I love that Maia started with ROI. You want to know who the investor is on this podcast.
Maia Bittner:Not a fintech specific, but one of my favorite acronyms.
Sam Maule:Yeah right, our ROI incredibly important. What are some of the others that you just like to grab? I also?
Maia Bittner:love LTV, that's a good one. Cac one of my favorites customer acquisition costs, and you know we often talk about the LTV to CAC ratio as well. And then NPS right, I'm, as a really customer-centric person, I love NPS. I love seeing how often the NPS score of FinTechs rises above incumbent banks and, yeah, just looking at customer satisfaction.
Sam Maule:So we just did it just now, because we blew by this we talked about. Cac right the customer acquisition costs. We talked about LTV, which would be the lifetime value of your customer. Right these terms that we, just when you've been in this space for a while and you're talking about, you know folks that are just starting their business.
Maia Bittner:Yeah, you just drop them back and forth free-flowing but again can lock a lot of people out.
Sam Maule:Yeah, you're just assuming. Oh, you know that, you know. But let's take customer acquisition costs, right, because even that you can slice and dice a million different ways, because it gets to how you know what process are you going by to promote or try to bring in the business. Because there can be emails, there can be organic social media, there can be lord google ads, seo mailing, direct mailing, hello capital one which still works great, by the way still, you know direct mail box.
Maia Bittner:oh my Dark horse of the customer acquisition methods.
Sam Maule:As it should not be, though I'm always shocked when people find out you know what CAC looks like around those direct mailers and how they work. And then there's, you know always my personal favorite, which is we're going to go out and get the celebrity.
Maia Bittner:Celebrity yeah, good God.
Sam Maule:Or we're going to remember super bowl. A couple years ago, when it was uh lord, it was the uh crypto super bowl, if you'll recall sofi stadium right so fine. Yeah, actually one of the best stadiums in the us there you go, it looks beautiful it does right. Well, um, oh, my god, I'm blanking 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 on a stadium?
Maia Bittner:Oh, that sounds right An FTX stadium.
Sam Maule:Yeah, we've all lived through that, oh my God. So I'm curious, as an as an investor, when you sit down, if I'm coming to you with an idea for a fintech right.
Maia Bittner:Yes, here's my first piece of feedback.
Sam Maule:Who cares?
Maia Bittner:Here's my first thing Fintech. You pitch me, your, and you're like it would be so cool and it's such a great idea and da-da-da-da-da and it's going to make the money. Right, this is a pitch everybody has and I say, look, you know, I wish you best of luck building your business. I'm not going to invest, and here's why I don't think you're going to be able to acquire customers for this business at a cost that's low enough to still be 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 be so cheap.
Maia Bittner:This is particularly true, I got to say, for product managers who have never been in charge of customer acquisition before and have just worked at a company where, frankly, it was kind of served up to them on a plate and they're like, no, we'll get 10,000 people, like we'll get 100,000 people just by like putting it out there. Or if they work for a big company where people you know are like anything that Twitter launches the tech is going to talk about, because it's Twitter. You've got a small startup. Nobody is talking about your product launches. Techcrunch is not talking about it. You get no publicity.
Sam Maule:So that's my first piece of feedback. I'm so glad you went there right. Hey, techcrunch is writing about us, congratulations. That means it's good, well done. But yeah, if that's your, that's your go-to-market strategy.
Maia Bittner:Well, and it's not scalable even if tech crunch does write about you, which is great. Uh, you can't like they're not going to do that every week, that you need to be acquiring customers to keep fueling growth for your business and you got to have that growth if you want people to value you like. Often people look at they're like oh, these multiples, you know, like software gets a 10x revenue multiple, or 100x, and that is only true if you've got growth behind it. Otherwise, people are not that excited about valuing your company so highly excited about valuing your company so highly.
Sam Maule:Yeah, 100% right. I mean we've seen some that have 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 their license that is profitable now where they did the waiting list approach. Remember, everybody now does the waiting list.
Maia Bittner:But back in the that idea of wait a minute, what I'm gonna sign up and be on a waiting list, um, you know we've seen some of those take off, um, but you know, if you're trying to repeat the successes of those other companies, good luck doesn't work well, or you can't assume, like a lot of these teams there's a lot of teams in fintech that have incredible customer acquisition teams and departments 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 deliberately be like here's how I'm going to get distribution and customer acquisition. Here are the things I'm investing in, the people. I'm bringing on board my strategy to get this.
Sam Maule:Yeah, I mean it's very good to understand and understand all those different models that folks have done, but on that flip side, it's very good to understand every single one of these acronyms that we're talking about, because when you go in front of an investor and they ask you, you know the running joke is you know you can go watch Shark Tank right and watch people bomb on their pitches. That's made for television everybody I think three quarters of that you actually don't see what's going on. But when they're coming to you and asking you know what are you projecting the LTV to be for your customers? What churn rate are you looking at right? What is your customer acquisition strategy? You better be tight and have these at hand and ready to go and ready to be challenged Down pat.
Maia Bittner:Well here's. So. Talk about banks right and net interest income or whatever. What I think a lot of people don't realize is that bank branches primarily exist to do for customer acquisition. Yeah, and so that's.
Sam Maule:The baby agrees um. And so that's the baby agrees everybody. Yes, the baby says so cute.
Maia Bittner:that's why we have bank branches, so we can acquire customers cheaply. Um, and so when people talk about like the neobanks and they're like, oh cool, they don't have to pay rent well, yeah, there's a common phrase that customer acquisition cost is the new rent. Like, yes, you save a lot of money by not owning real estate and having to staff that, but you end up paying all that money you save to Facebook to serve you up new customers, and so that's one of the things I mean. To me, I feel like I'm saying the most obvious stuff, but I honestly like, dude Sam, I hear a lot of pitches. People do not get this. They're like cool, we're going to make a bank and we're going to save money by not having branches and customers are going to come to us as cheaply as they come to a bank with a bunch of branches.
Sam Maule:And we're going to be billionaires and it just does not work like that. And we've as an industry and I'm talking generally speaking have failed a bit there. Right, because the customer service levels you talked about NPS, right? So net promoter scores, but we're talking about you know we're getting in here. You know your customer engagement scores, nps, how you do customer servicing. If you really want to enjoy yourself, 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 or investment. Oh my God, take any day where the market's crashing and go out and look at any one of these sites where you can buy stocks online. Enjoy that everybody.
Maia Bittner: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 were taken down by customer complaints. I actually don't think that was the case. I think they were taken down by a changing interest rate market and that a consequence of that was bad customer complaints. But I got to say tech in general as an industry has horrible customer support. My mom's locked up. My mom just makes a new Google account anytime. She loses access to her old Gmail account because it's impossible to get any customer support to get a new one, so she just makes a new Google account. It's horrifying to me. That is her strategy Just keep making new Gmail accounts Gmail, probably loves the growth it's easier.
Sam Maule:It is easier, it's way easier, yeah.
Maia Bittner:And Google has no customer service.
Sam Maule: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 that Understand your product, understand how your product's getting hacked, understand how users are actually using your product and hacking your product, and that's probably where some of your growth is and, by the way, this is making me laugh so hard.
Maia Bittner:I get the baby. So normally when we record with the baby, she was a newborn and just chill. Now she's like, ooh, is there a mic? I can grab these headphones are fun to play with.
Sam Maule:Like look at all these cool toys. Oh my God, think about what her world's going to look like when it comes to financial services 20 years from now. Oh God, I get excited. I have a new grandson everybody so I get excited about this probably I know.
Sam Maule: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? And, by the way, I guarantee we're still going to be talking about NIM and Net Promoter Scores and CAC, because I remember everyone telling me that NPS was going to die. And guess what hasn't died.
Maia Bittner:I know NPS also has a lot of flaws, but it's really simple and there's a lot to be said for something that's really simple and provides some value, you know it's still here, everybody.
Sam Maule:I can go back about 15 years ago when everyone was telling me it was going to die out. I'm like, yeah, guess what? Still around, still around, still drives that. And you know, I have a question for you as somebody who's built a couple companies now and help and ramp these up up. I'm really curious out of these, which ones do you feel like 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 If you had to do a pyramid right, the hierarchy of needs pyramid when it comes to these? And I think it depends on who you're supposed to.
Maia Bittner:So, sam, there's actually a new metric the hierarchy of needs pyramid when it comes to these In terms of metrics. So, sam, there's actually a new metric Well, not a new metric, but I feel like there's a metric that has kind of gained steam in. Give me another 15 minutes, yeah.
Sam Maule:I like it personally because it's like hand-to-hand combat while talking.
Maia Bittner:Yes, I feel like that you know every time I go out to dinner for sure.
Sam Maule:Oh my God, yeah, I feel you.
Maia Bittner:Okay, so there's a metric that's recently grown in popularity amongst investors that I really like, and that is actually revenue per employee.
Sam Maule:Ooh, mm-hmm that's a good one.
Maia Bittner:Because it gets at that measure of efficiency which, in today's age, when money is not as free-flowing for fast-growing startups and there's an emphasis on stuff profitability-like metrics revenue per head is one that I really like because it's like you know, you're not not as constrained by. It's like like I think you know it's very hard to build a billion dollar business that is cash flow positive early. So I get that. I get the need for investment, um, but not having a ton of people on board is something that I get excited about so I love that.
Sam Maule:Metric rpe is a fantastic one, and it also gives me a chance to do dad trivia. We haven't done that um near enough, which is making me laugh, because Maia's holding the baby that wants to eat this microphone so bad so for once for once. I want to stump Maia. I'm going to give you 2022 revenue per employee. So, rpe, can you name? Maybe I'll give you, if you can name, five out of the top 10 when it comes to tech companies globally.
Maia Bittner:Global tech companies revenue per employee.
Sam Maule:And this was 2022 during the pandemic. But here you go.
Maia Bittner:I was going to say 2022, this is like pre-meta layoffs.
Sam Maule:Yep, yep, yep. So when you think about that, oh yeah, actually way to caveat that because we've had some massive hits pre-twitter layoffs yep in us dollars in 2022. What do you think can you name? Maybe five of the top?
Maia Bittner:I'm gonna guess, so I'm gonna go. So only public companies, or public and private public, public okay, yeah, it's gonna be the big guys google should be yeah, so google meta definitely meta.
Sam Maule:Yep, meta was four number four cool.
Maia Bittner:What's google?
Sam Maule:um, oh, actually they didn't make the top 10 in 2022 too many employees, everybody 10.
Maia Bittner:I know too many damn employees google got huge everybody.
Sam Maule:So not Google, but Meta. Yeah, Meta was number four.
Maia Bittner:NVIDIA no.
Sam Maule:No, too soon. Too soon, it was 2022. I'm sure they're doing great now I got to go back in time. Yeah, a little bit. All right, there's the obvious one. Come on, you know it. Apple yeah there you go. Apple number two Apple is the obvious, not number one. I really thought Apple would be number one, so is it behind Microsoft? Microsoft was behind Meta.
Maia Bittner:Microsoft came in fifth. Microsoft is behind Meta.
Sam Maule:Number one is a banger. You got to kind of stretch your mind a little bit for number one.
Maia Bittner:Ooh, I like this Okay number one.
Sam Maule:It's not who you think.
Maia Bittner:Revenue per employee. Yeah per employee. Yeah, let's go.
Sam Maule:It's not what I think is it um? No, this isn't gonna be on the list I was gonna say tiktok, no, no, no, no. Yeah, I will give you the amazon was number 10, I thought amazon would be higher, but amazon does have a ton of employees they hire too many people.
Maia Bittner:I could tell you that they got like 4 000 people working on alexa or whatever you know they got way too many people yeah, that's true.
Sam Maule: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 behind microsoft ebay right under paypal.
Maia Bittner:Give me number one.
Sam Maule:Netflix.
Maia Bittner:I wasn't saying Netflix, over and over and over again with the FANG acronym. I wasn't saying Netflix Really.
Sam Maule:Netflix number one Edged out Apple in 2022, revenue per employee Way to go Netflix.
Maia Bittner:That's because they make so much money on those Netflix shows but the people who make the shows aren't employees, they're contractors. I feel like that's cheating.
Sam Maule:Hey, you're arguing with Statista, so we're going to say Statista knows what they're doing. I'll give you my other favorite around this as a Google employee. If you track Google stock and Domino's Pizza going back 20 years since they both went public, domino's Pizza going back 20 years since they both went public.
Maia Bittner:Domino's rocks man. Domino's rocks everybody. Dude, domino's is a crazy success story.
Sam Maule:See, you learned something new. I love that you went revenue per employee, especially in 2024. Maia, you win. When we are talking about acronyms and their importance, I would 100% say you are in with the trend that goes through business right now because the number of cuts we are seeing because of the massive growth we had when everything shifted to digital, whether it be Google or Meta 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 top right now. It is how efficient are you?
Maia Bittner:at your business. Efficiency is everything, Sam. On that note, I got to go feed a baby. Yay so let's wrap this one up. Thank you for listening as we dive into acronyms and how startups make money. It's always my favorite conversation. Please reach out to us and let me know what you thought of the show. You can always reach me on Twitter. I am at Maia B. I have open DMs there, sam. What about you? Linkedin LinkedIn becoming more and more man.
Sam Maule:ROI on LinkedIn. Everybody, I'm telling you it's a good spot to be. Let us know your favorite acronym, let us know if you agree with us, but we're just going to say RPE is king, it won the day. It won the day. Everybody, Maia, the little baby and I, I'll say have a great, great day. See you later.