Why did PayPal buy Braintree?

(Pasting my Quora answer here)

PayPal wants to be anywhere payments happen and it seems to be willing to pay a good price for that. Beyond the standard dynamic where the leader buys one of its most affordable up and coming competitors, PayPal acquired a few nice assets:

– The Braintree team is strong, with multiple highly talented folks that are both well known in the industry (= strong advocates) and generally capable.
– The product is superior to anything PayPal has in gateway tech. PayPal acquired Verisign’s gateway a long time back but that integration was not synergistic. With new PayPal management and Braintree’s product, they can get better access to a large and growing volume of gateway payments. This is a good and needed complement to PayPal’s portfolio.
– Last but not least, PayPal bought a foothold in the upmarket – medium and large merchants that usually do not use standard PayPal products due to lack of UX flexibility and integration, as well as strong presence in mobile payments.

So, bottom line, PayPal acquired a team, a product and a market. A smart move.

TrueAccord is looking for a community manager

TrueAccord is reinventing the debt collection process through data and behavioral analytics. Instead of the grim and negative experience it is today, we’re turning the collections process into one that allows debtors to grow, and improve their financial standing.  Since we’re dealing with such a contentious situation, customers often reach us angry, disappointed, and negative. This is where we can help them the most.

As a community manager, you will be in charge of communicating with our customers and the general public through the use of our internal tools as well as all standard social media outlet. You will help define, promote and support the company’s brand as well as the impeccable service it aims to provide its customers.

You will:

  • Manage day to day interaction with customers and solve issues that our system cannot address
  • Manage the company’s outgoing social media participation through Facebook, Twitter, blog and so on
  • Monitor the company’s social presence and participate in online conversations wherever needed
  • Participate in PR and marketing activities

The ideal candidate:

  • Is passionate about helping people through rough times and can exude empathy and positivity even under pressure
  • Has superb writing and speaking skills; English is a must, Spanish is a big plus
  • Is highly proficient and has tangible experience in using social media: Twitter, Facebook, blog and other social media outlets
  • Is motivated to work for a startup at its early stages and eager to participate in setting a direction for the company’s brand and voice
  • May have consumer marketing experience – this is a plus

Note: this is not a debt collector’s position. Debt collection experience isn’t required and is in fact discouraged for this position.

For more details, please send resumes to osamet67@gmail.com

BitCoin mass-adoption challenges

Crypto currencies, specifically BitCoin, are touted as the next big thing in financial
services. A secured, encrypted, technologically advanced platform that can support
monetary transactions across the globe is a dream come true for a lot of financial
services innovators hoping for a borderless financial world. This wave of innovation,
while still nascent, bears a lot of advantages.

It’s important to note, though, that not everything is green in the realm of BitCoin. While
some disadvantages are obvious – exchange rate volatility and lack of sufficient market
making are two obvious ones – some are less obvious, and are sometimes mistakenly
presented as advantages by newbies to the industry. Specifically, I am referring to fraud
using or on the BitCoin platform, and misconceptions about its feasibility – while some
may think it is much safer than other means of payment, that is absolutely not the case.
With BitCoin’s no-recourse movement of funds, transactions are subject to two types of
fraud: supply side fraud, and social engineering. Their prevalence might hinder mass
adoption of crypto currencies and must be addresses by the ecosystem before those
can be used the proverbial “normals”, the majority of consumers.

When a consumer purchases online using a credit card, the merchant charging the card
isn’t protected from fraud the same way they would be if charging the card in the offline
world. No issuer, acquirer or card network provides any fraud protection and merchants
can easily be victims of stolen cards or “friendly fraud”, a term describing customers
making actual purchases then charging back alleging fraud, while keeping the goods.

Defending oneself from chargebacks is difficult for merchants and fraud constitutes a major line item in retailers’ financial statements. However chargebacks serve a purpose: they
protect consumers from fraudulent merchants, failure to provide service and other
issues. With no ability to reverse transactions, no consumer protection is possible,
hence more and more fraud is perpetrated by those who pretend to be merchants. As
merchants, they can sell a service or product while charging in advance, and never ship
the product (or never own it in the first place). Consumers who pay find themselves out
of their money and the product they were offered, with no ability to reverse a payment.
Thus, demand side fraud becomes much more appealing to fraudsters.

This lack of protection hurts consumer trust. It also amplifies the damage from each
fraud case. A single fraudster using a stolen credit card may shop for $1000 in stolen
goods; a single fraudulent shop can easily scam dozens and hundreds of consumers.

The other thing to consider is social engineering. Fraud wasn’t invented in the 20th
century nor is it dependent on credit cards. There is a reason why Western Union or
MoneyGram was and still is a favorite for 419-type (“Nigerian”) scams; it, too, has no
option to reverse a payment. Every complex system is as strong as its weakest link, and
BitCoin is no different; the human element is its biggest failure point. As the SEC brings
to trial a man accused of running a BitCoin ponzi scheme, it becomes obvious that no
encryption beats greed and no sophisticated technology beats lack of good judgement.
In that sense, BitCoin isn’t different than any other means of payment, for better or for
worse. It is just not any safer.

Crypto-currencies hold a big promise for a more sophisticated financial infrastructure,
but the discussion about them is still limited to a small group of techies. As the world of
those currencies expands to meet the average user, questions regarding consumer
protection and social engineering must be dealt with, otherwise BitCoin will fail to be
adopted. We cannot just trust the users to be sophisticated, as we have all consistently
demonstrated that as a crowd, we are not sophisticated at all. In a sense, the same lack
of a governing 3rd party guaranteeing at least some protection or recourse, justifiably
hailed as the platform’s greatest advantage, is also one of its biggest disadvantages.
That, too, needs to be a part of an informed discussion.

How to get the most out of your acquired entrepreneur

I have a friend, let’s call him Joe, who’s an entrepreneur. Joe’s company was acquired a couple of years ago by a larger company, and Joe was left in charge of a suite of products only he could run for this company. He was doing very well but had the usual corporate complaints: it was too rigid, it was too slow, he didn’t enjoy it. We shared some of our war stories.

Then, one day, Joe was walking by a conference room where his CEO was hosting a group of b-school students, talking about acquisitions. The CEO calls Joe in, introduces him to the class, and says: “do you know what is the first rule when acquiring a company? Fire the entrepreneur. They never fit in, and they give you bigger headaches than anyone else could”.

As Joe was telling me this, I think he agreed with his CEO. I did too. Entrepreneurs are often celebrated and applauded in the Bay area, hailed as business leaders and innovators. That’s often true. However, there’s another thing that’s true, that acquirers find out quite often: most of us are individualistic, unmanageable hotheads who can’t, or at least won’t, play well within the corporate culture. It makes sense, too: had most entrepreneurs been able to or interested in participating in the corporate power structure or dynamics, most of them wouldn’t have become entrepreneurs.

Since I first heard Joe’s story, it resonated in many stories I’ve subsequently come across. Entrepreneur meets CEO. They become business BFFs. CEO acquires entrepreneur, hoping for higher returns and synergies. The entrepreneur is exhilarated: finally, he’s able to super charge his strategy in a much bigger organization. Acquisition goals? We’ll get them in no time. I’ll just do what I always do. The time bomb starts ticking.

Fast forward 12 months and the situation is almost beyond repair. The CEO has an energy ball running around the building calling his middle managers lazy and their process folks idiots. Every second person in his company is irritated by this person sitting in meetings making everyone else feel stupid. Plus, the guy’s team has set up a barricade and is unwilling to integrate with corporate systems, come hell or high water, because theirs are better. In the meantime, the entrepreneur is plucking out hairs due to the slow pace. Everyone’s so slow! Everything requires permission! He’s being asked to provide status updates and someone can override his operational decisions! All hell is about to break loose.

Not an ideal scenario, is it? That’s the worst case, of course. The usual case is a much more tame version of the same problem, with the entrepreneur still being unhappy and looking to eject as soon as his vesting has crossed some major milestone. How do you prevent this from happening? Here’s some advice.

  • Fire the entrepreneur. Joe’s CEO’s advice still holds. Hiring entrepreneurs to do what they did with their companies, only internally, seldom works. If you need a team, get the team. If you need the product, get #2 in the company to run it. Move the entrepreneur aside and let him work on something interesting and open ended, usually solving a really hard problem.
  • Keep them self sustained. The best use for an acquired entrepreneur is as head of a business or functional unit, separated from others and hopefully with its own infrastructure. Let them run free. If you put an entrepreneur in a role that requires them to touch all parts of the organization – well, they will. Big time. That can prove successful in one use case only: when you put them at the top, like eBay did with David Marcus. Otherwise, be ready for some turmoil. Entrepreneurs didn’t get to where they did by setting up committees and inclusive communication, and there’s no reason to believe that they’ll start when you acquire them.
  • Manage by KPIs/challenges. Once you have them overseeing a well defined area, give them concrete targets to hit. An unchallenged entrepreneur will get bored and either eject or try to redefine his mission, which often means stepping on other people’s toes. Set goals. If they’re met quickly, set more aggressive goals. Aggressive targets and the free hand to pursue them is what drives entrepreneurs. Give it to them and you’ll get an effective force. Let it slip and you’ll get mayhem.

Entrepreneurial people can be a positive force, if I may say so myself. Acquisitions happen because they, we, create value. However mismanaging an entrepreneur often results in both sides being less happy and successful than they could have been. Taking a few precautions can help your acquisition dollars do so much more for you.


Babylon’s bait and switch (updated)

(UPDATE: Babylon responded and this matter is sorted out. See the bottom of the post)

This is off topic for this blog, but I wanted to tell you about a product experience I found preposterous, on the verge of misleading, by a company I thought was serious.

I’m working on a project and found out that I needed some text translated to Spanish. Since this is a proof of concept I didn’t go to a regular translator but was looking for a cheaper alternative. Yes, I know, you pay peanuts etc – I get it. I needed a quick translation to check something.

A trusted connection suggested Babylon’s translation services. I went ahead and found the website. The form counted my words, suggested a price for the word count, and sold me up on “proofreading”. Not sure what that is, but I went with it. Altogether $12 that I happily spent to get one small translation. Roughly 50 words.

Then, a day later, I get this email from someone named Orly:

Dear Ohad,

My mane is Orly [redacted] , I’m Babylons professional translations project manager.

I noticed that your last request is for translation of 56 word and proofreading. According to that it comes to the total of 84 words.

Currently your account shows the balance of 75 words, so there are 9 words missing.

Please purchase a suitable package that covers your needs so we can proceed with the translation and send you the results as soon as possible.

Thank you and awaiting your reply.

Wait, what? The website gave me a price. I said ok. I paid. Suddenly there’s a higher price to pay? What’s this about? I asked:

I paid $8 for translation and $4 for proofreading as your website asked me to. I don’t understand why I’m being asked to pay more. That doesn’t make sense to me. Do you have a different price than your website?

Because hey, maybe I’m dealing with the militant faction of the human translation network. Like an unplanned road block by the militia. Diligent Orly promptly responded:

Thank you for your reply.

The payment of 12 $ (8$ translation + 4$ proofreading) is related to 50 words translation and 25 words proofreading.

You exceeded this amount -56 words translation + 28 words proofreading.

Due to that you need to add more words to your account in order to get it done.

Something is clearly not coming through. So far I’m far beyond the “One page in one hour” promised on their front page, but hey, there’s an asterisk and maybe my text is that kind of text (it’s not). I try again:

But that’s what your website asked me to pay. How does it make sense that I ask for something, your website asks me for a certain payment, and suddenly I need to pay more?

Trying logic. She replies:

The website offer you to purchase the word quantity according to your decision.

The website doesn’t know how many words you intend to translate. In that case you should choose a bigger words package that will cover all the words.

But, wait, the website has a word counter. It gave me an offer based on my word count. In fact, the price changes according to word count. Check it out.

At this point I decided it wasn’t worth my time. I will move to another service and leave Babylon and their bait and switch techniques to themselves. I asked for a refund and I fully intend to cancel the charge if I don’t get it within three days, as my concern about this company grows. I just want to put the word out there: be careful with Babylon.

UPDATE: I got a response from Babylon. David from the team asked for the following response to be posted:

“We would like to apologize to Ohad. There was a problem with the Babylon Human Translation website, of which our translation account managers were unaware, that caused it to report a faulty word count. It was this glitch that led to the misunderstanding. We are sorry for any frustration or inconvenience this may have caused.”

I appreciate Babylon taking this seriously!


Payments: What is the best career play in payments today (Jan 2013)?

There are two viable high yield[1] career plays in payments (other than completely staying away from this highly commoditized and increasingly red-ocean market):

  1. Work for a short term lending company. Successful companies are popping up and new underwriting models using social, new data sources, and other feedback loops are the future. From Klarna to LendingClub to other smaller ones, if you’re extending some kind of credit or facilitating that, you’re learning something very valuable for the next 5-10 years.
  2. Be a modeler/good risk person for payments. Good risk people are worth their weight in gold and possibly more expensive metals. Extra points if you understand the data science aspect as well as the operations side. I cannot begin to explain how big the need is – supply is at least 2 years behind the demand (in the sense that it takes time to grow people into being strong domain experts) and it’s going to remain that way for at least a few more years. For this path I’d try to get hired into companies like Signifyd.

[1] High yield means not working for the man for a low 6 digit income for the rest of your life. If you want that, there are many other options.

Online and Mobile Payments: What are the risks of mobile POS systems?

There are several risks related to POS systems:

  1. Setting up a fake store to collect card numbers, not selling anything or promising to ship and not shipping. While this is possible with Mobile POS it can be done at much larger scale online. So, while I know for a fact this is a problem (for the providers rather than the consumers, since the providers take the ultimate cost if the merchant bails), it’s similar for offline and online POS (and actually harder to pull off offline).
  2. Rogue employee at a store or just a random person scanning cards: they would have to take hold of your card. Again, doable but really the same risk as the cashier double-swiping your card at the restaurant. Does make it a bit easier.
  3. Skimming: altering the reader is some way to look normal but collect your details to a separate database, using a physical add-on on the reader. Pretty common with ATMs. I wouldn’t say this is unique to mobile POS.
  4. Intercepting the communication at the reader, the device itself or the medium between the device and the service. Regular POS systems and ATMs can be attacked in the same manner. It’s arguably easier to get a mobile POS and reverse engineer it, but I really think it’s a small risk.

All in all I’d say mobile POSs are exposed to reverse engineering, can facilitate manual duplication of cards because they are easy to get, pose higher vendor risk to the provider of the POS and are arguably weak(er) when the reader is not encrypted. Most of these risks are shared with other POSs and, in my impression, do not render mobile POSs less safe for the consumer (barring common sense. Don’t hand your card to a suspicious guy at a street corner).

How does TripAdvisor and Yelp detect fake reviews?

I don’t know how they do it, but here’s how I believe they are (or should).

  • Community policing through flagging of bad reviews
  • Batch rules running text scans for word lists and regexps looking for links, crossed with account parameters (time on site, email type, other provided details) and behavior parameters (frequency and size of posts, text quality, browsing pattern).
  • Linking mechanism detecting account connection and repeated users to identify socks puppets, an attack on a store or a store boosting its own reputation
  • Velocity mechanism to identify emerging trends (certain store getting bombarded, certain IP over represented etc)
  • Possibly: crawler for posted links, evaluating the website after the jump for content
  • Possibly: semantic analysis of the actual content, specifically focusing on semantic fields, grammar and punctuation analysis
  • Possibly: statistical models pointing at possible suspected reviews

All of these leading to manual review by (most probably) off-shored staff making an actual decision. Extra points for real time rules and modes and actual real time decisions based on more than just posting velocity, but I’d be (really) pleasantly surprised to hear that those exist.