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patio11's profile
Patrick McKenzie
Patrick McKenzie
Patrick McKenzie
@patio11

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Patrick McKenzie

@patio11

I work for the Internet, at @stripe, mostly on accelerating startups. Opinions here are my own.

東京都 Tokyo
kalzumeus.com
Joined February 2009

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    1. Patrick McKenzie‏ @patio11 19 Sep 2019
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      An interesting consumer credit card offering: https://www.petalcard.com  The most unique thing about it is the schedule of cashback, which gets more lucrative the longer you have the card (to a cap), contingent on on-time payments.

      2 replies 8 retweets 57 likes
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    2. Patrick McKenzie‏ @patio11 19 Sep 2019
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      (If you follow me on Twitter it is unlikely this is competitive with your best options, since it purports to target users who are not traditionally underwritable for credit, but it’s interesting how they must be modeling where the margin comes from.)

      1 reply 0 retweets 11 likes
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    3. Patrick McKenzie‏ @patio11 19 Sep 2019
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      The consumer credit industry has middling to high sophistication with respect to customer segmentation by behavioral profiles, and so would look at what the product features of a card would accomplish over a portfolio of blended customer archetypes.

      2 replies 0 retweets 9 likes
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    4. Patrick McKenzie‏ @patio11 19 Sep 2019
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      One reason why you see “reward you for your loyalty” sort of schemes less with respect to the top end of the market is that one *extremely lucrative* subgenre of credit card user a) spends a lot and b) will switch providers based on who has the best offer.

      1 reply 1 retweet 8 likes
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    5. Patrick McKenzie‏ @patio11 19 Sep 2019
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      So if you are designing a product for credit card users who have options, rear-weighting the rewards for the card tends to make it non-competitive with other offerings which frontload them (via e.g. a signup bonus). You’d thus not do this if that customer archetype mattered.

      1 reply 0 retweets 8 likes
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      Patrick McKenzie‏ @patio11 19 Sep 2019
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      Many smart geeks of my acquaintance are in this archetype and marvel about the persistent stupidity of bank marketing and product departments, believing the banks to continually lose money on their custom. This... is not the smartest belief of my acquaintances.

      2:42 AM - 19 Sep 2019
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      • regret maximizer John Lee Andrew Barber 🌹🌐 Benjamin “shelter in place” Chait knight of cups Paul Roales Varun Villait Kendall Miller
      1 reply 0 retweets 15 likes
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        2. Patrick McKenzie‏ @patio11 19 Sep 2019
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          There is always a spreadsheet.

          1 reply 0 retweets 14 likes
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        3. Patrick McKenzie‏ @patio11 19 Sep 2019
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          There are a lot of startup founders of my acquaintance who are interested in e.g. banking the unbanked or otherwise increasing access via technology. This is a worthy aspiration. It is tricky to build a business around, and people get surprised by how it is tricky.

          1 reply 3 retweets 13 likes
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        4. Patrick McKenzie‏ @patio11 19 Sep 2019
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          If you offer a product for people in economically precarious situations with the idea that consumption of your product will improve their situation and yay all good all around, you may be building a transitional product. Transitional products are tricky.

          1 reply 2 retweets 18 likes
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        5. Patrick McKenzie‏ @patio11 19 Sep 2019
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          For sake of illustration, consider a toy model which has two subgroups of consumers: Very Desirable Customers and Everyone Else. If you have a widely available credit card product, it will almost by definition not be competitive with options available to VDC.

          1 reply 0 retweets 9 likes
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        6. Patrick McKenzie‏ @patio11 19 Sep 2019
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          There exist many providers who specialize in the needs of EE. You look at their pricing, policies, etc, and consider them odious. You’re going to do right by your customers, darn it, and make enough money to keep the lights on by durably improving lives.

          1 reply 0 retweets 9 likes
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        7. Patrick McKenzie‏ @patio11 19 Sep 2019
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          Suppose hypothetically your company successfully executed on this mission for 20% of your customer base, and the margins from their accounts subsidize your services to everyone else. Bad news: by successfully working with you, you’ve flagged that 20% as VDC.

          1 reply 0 retweets 9 likes
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        8. Patrick McKenzie‏ @patio11 19 Sep 2019
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          “Flagged? Flagged how?” Oh remember that part where you’d underwrite people without material credit history? You know what they have after using your card for a year? Credit history.

          2 replies 0 retweets 15 likes
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        9. Patrick McKenzie‏ @patio11 19 Sep 2019
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          And thus the (extremely sophisticated and well resources) firms serving VDC will get in touch with them, plausibly using information (addresses, etc) that you reported to the credit bureaus, and say “Why not switch to our product? It is better for you in every way.”

          2 replies 0 retweets 12 likes
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        10. Patrick McKenzie‏ @patio11 19 Sep 2019
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          And here is a hard realization: the big bank marketing department telling your best customers this? They are telling your customers God’s honest truth. They factually are offering better terms than you are, plausibly across the board.

          2 replies 0 retweets 14 likes
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        11. Patrick McKenzie‏ @patio11 19 Sep 2019
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          There was a time in which financial institutions had relatively undifferentiated offerings and so the covert subsidy by your VDC of your EE was laundered through the bank. You can still find this in some markets. (Japan is an interesting example.)

          1 reply 0 retweets 9 likes
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        12. Patrick McKenzie‏ @patio11 19 Sep 2019
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          And thus folks building products for underserved folks find that they generally need to make the economics work on the population which *does not* transition out from being underserved. And then the mission... sounds a lot less fun.

          8 replies 1 retweet 38 likes
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        13. End of conversation

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