As I sit down with Marcus, our discussion begins with his journey into the world of PayPal. "I didn't realize it was this big," he confesses, speaking candidly about the sheer size of the 14-year-old company he's now shepherding. He's coming from a startup, fully aware that it's going to take more than a miracle to redirect the things that he sees as misguided. Though young by presidential standards, he fits the mold - he's spent the better part of his career obsessing over the finer details in payment processing, and how to make the procedure "as frictionless as possible."
And indeed, there was - and in many ways, still is - a lot of friction at PayPal. Friction, as Marcus points out, that is incredibly challenging to address. While PayPal isn't "a bank" in the traditional sense, he makes clear that his company deals with regulators in every US state and nearly 200 countries worldwide. No matter how you slice it, there's an overwhelming amount of red tape involved in handling millions of dollars in transactions per minute, and doing so "at scale" is something that fascinated Marcus from the outset. Personally, the only word I can find to describe it is "daunting."
That said, it's a bed that PayPal chose to lie in. No one forced the growth upon it, and it's certainly not enacting those per-transaction fees as a matter of social charity. Marcus knows why I made the journey, and he listens intently as I describe a recent situation where his service made me, frankly, feel like a criminal. A few weeks back, I randomly received an email from PayPal informing me, in the most robotic and sterile way possible, that I would need to jump through a series of hoops in order to reconfirm my address and identity. I hadn't had a PayPal transaction in months, and I last moved a year ago. There was precisely nothing suspicious about my recent PayPal activity - unless you consider doing nothing for a few months suspicious.
Marcus' head dips a bit, and his lips clinch ever so slightly.
"The culture needs to be one where there's a presumption of innocence to start with, instead of guilty until proven innocent."
"I had the same experience, and I was not happy," he said. "The messaging was so obscure that I didn't understand why in the world I had to do it. We really are always on the side of the customer - we just do an awful job at telling them, and explaining the circumstances of what's happening."
He continues to explain the background.
"The reason it happened is that there was a change in regulations that forced us. It was an anti-money laundering change, where [we had to provide] proof of residence that was less than a year old. That being said, we were more of a project / program-oriented company before, instead of being a product-oriented company. What used to happen is this: you've got a compliance team that sees this new regulation that we have to abide by, and then they write the product requirements to comply. And there wasn't a product manager in there to oversee the end-to-end experience. Now, however, we have that person embedded in the process. He or she would look at the best way to comply with the least amount of friction as possible."
It all boils down to protection. Risk management is quite clearly not just a focus here, it's a necessity. My best guess is that managing and mitigating risk was the primary focus of the Thompson-led PayPal, and while Marcus is certainly concerned with keeping the guard up where necessary, he recognizes that there are better ways to communicate what's happening, why it's happening and how PayPal is there to make life easier.
"The culture needs to be one where there's a presumption of innocence to start with, instead of guilty until proven innocent," he says. "And we're doing that ... massively."
That's a big promise, and it's perhaps the most meaningful one that Marcus makes during our visit. I point out that PayPal's communications have been ambiguous at best, and nonexistent at worst, and it's a message heard loud and clear. Mercifully.
.... And serve
"When you have 6,000 people sitting in call centers all around the world trying to help our customers, it comes at a huge cost. But, there are better ways to manage cost than to just look at handle time. If you fix your core product experience, you have less calls, and you can spend more time helping customers. You can't just flip that switch overnight - it's a journey - but we're working really hard and fast to do that."
You read that right - nearly half of PayPal's entire payroll works solely to field complaints, fix issues and offer resolutions in some seriously hairy situations. I offer up a suggestion that PayPal's guarded nature must have been born from being torched one too many times by digital launderers and professional fraudsters, and while PayPal's loss rate is almost unfathomably low by industry standards (less than 0.3 percent), Marcus confirms that it's a daily battle with the dark side.
"There are horror stories - it's just mind-numbing," he said. "We've been burned in so many cases, and seen so many horrible things."
"You can't just flip that switch overnight - it's a journey - but we're working really hard and fast to do that."
"I'm sure," I reply, but what's become crystal clear to me is just how unsympathetic the outside world has been to this particular woe. I actually make a point to recommend that PayPal make a concerted effort to add transparency to the amount of fraud it's facing - perhaps even detailing a few hilariously depressing stories somewhere on its website - to give its user base a taste of why it can't just assume everyone is a saint. Still, Marcus adds that outrageously long and unwarranted account holds - known more commonly as "frozen accounts" - cannot continue at the same clip. He adds that this particular issue is atop his priority list, and the company is actively changing algorithms and engaging with frequent customers in order to establish a greater level of trust.
"You can mess up a lot of things in people's lives, but the minute you touch their money, they're not happy about that, and they shouldn't be," he says.
The next frontier
Throughout my day at PayPal's headquarters, I'm ushered into a couple of fairly intriguing places. The first is a Product Showcase area, where the company builds mock stores and situations in order to demonstrate how PayPal's forthcoming retail payment solutions will work in earnest. "It's a story that's harder to tell without someone seeing it," I'm told, and looking back, I'm inclined to agree. You see, PayPal is about to embark on what I'd wager is its most risky endeavor ever as a company. No, it's not about expanding to nations where the moods of its leaders are less stable than the currency, it's about becoming an unmistakable payment option in more than 7 million American retail locations.
Starting in April of next year, PayPal is going to allow its users to pay for goods everywhere you see a "Discover Network" sign. And in an era where mobile payment adoption is lagging due to incompatible partnerships, hit-and-miss terminal installations and a general miseducation of what it offers, PayPal's aiming for an alternative that hits the only mark that matters: ubiquity. The deal makes use of the same VeriFone hardware network that exists today, enabling those with a PayPal Anywhere identity card to just swipe, input their PIN and walk away. Or, for those who don't want another card, you'll be able to punch in your phone number and PIN. It's a process consumers are already intimately familiar with, but the added benefit here is having access to loyalty cards, coupons and spot discounts without even having to think about it.
If you've got a coupon or rewards card in your PayPal account - even if you aren't aware of it - it'll automatically apply itself at checkout and present you with a digital receipt. Think of it less as a new payment method, and more of an integration of payment, loyalty and coupon cutting.
"You can mess up a lot of things in people's lives, but the minute you touch their money, they're not happy about that, and they shouldn't be."
You may wonder how exactly I could categorize this as a risk, particularly given that the company isn't really stepping out into a world that hasn't already shown proven growth potential. The reality, however, is that many who aren't tightly connected to internet commerce have never even heard of PayPal. And for many who have, they certainly haven't gone out of their way to use it. Next year, that all changes. Suddenly, PayPal will be labeling itself on the doors of businesses large and small, right alongside the iconic Visa and MasterCard icons that are now synonymous with "trusted payment processors." Suddenly, PayPal will thrust itself into the mainstream. Suddenly, any privacy violation or database hack won't just make the rounds on your favorite technology sites, it'll hit the teleprompters in front of Brian Williams and Will McAvoy.
As I tiptoe into the company's Network Operations Center, or NOC, I'm immediately blitzed with seven giant projections of lines, charts and graphs - none of which am I at liberty to photograph. It looks like a million digital heart rates, all being intensely monitored by a few dozen men and women sitting in near-darkness. I get the feeling that if any one of these individuals takes their focus away from the data points, even for a second, the world as we know it may implode. Well, PayPal's world, at least. But, as it turns out, PayPal's world is about to be a lot bigger, and this room full of people who are currently working every moment of every day to ensure that millions of online transactions are processed properly will soon be responsible for managing even more.
In PayPal we trust?
To me, the risk here is obvious: it's a trust issue. Many users, myself included, haven't trusted PayPal for a long, long time. There's just something mysterious about PayPal's behind-the-scenes decisions - decisions that I don't see my bona fide bank making - that make me queasy. Specifically, the idea of never really knowing if the company is going to freeze my account following an eBay transaction with a guy in Tangier, and the thought of never really knowing if I'll be able to get someone on the other end of the line who genuinely believes I'm not some kind of Madoff in the making.
Judging by the company's skyrocketing earnings (revenues in Q3 2012 were up 23 percent year-over-year to $1.37 billion), I may be in the minority here. That said, it's wise of Marcus to choose now as a time to focus intently on customer service. If a growing number of consumers stop trusting a financial service, it can easily spell death for whatever that service may be. Issues that have appeared on forums like paypalsucks.com are still few in number compared to the amount of transactions that are completed sans complaint, but the company's monumental retail efforts will quite simply force PayPal to garner the trust of those who give it a whirl next year.
"We can do many things differently and better," Marcus says. "And my standard is not the quality of products that comes from larger companies - be it financial institutions or banks - but my goal is to have the quality and iteration speed of a startup."
Marcus has been in his role as president for less than a year, and he has but a few months to fully morph the culture of his company into one that respects customer service, and healthily fears the repercussions for dropping even a single ball. I leave his office feeling more assured that there's finally someone in charge at PayPal who means it, and is doing more than just paying lip service. His own reputation is on the line, and his methods are certainly going to be tested once PayPal hits retail en masse.
"Trust isn't given, but earned."
Did he convince me - one of PayPal's most vocal critics - to trust his company again? I'm going to give the retail experience a whirl come April 2013, mostly because I have a deep appreciation for the technology involved, but I'll still be doing so with a cautious heart. As the great woman who gave birth to me once said: "Trust isn't given, but earned."
This article originally appeared in Distro Issue #69.