By Daniel P . Simon
Companies like Venmo have altered how we think and talk about money . Rather than visiting a bank branch to send a friend or family member funds , we simply “ Venmo ” each other . But , this cultural and societal change didn ’ t just happen overnight .
When Iqram Magdon-Ismail and Andrew Kortina decided to disrupt the world of finance , it was because Iqram forgot his wallet . This was 2009 , and Iqram was spending a lot of time going back and forth to New York City from where he lived in Philadelphia . The trip was becoming somewhat routine for him : he would spend his weeks working at his day job and then spend his weekends in New York working with his friend Andrew on their new idea .
Magdon-Ismail had met Kortina when they were freshmen at the University of Pennsylvania . They were randomly assigned together as roommates , and , unlike many of those random pairings , this one was a good match . The two of them shared the same interests and aspirations , and even some of the same computer science classes , so they got used to working side by side . By the time they were seniors , they were collaborating on a small business idea , a college classifieds site they called My Campus Post . They spent their afternoons doing grassroots marketing and their nights writing code . It was an exhausting , exhilarating first taste of the life they both wanted : creating an internet startup .
My Campus Post never took off , but it was a great learning opportunity . Most of all , it taught Magdon-Ismail and Kortina that they wanted to keep working together . After graduating , they moved to New York and started working as programmers , hopping from startup to startup and collecting experience along the way . Then a company back in Philadelphia offered Magdon-Ismail a position as vice president of engineering . He took the job , but he didn ’ t want to stop working with Kortina . They ’ d recently turned their attention to something big , something with real potential — something they were calling “ Venmo .” Venmo was a music app .
They got the idea while they were at a jazz show . The music was so good , but they would never be able to hear it again .
Wouldn ’ t it be cool , they thought , if you could send a text message to the band and have a recording of the live show emailed to you ?
The idea had promise , but figuring out how to implement it was taking a lot of time — and that meant , more weekends than not , one of them was on a train traveling to meet up with the other for a couple days of brainstorming and coding . And one particular weekend , Iqram forgot his wallet .
Kortina told him not to worry about it . It wasn ’ t the first time this sort of thing had happened to them , after all . They had been roommates for years , and over those years , they ’ d lent each other money for drinks , groceries , rent — and they ’ d always eventually gotten out a calculator , figured out who owed money to whom , and cleared their debt by writing each other checks .
How many times had they done this ? Dozens ? Hundreds ? But this time , the thought of their old system made Magdon-Ismail laugh . A check ? He wasn ’ t even sure he knew where his checkbook was . He paid all of his bills online .
It was like a relic from a bygone era . If he could find that checkbook , he would scribble the amount onto that bank-issued piece of paper in barely legible handwriting and then have to mail the check to Kortina — which would mean buying a stamp and an envelope and finding a mailbox . Then , when Kortina received the check , he would have to find a bank branch , go there during its business hours , fill out one of those antiquated little deposit slips , and hand it to a bank teller along with some identification . Eventually — after a three- or five- or seven-day hold period — the money would be added to Kortina ’ s account .
“ Why are we still doing this ?” In 2009 , people were doing everything from their mobile phones — except moving money . Somehow , this most fundamental , basic thing was a capability that hadn ’ t been invented yet . Why not ?
Magdon-Ismail and Kortina had come across a spot of what technologists and marketeers like to call “ friction ,” the chafe that happens when someone tries to do something that should be easy but isn ’ t . Imagine a visit to the DMV . That shudder that runs down your spine is because of friction . Friction has been a driving force behind many of life ’ s discoveries and inventions , and Venmo was no exception . “ Let ’ s just try to solve this problem ,” they decided .
Removing Friction
Magdon-Ismail and Kortina began work converting their mobile music app , Venmo , into a tool that people could use to exchange money . Why is it so hard to move money across the internet ? In 2009 , moving money on the internet wasn ’ t new . Amazon and eBay had been up and running for nearly 15 years . Every major retailer had some version of an online shopping cart on its website , and , according to the US Census Bureau , e-commerce was generating more than $ 130 billion a year in sales .
And e-commerce wasn ’ t just for people with credit cards , either . Banks were issuing debit cards that worked just as well for online purchases . Why was it straightforward to move money to Amazon and eBay but not to individual people ?
All Magdon-Ismail and Kortina wanted to do was create an app that could transfer money from a personal bank account to someone else ’ s . Their banks had websites that showed them how much money they had — so they knew this data was already in a digital format . Why was it so hard to access ? And more to the point , why hadn ’ t the banks created this functionality themselves ?
One answer is the banks just didn ’ t care . Banks had a long history of developing new technologies , but their idea of innovation was always aimed at making their own processes better and more efficient . Innovating the customer experience wasn ’ t something that would have occurred to them , and even if it had , it wouldn ’ t have been a high priority , least of all during the lean years that followed the market crash .
But for a software developer , creating a good user experience is paramount . Even if banks had wanted to build a tool for transferring money , it wasn ’ t as straightforward a problem as it might seem . In 2009 , according to the FDIC , the United States had just shy of 7,000 banks . Getting the banks to talk to one another was hard enough , but getting their databases to talk to one another — when each one had been built to its own custom specifications — was
www . MoAF . org | Fall 2020 | FINANCIAL HISTORY 13