Moneybox
A blog about business and economics.

March 3 2015 6:37 PM

Samsung Can Mock Apple All It Wants, but the iPhone Is Officially Outselling It

Over the weekend at the Mobile World Congress in Barcelona, Spain, Samsung unveiled two new smartphones, the Galaxy S6 and the Galaxy S6 Edge. Samsung’s announcement came with a sleek product video, but also with several jabs at Apple. The company reportedly poked fun at Apple’s “Bendgate” scandal and aspects of the iPhone 6 Plus’ camera. Samsung also rolled out the slogan “design with a purpose”—presumably a dig at what it sees as frivolous aesthetic choices by Apple.

Well, Samsung can mock Apple all its wants, but the numbers tell a different story. In the latest quarter, Apple overtook Samsung as the world’s top smartphone seller for the first time since 2011.

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Technology research firm Gartner said Tuesday that Apple sold 74.8 million smartphones in the fourth quarter of 2014—narrowly beating out Samsung’s 73 million units. That gave Apple the biggest share of the global smartphone market at 20.4 percent, followed by Samsung at 19.9 percent. The third-place seller, Lenovo, isn’t even close, with a 6.6 percent market share on 24.3 million units sold.

For the year, Samsung’s numbers still top Apple’s. Samsung sold 307.6 million smartphones in 2014 compared with Apple’s 191.4 million. Still, the iPhone has been on a tear lately. The fourth quarter was Apple’s best ever—not only shattering records for iPhone sales but also for quarterly revenue and net profit. For the first time, the iPhone also became the best-seller in China—the world’s largest smartphone market—according to an estimate from research firm Canalys. Over the seven previous quarters, Apple had never ranked higher than the No. 4 spot.

Interestingly, both Apple and Samsung ended up losing market share overall in 2014 from the previous year as smaller manufacturers—such as Lenovo and Huawei—gained ground. But if we’re just comparing Apple to Samsung, the gap is shrinking. In 2013, Samsung had a roughly 15 percentage-point lead on Apple for market share. In 2014, that fell to 9 percentage points. It’s anyone’s guess what will happen in 2015. But for now, Samsung should realize that jokes alone aren’t going to cut it.

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March 3 2015 6:22 PM

There Are No Rich People in America

Americans do not often admit to being rich. There are, of course, prominent exceptions. Warren Buffett will tell you he is in fact affluent. Kid Rock will too, and really exuberantly. Guys like Tom Perkins, the venture capitalist, will talk about how they're tired of being envied for their money and make unfortunate Nazi Germany analogies in order to illustrate their persecution complexes. But as a rule, we don't own up to our wealth. Just 1 percent of Americans say they are "upper class," according to the Pew Research Center. Everyone else thinks those words describe somebody richer than they are.

Richard Reeves of the Brookings Institution, who has made this quirk of our class identities into a hobby horse of sorts, recently put together a nice illustration of what he calls our national, "Me? I'm not rich!" problem. In 2011, Gallup asked Americans how much income they needed to be "rich." In general, they answered some amount that was higher than whatever they made. Most people who earned $30,000 a year or less thought you could be rich making under six figures. A majority of those who earned between $30,000 and $99,000 thought you needed to cross the $100,000 threshold. You get the idea.

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None of this is especially surprising. People don't generally think about living standards in absolute terms. They think about them relatively, and tend to compare themselves with their peer group. And because most of us know at least a few jerks with a bigger house, nicer car, and more interesting-looking vacation photos, it's easy to conclude that, no, we ourselves are not truly rich. I'm making fun of Americans for it, but my guess is it's near universal. It just happens to be a problem in the U.S. because, as Reeves writes, those of us who think we should be paying taxes at all tend to believe the rich should be the ones shelling out. That's a political problem when there are apparently no rich people to be found.

Via Danielle Kurtzleben at Vox

March 3 2015 2:15 PM

JPMorgan Adds Another $50 Million to Its Gigantic Settlements Tally

JPMorgan Chase, the bank that has already paid out more than $27 billion in settlements over the past two years, is adding another $50 million to that tally over a “robo-signing” scandal.

The Justice Department said Tuesday that JPMorgan will pony up $50 million in cash, mortgage loan credits, and loan forgiveness after it failed to properly review more than 50,000 documents filed in bankruptcy court. The term in this case is robo-signing, and it means basically what it sounds like—employees robotically signing off on documents without actually reviewing them. In some cases, this is because robo-signers assume whatever they’re signing is correct, and don’t bother to go over it. In others, the problem is that the signers just aren’t qualified to be reviewing the stuff in the first place.

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With JPMorgan, the bank admitted to filing more than 50,000 payment-change notices in bankruptcy court that were signed in such a way between 2011 and 2013. At least 25,000 of those were signed by former employees or employees who had “nothing to do with” reviewing the documents, the Justice Department said.

“It is shocking that the conduct admitted to by Chase in this settlement, including the filing of tens of thousands of documents in court that never had been reviewed by the people who attested to their accuracy, continued as long as it did,” Stuart Delery, acting associate attorney general, said in a statement. “Such unlawful and abusive banking practices can deprive American homeowners of a fair chance in the bankruptcy system, and we will not tolerate them.”

While $50 million is a drop in the bucket for an institution like JPMorgan, the bank is starting to feel the weight of its fines. During the latest quarter, JPMorgan posted a 6.6 percent decline in profit amid more than $1 billion in legal costs. The institution's investment-banking side has suffered in particular, with a 16 percent drop in profits last year despite cost-cutting efforts. JPMorgan's CEO Jamie Dimon has declared banks “under assault.” The homeowners whose documents were robo-signed probably felt the same way.

March 3 2015 1:06 PM

Some Law Schools Will Now Accept Students Who Didn’t Take the LSAT. That’s an Awful Idea.

Recently, two law schools announced that they will begin accepting a select number of students who have not taken the LSAT, the much-loathed exam that has traditionally served as the make-or-break measuring stick for J.D. applicants and punctuated the academic career of many an aimless history major. As Bloomberg Business reported last week, "The State University of New York-Buffalo Law School and the University of Iowa College of Law said they would admit students from their respective undergraduate colleges" based on their grades and scores on other standardized tests. They're the first institutions to pounce on a major rule change by the American Bar Association that will let law schools start filling 10 percent of their classes with non-LSAT takers who meet other academic requirements. But chances are that other schools will follow suit.

Mostly, this is yet another example of just how desperate law schools are to fill their classroom seats. Enrollments have plunged—Buffalo's first-year class has shrunk 18.3 percent since 2011, while Iowa's is down 21.7 percent—and that has created financial stress on institutions. Buffalo's dean says the changes are aimed at saving qualified students the pain and expense of taking the LSAT (the test requires a $170 fee, and usually a pricy prep course) but admits to Bloomberg that it might also help goose applications, "to the extent that they remove what is, for some students, an obstacle for applying to law school."  

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This is all very problematic.

I doubt that Buffalo or Iowa will end up admitting significantly weaker students as a result of these changes. Theoretically, it might let them recruit students who would have tested poorly without hurting their all-important ranking in U.S. News, which factors in LSAT scores. But the new ABA rules are still reasonably strict about academics. Law schools can only admit LSAT abstainers if they obtained a bachelor's degree at the same university or are applying to a joint degree program like a J.D./MBA. They also need a decent GPA and strong scores on either the SAT or a grad-school admissions test like the GRE. We're probably not talking students who would typically fill out the bottom of Buffalo's 1L class.

The real issue is that applying to law school shouldn't be convenient. It should be hard—about as hard as possible, in order to scare off the kids who don't really belong. I don't think I can make this point better than Elie Mystal already has at Above the Law, but in short: Going to law school is a wildly expensive, life-altering choice that can lead to years and years of misery (even if things go well). Most people shouldn't go unless they really, truly want to be a lawyer, or have a crystal clear idea of the alternative career that a law degree is going to land them.1 And if you don't want it badly enough to take the LSAT, chances are you don't want it enough to spend three years of your life amassing tons of student debt to pursue that goal, either. As Mystal writes, if "you can’t be bothered to spend $170 for a test, then you shouldn’t be allowed to borrow $150,000 for a degree. Anybody who tells you different is trying to sell you something."

1 In which case, I still say now is a great time to go.

March 2 2015 6:03 PM

Are You 30? Tinder Has Officially Decided You’re Old.

On Monday, Tinder launched Tinder Plus, a premium version of its matching service that includes a couple of new features. “Passport” will let travelers on Tinder set their location anywhere around the world so that, as the company puts it in a blog post, “you’re swiping before you arrive.” And another add-on, “rewind,” lets users undo their last swipe. “If you accidentally swiped left on someone you want to get to know,” Tinder explains, “they're no longer lost in the Tindersphere forever.” Tinder also plans to introduce advertising by the end of the month, which Plus members won’t have to see.

The first catch, of course, is that Tinder Plus costs money. The second is that the price you pay depends on your age.

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Tinder plans to charge $9.99 a month for Plus to U.S. users who are younger than 30, and $19.99 a month to those who are 30 or older. In the U.K., the teens and most twentysomethings will pay £3.99 a month while those 28 and older will be charged £14.99 per month. A spokeswoman for Tinder told NPR that several months of testing showed that “these price points were adopted very well by certain age demographics.” She added that “younger users are just as excited about Tinder Plus, but are more budget constrained, and need a lower price to pull the trigger.”

In theory, this should be the main reasoning behind Tinder’s pricing tiers: Younger users presumably have less disposable income to throw around on a dating app than those in their late 20s and above. Economic studies partly bear this out. A recent paper from Federal Reserve researchers found that the “bulk of earnings growth” for men tends to occur during the ages of 25 and 35 (the blue line in this chart):

On the other hand, as Kevin Roose points out at Fusion, the move could also be seen as “the equivalent of Uber’s supply-and-demand surge pricing—as you get older on Tinder, your supply of available matches shrinks, so it should cost more to find them.” Because 30 is, you know, ancient.

So, will people pay up? In a note to clients last week, Morgan Stanley expressed its doubts that the dating service will ever see this happen. “Given the young age of the target demo and frequent unwillingness to pay monthly recurring fees for social services, we believe Tinder will not have much success monetizing with a high-cost recurring monthly subscription offering,” the firm wrote. This is all the more true when there are so many different dating apps on the market. Users who have hit their limits on Tinder can head over to Hinge or Coffee Meets Bagel.

What’s also possible is that Tinder doesn’t really expect many younger users to pay at all. That would certainly help to explain the sizable pricing jump between age cohorts. But in that case, why do it at all? Well, if Tinder can start getting young twentysomethings used to the idea that access to quality dating apps comes at a cost when you’re older, maybe it can prime those users to pay later. Should Tinder’s users age with it, that could add up to a lot of revenue in the future.

Correction, March 3, 2015: A credit on a chart in this post originally misspelled the last name of Federal Reserve researcher Fatih Karahan. The credit also misidentified one of the authors of the 2015 staff report; it was Serdar Ozkan, not Greg Kaplan.

March 2 2015 1:56 PM

Overfunded Uber Will Sink Excess Money Into Print Magazine

Multibillion-dollar ride-hailing startup Uber said this week that it has launched and is shipping out the first installment of a quarterly publication called Momentum to drivers in Boston, New York City, Chicago, Ohio, Oklahoma, and San Francisco. The goal of Momentum, according to a post on Uber’s blog, is to help Uber connect better with drivers. The other, less explicitly stated goal seems to be promoting positive stories about Uber (because if you can’t get it from the mainstream media, you might as well start your own publication).

Uber isn’t the first tech startup to try its hand at traditional print publishing. Back in November, Airbnb introduced Pineapple, a “magazine of local stories and travel inspiration” that it distributed to select Airbnb hosts. The first issue is 128 pages and sells online for $12. Unlike Airbnb’s Pineapple, Uber’s inaugural Momentum issue is brief—just 15 pages. It includes a greeting from Ryan Graves, Uber’s head of global operations, and details on Uber’s loyalty program (which also goes by the name “Momentum”). The magazine also includes tips on how to stay healthy while driving all day, like sleeping right, drinking enough fluids, and taking 10 minutes off from sitting in the driver’s seat to do something aerobic. (Recommendations include climbing stairs, jogging, kick-boxing, and swimming.)

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The real question is how much money Uber expects to spend on Momentum at a time when most remaining print publications are financials sinkholes. Uber declined to answer questions about the estimated budget for Momentum. Then again, at last count, the company had nearly $6 billion in funding and debt financing and a valuation of more than $40 billion. If Uber wants to throw some of that into fixing a well-established image problem, it can probably afford to take the hit.

March 2 2015 1:25 PM

If the Supreme Court Guts Obamacare, Republicans Might Just Keep It Alive

On Wednesday, the Supreme Court will finally hear oral arguments in King v. Burwell, the conservative lawsuit designed to cripple Obamacare by cutting off subsidies to millions of Americans who have come to rely on them for purchasing health insurance. Quite reasonably, Republicans have started to worry that if the challenge succeeds, their party might face a wee bit of backlash from the hordes of voters who suddenly won’t be able to afford their medical coverage. So, over the past week, a few GOP members of Congress have started publicly outlining a plan to contain the fallout from a potential win at the high court.

Their idea: Keep Obamacare and its subsidies alive. But, you know, only temporarily.

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As Ezra Klein argues, the word “plan” might be too generous here. Unless it’s a vote to repeal or hobble Obamacare for the 56th time, the Republican leadership is just about incapable of passing legislation through the House of Representatives. And the notion that conservative hardliners will suddenly circle around a bill meant to prop up health care reform in the wake of a gruesome legal defeat seems a bit fanciful. But it’s a concept, at least. A coherent thought. And it shows that some Republicans are aware that this case has backed them into a political corner.

The problem is that even if voters don’t think they like Obamacare, they will almost certainly like even less the grisly spectacle that unfolds as millions lose their coverage due to a politically motivated court case. Currently, the federal government offers middle-class families subsidies, in the form of tax credits, to help them buy insurance on the state and federal health care exchanges that were created under the Affordable Care Act. The plaintiffs in King argue that’s illegal. Based on a four-word passage of the health law that may or may not have been a drafting error, they contend that Washington cannot give subsidies to residents of the 37 states that chose not to set up their own exchanges for either political or technical reasons, and instead relied on healthcare.gov.

If the justices agree, it could have ugly consequences for the entire U.S. health-insurance system. At least 9.3 million Americans would lose their subsidies, according to an analysis by the Robert Wood Johnson Foundation and Urban Institute. About 8.2 million would end up uninsured, as coverage would become too expensive (people who can’t afford a health plan are exempted from Obamacare’s individual mandate to buy coverage). While the dropouts would generally be younger and healthier, those remaining in the marketplace would likely be on the older and infirm side, which would cost insurers and potentially send premiums skyrocketing, forcing more people out of coverage. The end result would be “a textbook case of an adverse selection death spiral,” as the brief puts it.

It’s hard to predict exactly who would get blamed. Americans might reflexively split into their partisan camps, letting Democrats and Republicans point fingers at the other side while the carnage unfolded. But some conservatives (and liberal writers like Jonathan Chait) are predicting a bloodbath for Republicans if they simply stand pat as our health finance system implodes. Internal polling by GOP activists, reported on by Byron York, suggests that voters want lawmakers to “do something to restore subsidies” if the court nixes them. Last week, Ben Sasse, a conservative senator from Nebraska, wrote a fretful Wall Street Journal op-ed predicting a “deluge of attacks on Republicans for supposedly having caused this. Daily White House emergency briefings. Liberal interest-group ads of wheelchairs going over cliffs. President Obama’s cheerleaders in the media screaming that ideologues are killing patients.” This, Sasse worries, could force red-state governors to finally "fold" and build their exchanges in order to get Obamacare’s subsidies. Instead of taking that risk, he believes that Congress should pass a bill extending the subsidies for a “transitional” 18 months, by which point there might be a Republican in the White House who could scrap and replace the health law for good.

This weekend, Sasse’s idea got a boost from a trio of three more Republican Senators—Orrin Hatch, Lamar Alexander, and John Barrasso—who wrote in the Washington Post that they would support providing a “bridge away from Obamacare” that would provide “financial assistance to help Americans keep the coverage they picked for a transitional period.” The rather short piece didn’t specify a time frame, and it included some noise about giving states more “freedom and flexibility” to mold their insurance marketplaces (which is basically a euphemism for deregulating so insurers can offer skimpier coverage than Obamacare currently allows). But the gist was clear enough: Should the King plaintiffs prevail, the GOP’s only significant idea is to keep Obamacare basically in tact until their ever-fractious majority can converge on something it likes better. If you think the House's Tea Party faction wouldn’t go for it, consider that Rush Limbaugh says he can’t think of a better way to deal with the fallout of a conservative high court win. But he's pretty terrified of how the Obama administration might parlay it politically.  

They probably already have found, say, people that are on dialysis in the 37 states with federal illegal subsidies and they've already made deals with this patient, "We're gonna feature your story when you lose your dialysis in June when the court rules."  They're gonna have 'em ready to go.  ‘Look what the Republicans have done now.  Their hatred of Obama is so boundless that they're willing to let patients die in order to deny Obama the success.’  I can hear it all now. And that's what the Regime wants. [The “Regime” is Limbaugh’s affectionate term for the Obama White House.]

There's an obvious downside to the temporary extension plan for Republicans. The Democrats might just win the White House again in 2016, which would lead us back to the same argument in 18 months. Except, that would be 18 more months for Americans to get used to Obamacare and its subsidies, making it all the harder to do away with them. And forcing an apocalyptic standoff over this particular issue with a brand-new president doesn't seem like an especially promising political tactic. But hey, if talk-radio Republicans are willing to entertain the idea, maybe the House will be, too.

Feb. 27 2015 11:24 PM

Venmo Issues Apology for Security Shortcomings

Venmo has responded to concerns about its security and customer support in a note of apology to users on its blog.

The popular mobile payments app, owned by eBay’s PayPal, began facing questions about its security and support systems earlier this week after I published a story in Slate about a user who had $2,850 stolen from his Chase bank account through the app. The story also documented structural weaknesses in Venmo’s approach to security, including its lack of two-factor authentication and poor customer communication practices. In a somewhat terrible response to those concerns, Venmo CEO Bill Ready said earlier on Friday that the company has preferred not to alert its users to possible instances of fraud because “in many of these cases, we want to handle it seamlessly so we’re working behind the scenes.”

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Venmo didn’t respond to multiple requests for comment for my initial story, or to follow-up inquiries I sent today, but late this evening passed along a link to its blog post. “We never want you to be disappointed and we’re sorry if that’s been the case,” Venmo general manager Michael Vaughan writes. “Our support team is the lifeblood of Venmo and we aim to be the biggest advocates for you. As we grow rapidly, we are working diligently to keep the level of service you should expect, and we’re hiring more people to work in support (if you are interested in joining us).” As of November, Venmo had about 70 employees; PayPal has more than 10,000.

“I want to assure you we are continuously improving product and security measures,” Vaughan writes in the post, which documents a number of the company's security practices and explains steps that users can take on their own to prevent theft. “We have a bunch of things we’ve been working on and we’ll share more of those with you soon. While we know that we measure up favorably against the industry standards for fraud prevention, we aren’t sitting back.”

You can read the full post at Venmo’s blog. And, if you missed it, the original Slate story is here.

Feb. 27 2015 6:15 PM

Looks Like Uber Got Hacked

No one is safe, not even multibillion dollar ride-hailing companies. According to the latest Uber update, as many as 50,000 of its drivers may be affected in a security breach that occurred last May.

Uber says it discovered in September that one of its databases “could potentially have been accessed by a third party” (note the double hedging here). Upon realizing this, the company continues, it “immediately changed the access protocols for the database and began an in-depth investigation,” which showed that there had been one instance of unauthorized access. From that breach, the hacker would have gained access to only names and license numbers of drivers, Uber says.

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While 50,000 people is a lot, it’s not nearly on the same scale as the estimated 80 million customers that were put at risk in the recent Anthem insurance breach, or the 70 million affected by the Great Target Hack of 2013. Uber also seems to be handling this well. The company is notifying drivers and offering one year of free “ProtectMyID” monitoring from credit report firm Experian. Uber has also filed a so-called “John Doe” lawsuit in an attempt to track down the alleged hacker.

In the meantime, the company seems to hope its blog post on the matter will disappear from Internet memory. The URL is impressively unsearchable.

Feb. 27 2015 5:16 PM

Venmo’s Terrible Excuse for Not Telling You When Someone Steals Your Money

On Wednesday, I published a story on Slate about a Venmo user who had $2,850 stolen through the app from his bank account. In the piece, I documented several apparent issues with Venmo’s security and customer support: It doesn’t offer two-factor authentication, routes all support inquires through an email address (and can be slow to respond to those emails), and, at least until Wednesday, didn’t alert you if your email and password settings were changed from within the account. Venmo also encourages new users to link their bank accounts directly to the app, without any warnings as to why this might be unwise.

I first contacted Venmo on Monday and, after initially pointing me to its online security and privacy policies, the company did not respond further. My attempts to follow up with Venmo since the story ran have also gone unanswered. But Venmo is apparently speaking to other media outlets. It sent a run-of-the-mill statement on its policies to BuzzFeed and Gigaom, and Friday afternoon the Verge published comments from an interview with Bill Ready, the CEO of Venmo and its parent company Braintree. They’re not exactly reassuring.

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Ready explains that Venmo has until now preferred to deal with fraud without looping in the user because “in many of these cases, we want to handle it seamlessly so we’re working behind the scenes.” This is despite the fact that Venmo’s user agreement instructs consumers to notify the company within two days if they suspect their account has been compromised to keep their maximum liability from rising to $500 from $50—something that becomes much tougher to do if the service isn’t alerting you to suspicious activity in the first place.

Venmo isn’t the first tech company to defend its practices in the name of a frictionless user experience. Uber, the multibillion ride-hailing company, automatically tacks on a 20 percent gratuity to each fare to keep the experience cashless and hassle-free. Snapchat, which has suffered a few security snafus of varying severity, used to automatically link users’ accounts to their phone numbers to simplify onboarding and friend-finding. Even BuzzFeed, which sees itself as first and foremost a tech enterprise, defended its decision to quietly delete thousands of posts from its website—a huge journalistic sin—as a move that benefited the user.

While wanting a smooth user experience is all well and good, it often feels like—and Ready’s comments seem to confirm—a desire to be frictionless can lead companies to sacrifice some pretty important stuff. “It’s a big issue, balancing the customer experience with the fraud measures that you want to have in place,” says Matt Tatham, a spokesman for Experian, a global credit report and fraud monitoring firm. “Nowadays, just log-in password isn’t enough. You need extra layers to make it difficult for people to take advantage of any site, whether it’s mobile payments or something else.”

In this respect, Venmo is quite different from traditional financial institutions. As anyone who has forgotten to notify a bank or credit card company of major travel plans probably knows, fraud departments will often freeze accounts as soon as they notice irregular spending patterns. Credit card issuers also charge merchants transaction fees in part to have money for anti-fraud efforts. Those measures might at times feel inconvenient, but they also deliver some important peace of mind. As a colleague noted this afternoon, “I really like the experience when my credit card company calls to tell me that they’ve already caught the fraud. It sucks to have to wait a day or two for a new card, but it beats not knowing.”

For now, Venmo is trying to send a message that it takes security concerns seriously. “I think there are some valid points around how we can communicate more effectively on a couple of these issues,” Ready told the Verge (though at least in the story, he didn’t elaborate on which ones). Venmo is working to enable two-factor authentication. It also notes that users who want more protection can add a four-digit PIN to their accounts—this is true, but that PIN isn’t required to log into your account in a desktop browser or complete a transaction there. And while Gigaom’s Kif Leswing reported Friday that changing his account password produced an email alert, when I and three other colleagues tried this from within our accounts we still weren’t getting notified.

At any rate, are people concerned enough about having their accounts compromised on Venmo to actually leave its service? If so, you’d think Venmo would be more inclined to add extra layers of protection at the cost of convenience. At least to me, not being immediately alerted to fraud exemplifies a bad user experience. But for others, maybe the “seamless” factor really is more important.

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