Credits, Debits, and CodeHow Credit Cards Work — Series Introduction
Ten years ago, when I started work as a software engineer at Capital One, there were more than 1.7 billion credit cards in circulation. Since then, those numbers have only grown. When I think about those borrowers, I think about the half that carry a balance from month to month. To tell you the truth, I haven’t always had enough money to pay my bill on time. Maybe that’s why it’s so important to me to think about the journey and the experiences that the users that pay interest go through.
One big thing I learned at Capital One was how interest and fees were calculated. It turns out it varied from card to card, and it was really complicated.
One interesting insight from that time was I discovered that most borrowers were not questioning the statements they received even when they didn’t understand the calculations and suspected they might be wrong. They typically made their minimum payment, even when it was more than they expected to pay.
Not everyone was happy about this. A few people actually tried to check the bank’s calculations.
As the technical lead of servicing at Capital One, I worked on an analytics project that revealed why our customers contacted us. One reason was for clarification. They’d call us, and they’d be like “I just gave you $50, and I don’t understand where you put it.”
Today, things are different. What used to work in the past, has stopped working. Today, when customers don’t understand your interest and fee policy, first they stop using your card. Next, they share their grievances on social media channels like TikTok. They make videos of themselves doing the math showing that if they only make the minimum payment on their card, then they will still be in debt 100 years from now.
Businesses have realized this, and it has created a demand for servicing systems like Canopy that provide transparency around interest and fees.
But to get the most out of transparent infrastructure, everyone needs to understand the underlying policies around interest and fees, and the complexity of those policies has not diminished. Companies have a hard time articulating their policies to even their own employees.
I am writing this blog series to shed light. I want to help our clients and their customers understand how interest and fees are calculated. In this series, I plan to address the technical aspects of creating payment cards. I’ll also accept questions from you, my readers, and do my best to answer them. I’ll cover a new facet of credit and lending policies every other week or so until I’ve shared everything I believe can help someone create better products faster and or until there are no more questions.
My goal is to provide information that is useful to those extending credit and to those receiving it. Credit can be transformative when extended strategically and at the right moment, but too much debt can lead to bad experiences for everybody. I want to help people understand how the technical choices they make can increase safety for their borrowers and themselves. A good example of this is the choice between line-item-level policies and account-level policies, which is the topic of my first post.
What is Canopy?
We believe in building technology that helps facilitate better life experiences. Financial products have largely been the same, lacking transparency and control. Canopy is built for developers to launch and service financial products in the most flexible way.