Chargebacks/credits

[Rolo]

I have started a project regarding chargeback/credit issues. The goal is to find potential chargebacks/credits based on the information collected at paysites (not that voodoo some processors do at the signup process - this is based on real numbers and real risk).

Now I have access to somewhat of a critical mass of information, but it would always be interesting to hear if other paysites have made any similar projects or have any thoughts regarding this. Simply any information you have regarding chargebacks and credits will be good :D

Since no one earns from chargebacks and credits (expect from VISA & MC that is), then any useful information should be posted, so it might help paysites to take control of their chargebacks/credits ratios.

[Rolo]

My first observation based on the matrial I have access to is that we should start to classify credits and chargebacks into 3 time periods based on what time they occurred from the orginal signup date:

Short Term = 1-60 days
Mid Term = 61-120 days
Long Term = 121-xxx days

This is because it would help to determine why a chargeback or credit have happen, and in the future use findings to prevent similar credits and chargebacks.

Ex. Short Term credits would probably be because of technical issues with the paysite, and disappointment with the content, and ofcourse cancelling reasons, while Mid Term/Long Term credits will mainly be because of subscription cancelling reasons.

[Rolo]

International credit cards merged with local debit cards (the 2 cards on 1 card solution is used by some European banks) also have a higher % chargeback, then normal credit cards. This is because the issuing bank typical use the "2 in 1" card as a debitor card, so that transaction made with the "credit card" part is deducted from the cardholders bank account the same day. In that process some banks do not pass the information regarding who have made the charge (ex. IBill*Company*), and they also convert the dollar ammount to the national currency using the bank´s own conversion rate.

Insted of what a normal US credit card subscriber sees on his credit card statment, then a european subscriber using a "2 in 1" card solution would see something which has no direct connection to with the subscription (except that it is a VISA or MC transaction). Ex. this is how the same transaction could show up on a US and European subscriber statement:

11/11/2003 - IBILLCS.com*Company 800.307.3558 $39.95 (US subscriber)

11/11/2003 - Visa Charge #1 €37.72 (European subscriber)

Now the european subscriber has no way of knowing who that charge is from, and ammount he probably also would not recognize. Then imagine if that european subscriber is using his "2 in 1" card to buy multiple subscriptions online, and that he forgets to cancel 1 or 2 of them... now my guess is that at some point he will feel like he has lost control of his bank account (remeber he does not get a seperate account at his bank - they are using his main account), since the charges are made the same day (debitor card) without him having any way of knowing who charged him (Visa charge 1, 2, 3 etc.). He will call his bank, and then the whole process of pending chargebacks starts :headwall:

Now a way to determine which subscribers are using "2 in 1" cards would be good, and also build a list of known "2 in 1" cards that will have a bigger chargeback %. This could be done at signup page at the processor -making new subscribers choosing what kind of card they are using - give premade made options based on which country the subscriber is from.

If thats not possible, then we probably have to live with the fact that some surfers are holding "2 in 1" cards, which are more likely to chargeback then normal credit cards.

[Rolo]

Long post - and I Know this might be pretty basic stuff for some, but more information is better for everyone - might even create some spin off thoughts :okthumb:

How to lower credit/chargeback ratio:

Credits are the first step before chargebacks... a credit could have been a chargeback - its just a matter of how the subscriber choose to handle the issue (subscriber contacts paysite or paysite´s processor and it will become a credit... subscriber contacts his bank and it will become a chargeback). So for every credit the paysite can avoid, then the paysite is probably also lowering its chargebacks in the process :D

Because most credits are "short term" (big % happen within 60 days of signup), then paysites doing active things to lower credits will see fast results. First lets split credits or refunds up in 4 categories:

1. "Technical credits" happen when a subscriber does not get access to the paysite or he is not able to watch the paysite because of his computer/browser/connection.

2. "Content credits" comes from subscribers who are feeling cheated because they did not find the content they were looking for or had been promised.

3. "Subscription credits" mostly happen because subscribers cancel their trial subscription after it has recurred into a full monthly subscription.

4. "Fraud credits" are made either from dishonest subscribers or fraudtly resellers/affilates promoting the paysite.

Some of these types of credits are easier to lower than others.

One thing paysites need is infomation regarding why the credits are happing. Some subscribers will contact the paysites direct regarding why they want credits others will go direct to the processors. Some processors lets paysites know why they have issued a credit to the subscriber. Another option for paysites is that they could e-mail those subscribers who have received credits, and simply ask them "why".
Paysites collecting information regarding the credits and why they are happing is very important, so its known where to focus.

1. "Technical credits" are short term and prehaps one of the easist to lower, because paysites can control most of it. Making sure that subscribers gets instant access, and that they can find easy infomation on how to contact for technical support (e-mail, phone access etc. - if it takes more than 5-10 mins to get access, then they will demand credits insted of access). Try not to use any exotic video/plugin formats - paysites using wide accepted formats windows media, real and mpeg have less problems with their subscribers setups. Making sure that paysites loads fast, and that subscribers with slow connections also have content they can watch without waiting for 20 mins to download is also a good thing to keep subscribers happy.

2. "Content credits" are short term and can usual be spotted by looking at the tour of the paysite... does the paysites have everything inside its members area - just like tour says? Wild exaggerations are not good... also check if there are any resellers/affilates who have spiced up the promoting a bit to much.

3. "Subscription credits" are harder to fight, because they can be short term, mid term or long term... short term credits are usual subscribers who are waiting until the last day of the trial before they cancel - or the day after... they feel they "made the deadline", so when they check their credit card statement and sees a monthly subscription on top of their trial, then they will be contacting someone, either to verify that the subscription has been cancelled or to get a credit (if they call their bank, then it will most likely end with a chargeback). Now the trick is information - let them know when their subscription has ended by e-mailing them. That will satisfy most of them, and if the paysite have a good members area (see content credits), then they might be ok with the extra time, because they knew they were playing close to the "deadline", and did like the content. Mid term credits are also subscribers going over the "deadline", but there are also new reasons like subscribers who have forgot about their subscription (explaining that their subscription will be cancelled will also satisfied subscribers in mid term), wifes/girlfriends/parents checking up on credit card transaction is also a problem, but there is not much paysites can do (here its very important to have good phone support at the processors).

4. "Fraud credits" are also hard to fight. Most of this fighting is done at the processor, but the paysite can also do some work. Getting to know the paysites subscribers by checking each signup for strange info (will know when you see it - ex. usernames like "fuckyou" etc. should setoff a red flag). Also monitor paysite for password traders - new accounts which get detected by the paysite´s anti password trade script is probably made with a stolen/fake card - new subscribers which are heavy users (starts to download everything within the first 10 mins) are also worth to do an extra background check on.

Resellers/affilates fraud is also hard, but there are some tools which will make it easy to spot those (don´t think I should give away all the tactics in this forum) - but if paysites suspect a reseller is cheating then they will contact processors and/or other sponsors the reseller is using and do some asking... also sharing infomation with other paysites regarding who they have found cheating is popular.

This is just the very basic stuff, and like I said in the begining most will already know this and MORE... and its that "more" which would be nice to know about :rolleyes:

This will help us take the "next step", which would allow us to lower our chargebacks/credits even more without costing too much on the profit side...

Who is with me and got some infomation to share :okthumb:



Last edited by Rolo at Jan 3 2003, 12:52 AM

[Mike AI]

The question Rollo is what will be the mechanism to make it easy for webmasters who run programs to get together and share this information in an easy, SAFE, way to build up a DB to be used by all.

One of the big things I think most webmasters worry about in dealing with other webmasters is fraud. Lets face it there are a lot of unscrupulous webmasters out there, many who are like the street sign ONE WAY, etc...

[Dianna Vesta]

It's a lot to digest but seems like a valuable resource. As Mike has pointed out, it's hard finding people you can trust. IN this past year alone companies you've depended on prove to be more interested in making money then doing good business.

[Rolo]

Some of the tools to fight credits/chargebacks I have been thinking off would not need alot of information sharing. Rather we need to find some common situations (ex. subscriber not loging into to his account after signup) to look for when trying to spot which transactions might end up as credits/chargebacks. The variables (ex. average days of membership, reseller hits, subscribers names etc. ) used to build a profil of potential bad transactions, would be unique for each paysite (each paysites have its own lifetime, setup etc., so it would make sense that the "profiles" are unique for each paysite). That way we can keep valuable information secure at the paysites, the scrubbing at minimum, and not end up like current processors who have setup broad scrubbing levels, which hurts profits to much for everyone involved.

Ofcourse building a database of known cheating webmasters, and subscribers doing credits/chargebacks could give an extra layer of protection. As you mention this would also open new issues like who to trust, but if this is done right, then all information would be safe from outsiders (this would ofcourse only be available to verified paysites, it would also be possible to make a system which will expose those paysites misusing the information).

It would have been great if UAS, or another trusted adult organization would have been around, but since this is not the case, then I guess we could use the almighty "dollar" as trust - meaning a private company who have money to loose if they are not professional about the setup.

[Rolo]

Mike AI, Dianna, other... have you done any inhouse scurbbing at your paysites to find potential bad transactions? What did you look for, and where did you look?

[MissEve]

I would love to have a database of people who sign up 20+ times and cancel within the trial period. They arent really fraudulent but I hate them :)

Some people are so bad that I actually recognize their names on the Epoch confirmation emails. Grrrrrrrrr!

[Rolo]

MissEve - thats right... dunno if processors are still making sure a surfer only can signup for the trial option one time in a given time frame? (ex. 30 days)... but with all the "cheap" trials out there, then a surfer can get alot of content for 10*$2.95 3 days trials vs 1*$29.95 30 days membership, so there are probably alot of them doing so. These surfers are differently also in a higher risk group, when it comes to credits and chargebacks, because if they join 10 trials, and cancel them close to the deadline, then surely some of those trials could renew into full monthly subscriptions. Could quickly become a big mess on the credit card statment...

[Rolo]

Another credit card / chargeback situation: credits and chatgebacks at the same time...

Subscriber calls processors after he has been a member for 4 months - he claims fraud. Processors wants to avoid the potential chargebacks, and issues him 2 full credits... 1-2 months after the call, the internal "loss prevention department" at the processors decides to issue 2 more full credits, however in the meantime the subscriber have talked to his bank, and they have chargeback 2 months, which are received by the processor 1 month after they made the last 2 credits...

Subscriber have claimed fraud for 4 months
-------------------------------------------------------------
Processor have issued credits for 4 months
Subscriber have his bank chargeback 2 months
--------------------------------------------------------------
Total paid back to subscriber 6 months
Total paid by subscriber 4 months

That means the subscriber have gotten money for 2 months access, which he never have paid. At $30-40 per month - thats $60-80 (plus chargeback fees etc.). Would you try and collect the money from the subscriber or just write it off as bad luck? :unsure:

[Mutt]

that would be nice if all the processors adopted that policy, keep track of the trial and cancel junkies, once they've done it once or twice in a month the next time they try to sign up for a trial they get a page which tells them only one trial membership per month is allowed then send them back to a join page with only the month and 3 month option.

[Rolo]

Good idea Mutt :okthumb:

I wouldn´t mind if its only possible for 1 trial per 30-45 days per paysite, and if processors also only allowed max. ammount of trials/subscriptions per card holder in a given period. Guess the processors have already things like this in place, but if they haven´t then it would be a great feature (like the option to pay full monthly subscription, if card is declined because it already have had a trial within the last few days/weeks).