Chargebacks are not caused by consumer fraud

[NetRodent]

In this industry you hear a lot of complaints about how easy it is for a customer to chargeback. Often these complaints are followed by implications that savy consumers know they can join a site, view all the content and never have to pay a dime. In light of the new Visa 1% rule, I've been doing some analysis of our recent chargebacks and it seems like cardholder fraud isn't the problem.

Our chargebacks from June can be broken down as follows:
21% - members never logged in
60% - members not logged in during period charged back
13% - members logged in two times or less during during period charged back
6% - members logged in more than twice during period charged back

Only 6% of our June chargebacks came from people who were actually using the site. Even if you assume that all of these are cardholder fraud (instead of stolen cards) it doesn't seem like a significant number.

In a sense its good news that 81% come from people who aren't using the site. People shouldn't be paying for services they aren't using, so it seems that by monitoring inactive accounts a large percentage of chargebacks could be avoided.

Interestingly, it also seems that members who never logged in were much more likely to have supplied a bogus looking email address. I don't have stats to support this last assertion, just a gut feeling.

I'd be very interested to see if anyone else has done a similar analysis.

[Brujah]

Originally posted by NetRodent
...

Interestingly, it also seems that members who never logged in were much more likely to have supplied a bogus looking email address. I don't have stats to support this last assertion, just a gut feeling.

Sorry, but if I give my real address I always end up getting spammed to death. I stoppged giving it out.

[Theo]

very interesting post,i can tell for 1st hand very few program owners have such data....if any.

[NetRodent]

Originally posted by Brujah


Sorry, but if I give my real address I always end up getting spammed to death. I stoppged giving it out.

I do the same thing unless I'm spending money. Anywhere I spend money gets a valid but unique email address so I'm sure to receive receipts or other valid correspondance.

[micky--ams]

you have a point there, just want to add something to pple using the site and not paying:

and its what I hate the most - and it happens not daily but regularly enough to get me mad:

the members that pay by check and get their money back through their own bank - NOT through the payment processor.
They either have a good realitonship ith their account manager, or use excuses to get their money back.

this sucks big time

they DO use the site, and just walk over to their bank with any excuse and get their membership fee back !

Nothing we nor our processing companies can do about this.

I know its a bit off topic- just had to mention it once ;)

For the rest, I agree that on teh cc payments theres not too much fraud happening - at least not in our experience.

Michael

[Matt 26z]

Assuming you do enough sales to make these numbers valid, it certainly flies in the face of what many around here preach.

Obviously in this instance people are either forgetting to cancel, and/or they have no idea what recurring means.

[$tandaman]

do you have resellers?
if you do, dont you think some of them could card signups, and never log into the members area?

[NetRodent]

Originally posted by micky--ams
the members that pay by check and get their money back through their own bank - NOT through the payment processor.
They either have a good realitonship ith their account manager, or use excuses to get their money back.

this sucks big time

they DO use the site, and just walk over to their bank with any excuse and get their membership fee back !

However, they're not getting their money back. They never gave you any money in the first place. The account information they gave your processor probably doesn't even exist. Since there's no way to verify a check in real time, you can enter pretty much anything for the ABA and account numbers and get approved.

[NetRodent]

Originally posted by $tandaman
do you have resellers?
if you do, dont you think some of them could card signups, and never log into the members area?

We have a few resellers but most our traffic is in house. We have had some resellers do as you descibe so we watch our affiliates very closely. Some of the chargeback I used to generate the above stats come from affiliates, but those would
be the minority.

[NetRodent]

Originally posted by Matt 26z
Assuming you do enough sales to make these numbers valid, it certainly flies in the face of what many around here preach.

Obviously in this instance people are either forgetting to cancel, and/or they have no idea what recurring means.

It flies in the face of what I expected prior to looking at our numbers. I had always assumed a significant percentage of chargebacks came from husbands who lied to their wives about how a charge from a porno company got on their credit card statement.

[tony286]

I have to tell you , I switched to achdebit for my checks. For the first time I am seeing money on checks. I pay I little extra because I have two forms of scrubbing on it but its worth it. There was nothing worse then 29 checks signups and 22 were bad and your third party processor is only paying you $29.95 for 7 left because of returned check fees and other charges.

[xxxdesign-net]

21% - members never logged in
<b>-Not fraud, I agree!</b>

60% - members not logged in during period charged back
<b>How's That not fraud?? You forgot to cancel.. You PAY!!</b>

13% - members logged in two times or less during during period charged back


6% - members logged in more than twice during period charged back

[Webby]

NetRodent:

Yep.. inclined to agree with you... I did that survey a few months back and it looked very similar to the percentages you quoted.

There are the odd "hit the bandwidth and contest the charge" cases, but they are pretty low.

Inaccessibility or "no use" was the main reason for CB's.

[micky--ams]

Originally posted by NetRodent


However, they're not getting their money back. They never gave you any money in the first place. The account information they gave your processor probably doesn't even exist. Since there's no way to verify a check in real time, you can enter pretty much anything for the ABA and account numbers and get approved.

true and not true
this also happens after 3 - 4 weeks

so the money was transferred and they have been seeing the content and dl the movies and stuff

I wasnt talking of of it happening in the first few days only

mick

[BRISK]

Maybe the CC processors should make an option of sending an email to members that haven't logged in for X number of days?

Like if a member hasn't logged in for 10 days, an automatic email goes out that says something like:

"Hey! We've missed you over at www.xyzpaysite.com , in case you forgot, here are your login details:

user:
pass:

Come by the site and check out our new pics and videos!"

Keep your members involved with your site and they'll be much less likely to charge back IMO.

[smut4all]

I know Maxcash did something similar, but their numbers were all different. 65% of chargebacks were from people logging in reg, but canceling. 20% I think was from people logging not too often, the rest dont' remember.

[playa]

My guess is that there would be more fraud from PPS sponsors

I noticed european card holders was able to chargeback alot easier.

[NetRodent]

Originally posted by BRISK
Maybe the CC processors should make an option of sending an email to members that haven't logged in for X number of days?

Like if a member hasn't logged in for 10 days, an automatic email goes out that says something like:

"Hey! We've missed you over at www.xyzpaysite.com , in case you forgot, here are your login details:

user:
pass:

Come by the site and check out our new pics and videos!"

Keep your members involved with your site and they'll be much less likely to charge back IMO.

That would probably reduce the number of inactive members who charge back, but it should be the site, not the billing company, sending the email. I also have to wonder how much an email like that would hurt rebills.

Originally posted by smut4all
I know Maxcash did something similar, but their numbers were all different. 65% of chargebacks were from people logging in reg, but canceling. 20% I think was from people logging not too often, the rest dont' remember.

I'd love to see that study. Any idea when/where you saw it?

Originally posted by playa
My guess is that there would be more fraud from PPS sponsors

I noticed european card holders was able to chargeback alot easier.

The above stats don't really take into account fraud by an affiliate. The 21% who never logged in could all be from affiliates in our pay per signup program, but I didn't correlate the chargebacks to the affiliate for the purpose of this analysis.

[Babaganoosh]

Oh sweet. I have a car that I bought a year ago or so that I haven't driven much lately. Does that mean I can get my money back from the seller? Sweet deal. I will call him right now.

[goBigtime]

Originally posted by NetRodent


In a sense its good news that 81% (of the charbacks) come from people who aren't using the site. People shouldn't be paying for services they aren't using, so it seems that by monitoring inactive accounts a large percentage of chargebacks could be avoided.

In that case my cell phone provider should turn off my extra cell phone... as it just sits here 99.999% of the time doing nothing.

I ordered it.

I can't go back 6 months later and say "hey I never used this... I'm gonna charge it all back."


NetRodent - Now rerun your stats & figure out how much of your legitimate revenue base you would be killing off if you decided to start clipping 'idle' accounts.

Just because some people want to be scammers and chargeback stuff that they know they ordered, and have all the info they need to cancel at any time..... doesn't mean everyone is like this.

Most people own up to the fact that it's their irresponsibility & procrastination that led to the recurring billing after they might have wanted to quit.

We're just businessmen - not mind readers. We don't know when they want to cancel.

[SweetT]

Hi Netrodent...

I appreciated your post as it was well thought out and well articualted (something you dont find much here in this forum ;)

I did however, want to respectfully take exception to one point:

Originally posted by NetRodent
People shouldn't be paying for services they aren't using, so it seems that by monitoring inactive accounts a large percentage of chargebacks could be avoided.

See, I disagree with this whole-heartedly. I will use one analogy that I have often used: If you rent a car, park it in the drive way and never drive it...do you still have to pay for it? At first you may think that it is not the same, but in reality it is exactly the same. A paysite has to be sure that it has ample hardware, bandwidth and content for its members to be able to access the site...even if they never come. These expenses are incurred even if the member never visits the site so yes, they should still pay for it even if they dont come and visit.

Just my $.02...other than that I thought your post was very well stated.


--T

[wimpy]

I don't think we need to monitor for fallow accounts. a year ago I saw a post by someone (I forget who) who is a frequent poster and seems well respected, a well known sponsor, and he said he immediately cancels any account that gave him an invalid email address and his chargeback ratio was near zero.

If they're gonna do fraud, they don't want to give any real info, so the e is invalid. He said that he has cancelled lots of accounts due to invalid e and never got a complaint about access failure.

Wish I could remember who that was, but it makes sense and I believe it.

[tony286]

Two examples we had a customer the other day. Who wrote us saying he hadnt been on it months, couldnt remember his username and password. It turned out he has been a member for 10 months , we have few that stay members for a long time and dont go in all the time but when they want to they want it there for them. Second example I have a membership to adultstaffing I dont go in all the time but i keep it.

[NetRodent]

Originally posted by goBigtime



In that case my cell phone provider should turn off my extra cell phone... as it just sits here 99.999% of the time doing nothing.

I ordered it.

I can't go back 6 months later and say "hey I never used this... I'm gonna charge it all back."


NetRodent - Now rerun your stats & figure out how much of your legitimate revenue base you would be killing off if you decided to start clipping 'idle' accounts.

Just because some people want to be scammers and chargeback stuff that they know they ordered, and have all the info they need to cancel at any time..... doesn't mean everyone is like this.

Most people own up to the fact that it's their irresponsibility & procrastination that led to the recurring billing after they might have wanted to quit.

We're just businessmen - not mind readers. We don't know when they want to cancel.

I'm going to be running those numbers today. I imagine the majority of idle accounts don't chargeback and culling them would probably result in a huge loss of revenue. If that's the case, there's a potentially fatal flaw in our business.

Lets take your cellphone example. What percentage of cellphone subscribers don't get any value from their phones for months at a time? A cell phone can still be of value even if you don't use it (ie in case of emergencies or to recieve infrequent but important calls). I would venture to guess that most cellphone subscibers use their phone. I would also venture to guess that most cellphone subscribers know they have a phone and understand their financial responsability to the phone company.

In the case of a porn site, there is no value to someone who doesn't use it. You can't claim that someone would keep a subscription for an emergency session of masturbation. Also, convention wisdon in our industry is to make sure the subscriber understands a little as possible about the fact they will be rebilled.

In short I assume that most cellphone users know they have a phone and know they have to pay for it while most porn site members don't know they have a membership or that they have to pay for it. That seems like a pretty major problem. Perhaps that's the problem Visa is trying to correct?

[NetRodent]

Originally posted by SweetT
See, I disagree with this whole-heartedly. I will use one analogy that I have often used: If you rent a car, park it in the drive way and never drive it...do you still have to pay for it? At first you may think that it is not the same, but in reality it is exactly the same. A paysite has to be sure that it has ample hardware, bandwidth and content for its members to be able to access the site...even if they never come. These expenses are incurred even if the member never visits the site so yes, they should still pay for it even if they dont come and visit.

I rewrote that part of the post several times because it wasn't quite what I meant, and its still isn't quite right. If someone agrees to buy a membership (or rent a car) under a certain set of
terms, they should follow the terms. However, the issue comes down to understanding. In the case of the car, people know they have to pay even if they don't use. In the case of a paysite, people take the trial and don't know they have cancel if they don't want to pay. Is this the member's fault for not reading the terms or is the site's fault for not clearly disclosing the terms? I assume the average intelligence level of people who rent cars is the same as that of people who join paysites the problem probably isn't with the consumer.

[Strife]

interesting stats

[AbeFroman]

How about we devise a system where we disguise the initial charge as netmediablahblah but if they charge it back the statment will read "Cum Filled Teen Fisting Anal Sex Inc."

[polish_aristocrat]

1. I've done 1 charge back in my life.
Few months ago some fucker bought a membership to an email service provider with my credit card.
This was my one and only card and I needed it very often but I went to my bank asap ( I must had looked very scared LOL ), charged back that amount and at the same time applied for a replacement card.
IMO it should always be like that...
If someone finds a $39.99 bill on his credit card statement and he claims to have no idea what's that bill for, it's obvious that someone else got his cc details !
That means that he could use his cc again, for even a bigger purchase. If he doesn't apply for a new card, he's either an idiot or definitely a scammer, who's trying to charge back a valid purchase... Why Visa doesn't understand that ?

2. Someone said that some surfers don't understand how rebills work...
the best idea to reduce charge backs without eliminating rebills would be eliminating trials and every paysite had to say:
"I am purchasing a 1 month membership to "..." for $29.99.
I understand that I will be rebilled each month until I cancel my membership"...

[titmowse]

bump

this is interesting

[SpaceAce]

Originally posted by NetRodent


I'm going to be running those numbers today. I imagine the majority of idle accounts don't chargeback and culling them would probably result in a huge loss of revenue. If that's the case, there's a potentially fatal flaw in our business.

Lets take your cellphone example. What percentage of cellphone subscribers don't get any value from their phones for months at a time? A cell phone can still be of value even if you don't use it (ie in case of emergencies or to recieve infrequent but important calls). I would venture to guess that most cellphone subscibers use their phone. I would also venture to guess that most cellphone subscribers know they have a phone and understand their financial responsability to the phone company.

In the case of a porn site, there is no value to someone who doesn't use it. You can't claim that someone would keep a subscription for an emergency session of masturbation. Also, convention wisdon in our industry is to make sure the subscriber understands a little as possible about the fact they will be rebilled.

In short I assume that most cellphone users know they have a phone and know they have to pay for it while most porn site members don't know they have a membership or that they have to pay for it. That seems like a pretty major problem. Perhaps that's the problem Visa is trying to correct?

Dude, you're really stretching on this one. Your analogy is wrong and no matter how many words you use it will continue being wrong. When you agree to pay a flat fee for a service, it's tough noogies for you if you don't use it. It doesn't matter whether or not most people use their cell phones every month. Whether or not they use it, they pay. If you rent a house and go on vacation for a month, you still pay the rent for the month you were gone. If you buy or lease a car and it sits in your garage rotting away, you still have to pay. If you pay $39.95 per month for DSL and never use it, you still pay. It doesn't matter if you never watch your TV, if you have cable you pay for it. Subscribe to the newspaper? You pay whether or not you read it. Have insurance? You pay even if you never need it (yes it is a valid comparison... it's there when you need it, just like a porn site).

As for people understanding their obligation to the cell phone ocmpany, that's total crap. Unless you buried the rebill statement under the join button in a -3 font size, they know they will be paying monthly. Let's just see you try and pull that shit with any of the services I mentioned above. There is no excuse for this behavior. Unless the card was stolen, they owe for every month they were a member. If the card <I>was</I> stolen they should be required to get a new one. No more of this easy scam bullshit.

SpaceAce

[NetRodent]

Originally posted by SpaceAce


Dude, you're really stretching on this one. Your analogy is wrong and no matter how many words you use it will continue being wrong. When you agree to pay a flat fee for a service, it's tough noogies for you if you don't use it. It doesn't matter whether or not most people use their cell phones every month. Whether or not they use it, they pay. If you rent a house and go on vacation for a month, you still pay the rent for the month you were gone. If you buy or lease a car and it sits in your garage rotting away, you still have to pay. If you pay $39.95 per month for DSL and never use it, you still pay. It doesn't matter if you never watch your TV, if you have cable you pay for it. Subscribe to the newspaper? You pay whether or not you read it. Have insurance? You pay even if you never need it (yes it is a valid comparison... it's there when you need it, just like a porn site).

As for people understanding their obligation to the cell phone ocmpany, that's total crap. Unless you buried the rebill statement under the join button in a -3 font size, they know they will be paying monthly. Let's just see you try and pull that shit with any of the services I mentioned above. There is no excuse for this behavior. Unless the card was stolen, they owe for every month they were a member. If the card <I>was</I> stolen they should be required to get a new one. No more of this easy scam bullshit.

SpaceAce

Don't confuse the message with the messenger. I'm not saying I subscribe to the philosophy, but it seems to describe the situation. Perhaps instead of writing, "People shouldn't be paying for services they aren't using" I should have written, "People shouldn't be subscribed to services they aren't using."

I will agree with you that this isn't a problem for most businesses. I disagree with your insurance analogy because simply by having insurance, you're using it. Don't mistake filing a claim for use. I did property management before getting into adult and we never had anyone try to get out of paying rent while they were on vacation. I don't know the cell phone, car rental or cable business but I think you're probably right that they don't suffer from the "I didn't use it, I'm not paying for it syndrome". However, if you're right that everybody who joins a pornsite knows they're going to be rebilled, why does it seem like more of a problem for pornsites than cable companies? Also, if its only people trying to get out of paying a valid bill, why is the percentage of chargebacks from active members so low?

[SpaceAce]

Originally posted by NetRodent

I did property management before getting into adult and we never had anyone try to get out of paying rent while they were on vacation.

That's my point, they are responsible for it whether they want to be or not. They pay when they aren't there because they are obligated to.

Originally posted by NetRodent

However, if you're right that everybody who joins a pornsite knows they're going to be rebilled, why does it seem like more of a problem for pornsites than cable companies?

You already know the answer to that. "These evil, thieving pornographers ripped me off" goes over easier than "This fine, upstanding corporate citizen ripped me off". I think there's also more ego/embarrassment reasons for people to want to deny their porn charges, too.

Originally posted by NetRodent

Also, if its only people trying to get out of paying a valid bill, why is the percentage of chargebacks from active members so low?

Because the active members are not the scammers. Even if the people charging back are not "scammers", the "I didn't log in" excuse is still bunk. That may actually be the reason someone is charging back but it doesn't justify the act.

SpaceAce

[Kimmykim]

Without resellers factoring into the equation you have a nice picture to look at.

[Mr.Fiction]

If this data was to be validated by the processors, then couldn't they run some sort of system that would (optionally) only re-bill people who have logged in in the last $X days.

If someone hasn't logged in within say 20 days of their rebill date, then an email is sent and if they don't respond, then the rebill is canceled.

Maybe you could even make it so that the re-bill is re-activated if they re-login or something like that?

Is a system like that a possible way to prevent chargebacks?

Kimmy knows all the numbers. How much money would you lose, versus how many chargebacks would you get rid of?

[Mr.Fiction]

I thought this thread had some potential, so I'm giving it a nudge.

[siccmade]

Originally posted by BRISK
Maybe the CC processors should make an option of sending an email to members that haven't logged in for X number of days?

Like if a member hasn't logged in for 10 days, an automatic email goes out that says something like:

"Hey! We've missed you over at www.xyzpaysite.com , in case you forgot, here are your login details:

user:
pass:

Come by the site and check out our new pics and videos!"

Keep your members involved with your site and they'll be much less likely to charge back IMO.

I don't own any paysites, but this could be a good idea.

Not to all members who havn't logged in for x amount of days, but only to NEW members who have never logged in, and after 10 days you could send them an email with their details

but, wouldn't it help if you also included a cancle link? Maybe they signed up and forgot about it, or maybe something happend to where they don't want it anymore.

Some surfers are stupid, and may think if they don't login, they won't be charged.

With a cancel link, these surfers will cancel when they read the email before they get charged and charged again and end up charging back.

and while we're talking about emailing subscribers, why not shoot the ones who cancelled an email after 30 days telling them about all of the great updates you've made to your site since they left?

[mrthumbs]

Originally posted by NetRodent
People shouldn't be paying for services they aren't using, so it seems that by monitoring inactive accounts a large percentage of chargebacks could be avoided.

this whole industry is build on this..

[Mr.Fiction]

Originally posted by mrthumbs


this whole industry is build on this..

Maybe now is a good time to start thinking about some changes?

Does any script/processor currently offer the option of emailing inactive members an unsubscribe link or automatically cancelling anyone who doesn't login in a certain amount of time?

It sounds like a good option, even if you don't think the big guys would use it.

[TaDoW]

It's all about customer service ...


sure we could milk it for more than we are currently, but our chargeback rate is 0.06% for the past 6 months.


How? Why? because we only advertise what is in the site. We never let a customer support email go unanswered. And we always provide links to the customer support page from anywhere the user is on our site.

There's the E-A-S-Y solution, and if everyone would adhere to it, visa and MC wouldn't even be looking in our direction.

[Carrie]

Originally posted by Mr.Fiction
If this data was to be validated by the processors, then couldn't they run some sort of system that would (optionally) only re-bill people who have logged in in the last $X days.

If someone hasn't logged in within say 20 days of their rebill date, then an email is sent and if they don't respond, then the rebill is canceled.

Maybe you could even make it so that the re-bill is re-activated if they re-login or something like that?

Is a system like that a possible way to prevent chargebacks?

Kimmy knows all the numbers. How much money would you lose, versus how many chargebacks would you get rid of?

There is a system like this - it's called AOL.
Cancel your subscription with them, uninstall the software, and they will STILL leave an icon on your desktop "just in case" something happens and you want to use them again.
The fucking instant you hit that icon (which you are now trained to do in order to get online), you are logged in, your account is re-set as active, and you are charged, baby.

And it's all in the extremely fine print on the cancel page.

Btw, I like the chargeback = "teen anal fucking sex site" statement line. LOL.

[Carrie]

I wish some sponsors would read this thread and get some ideas.
I probably have an account at every sponsor program in existence.
But I can only find about half of my usernames and passwords.

The number of sponsors who don't have a "forgot your password?" link is amazing. Such a stupid little thing to add that would make life so much easier.

The number of sponsors who send out update newsletters without including your username and/or password is also amazing. Yep, your new features look really cool. But I can't log in, because I can't find my frigging nonsensical username that you assigned me, and you don't have a "forgot password" link on your site, and you don't bother to include my username in the spam you just sent.
Oh well, your loss... see, the other sponsor who spammed me in the past ten minutes DID include my username, which I'm now adding to my list that I'm actually keeping these days, and in about thirty seconds I'll be logging in to their site to take a look at their promo material...

Needless to say, I think emailing inactive members with their username and password is a good idea. It's just good customer service. (And of course include an irresistable list of updates that you've done.)

[mrthumbs]

Originally posted by Mr.Fiction


Maybe now is a good time to start thinking about some changes?

Does any script/processor currently offer the option of emailing inactive members an unsubscribe link or automatically cancelling anyone who doesn't login in a certain amount of time?

It sounds like a good option, even if you don't think the big guys would use it.

You have no idea what impact this 'fair policy' will have..

This industry is build on sleeping rebillers.. really..

However: if we dont do this ourselves (and we wont) eventually the cc companies will take care of this by prohibiting rebills 4 adult..

Sounds crazy eh? Just wait and see..

[polish_aristocrat]

Originally posted by Mr.Fiction


Maybe now is a good time to start thinking about some changes?

Does any script/processor currently offer the option of emailing inactive members an unsubscribe link or automatically cancelling anyone who doesn't login in a certain amount of time?

It sounds like a good option, even if you don't think the big guys would use it.

I've herad that Probill ( ? ) emails all membersevery month if they want to be rebeilled and it certainly reduces the rebills...

[polish_aristocrat]

Originally posted by TaDoW
It's all about customer service ...


sure we could milk it for more than we are currently, but our chargeback rate is 0.06% for the past 6 months.


How? Why? because we only advertise what is in the site. We never let a customer support email go unanswered. And we always provide links to the customer support page from anywhere the user is on our site.

There's the E-A-S-Y solution, and if everyone would adhere to it, visa and MC wouldn't even be looking in our direction.

you don't pay $35 per sign up ?