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An Israeli web app fights credit card fraud

Posted By Brian Blum On November 3, 2011 @ 12:00 am In | No Comments

BillGuard scans your bills for scams, saving users more than $250,000 in first two months of beta testing.

If you’re like many people, when you get your credit card statement you probably give it a quick skim. Going through all the charges line by line just takes too much time, so you hope for the best and trust in your card provider.

That’s not the best idea, says Yaron Samid, CEO of the hot new Israeli startup BillGuard. But not to worry: BillGuard will do the scanning for you, looking for scams, bad billing practices, double charges and errors. Samid estimates that BillGuard finds at least one bad charge for one out of every five subscribers of the free service.

In the first two months of beta testing, BillGuard, which just raised $10 million in a second round of financing last month, saved users more than $250,000 in refundable charges. That’s a lot of cash to the consumer, and it usually comes direct from banks, which would rather honor a claim than get into a time-consuming dispute. With such benefits to both banks and consumers, it’s little wonder that BillGuard has already raised $3 million.

The team behind BillGuard.

The company won O’Reilly Media’s 2011 Big-Data Startup of the Year and was a runner-up in the TechCrunch Disrupt 2011 Top Startup of the Year competition.

A people-powered movement

Credit card fraud is a crime netting some $7 billion a year for scammers. “10 million US cardholders get hit by some sort of fraud every year, but banks only catch 30 percent of it themselves,” Samid tells ISRAEL21c.

After you sign up on the BillGuard website, the service scans your online credit card statement daily, looking for fraud from sources that the company has logged into its database from a wide variety of publicly available complaint boards, discussion groups and even Twitter posts.

When you see an incorrect charge on your statement while inside the BillGuard website, you check a box. As soon as the software senses a pattern, the dispute is added to BillGuard’s database and flagged for the next user. “It’s a people-powered movement,” says Samid. “We simply structure the data that’s already out there.”

The service provides an easy-to-read summary of its findings.

The idea behind BillGuard is the same one every big email service – from Gmail to Yahoo – employs to beat spam. Users mark offending emails, and the next time a message from the same address arrives, it’s automatically booted into the trash box.

Three types of fraud targeted

BillGuard catches three main categories of problem charges.

First are unwanted subscriptions, typically “free” credit reports you receive after providing a website with your payment details. “What you might not realize is that only the first report is free; after that you’re paying upwards of $15 per month,” Samid explains.

Next are hidden charges. Cell phone companies are notorious, Samid points out, “by baking into the contracts miscellaneous SMS or ring-tone charges. You don’t realize you’re paying an extra $10 per month.”

Finally, there are the subtle frauds. For example, it’s very easy for a hacker to create a website with a generic name like Books4UForever, get a merchant account and charge you for a purchase of $8.99. You look at the charge, try to remember if you bought a book recently, scratch your head and move on. But when the scam is being run on tens of thousands of cards, that adds up. “And it’s a lot less noticeable than if a hacker is making single charges for $8,000 each,” Samid says.

The problem is widespread. “If you’ve used your credit card to shop online in the last two years, the chances are your credit card is sitting on a hacker’s platform now,” Samid says. Breaches happen daily; we only hear about the really big ones. “The only question is if your card will ever be used.”

This raises another question: Why would you feel comfortable giving your sensitive login information to some startup in Tel Aviv?

Samid has a handful of answers. First, you’re not giving access to your credit card, just to your online statement. The worst that could happen is that a hacker could see where you shop, but couldn’t make any charges.

Second, BillGuard’s investors and advisors come from some of the biggest security companies out there: Verisign and McAfee, as well as the lead investors in LinkedIn and Skype. And BillGuard doesn’t directly “talk” to the banks — that’s done through a third party called Yodlee, a banking industry standard for account aggregation that Samid says is “rock solid. It’s never been broken into.”

Banks love it

Cooperation with banks is key to the system — and also how BillGuard makes its money, since the web app is entirely free to the consumer. As Samid explains it, banks love BillGuard.

“We’re building a central collaborative database [of fraud] that will provide the banks with advanced card protection services. If we can weed out bad merchants faster, that brings down their costs.”

BillGuard will sell the database to the banks, which can then offer the service to their customers. Samid sees BillGuard leading the industry, creating standards and issuing white papers, doing for billing fraud what the anti-spam industry did for email.

BillGuard covers 5,000 issuing banks but is currently only available for US credit cards. Look to see it integrated into personal finance programs like Quicken down the road.
The app also offers an online resolution service. Customers can click a button on their online statement and quickly (even instantly) receive their money back from a disputed transaction, rather than being routed through an expensive call center. “The bank can stay entirely out of the loop,” Samid says.

Samid envisions creating a certificate program like McAfee Hackersafe. A merchant would receive a dynamic badge displaying its “BillGuard score,” indicating whether it’s safe or not to shop there.

The Israeli-born Samid had lived in New York for many years but moved back to Israel to found the company with 24-year-old Raphael Ouzan, who spent his army service in the elite 8200 division. The company has 12 people working in Herzliya.

Samid is now returning to New York with his family to head up sales and marketing efforts. “From the personal side, it’s definitely a bummer. But there is so much activity going on in the States — it’s taken off like a rocket ship,” says Samid, who’s well known in the Israeli tech scene for founding an invitation-only Israeli professional networking organization called TechAviv, which has branches in Tel Aviv, New York, Boston and Silicon Valley, with more than 2,000 members.


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