educational

iBill: A Case Study

Jonathan Barnes
For almost a decade, Internet Billing Company (iBill) has been a leader in the online transactions processing business, focusing on protecting its customers from the dangers of online credit fraud. Recently, iBill enhanced this protection. Here's how:

The Situation
While purchases over the Internet have exploded, and more and more consumers are beginning to trust this means of doing business, Internet transactions remain among the most vulnerable to credit card fraud, not only because the transaction is solely electronic but because it’s often difficult to prove which web sites and customers are legitimate.

Fraudulent transactions often result in credit card "chargebacks" which can cost merchants, credit card companies and transaction processors large sums of money. In fact, according to CyberSource®’s 2004 Online Fraud Report, total online revenues lost to fraud are likely to exceed $1.6 billion for the year. As online purchasing reaches record numbers this year, it is becoming increasingly important for online payment processing companies like iBill to put best practices in place that virtually eliminate credit card chargebacks.

Recognizing the importance of secure online transactions, the team at iBill spent the better part of a year implementing a system of best practices in order to significantly reduce pricey chargebacks and better protect both merchants and credit card companies from fraud.

Strategy
iBill’s strategic plan to reduce chargebacks incorporated the following elements:

  • Clients are consulted about subscription price-points and business models and new client sites undergo a compliance approval process based upon our years of experience in online subscription billing.
  • CVV (Credit Card Verification Value), CVC (Card Verification Code) and CID (Card Identification Number) matching is now mandatory for all transactions – all transaction rules are processed utilizing CVV2 match criteria.
  • Zip code and/or street address for AVS (Address Verification Service) is now mandatory for all U.S. consumer transactions.
  • Free trials have been virtually eliminated and replaced with low dollar trials – Statistically free trials more often result in chargebacks because customers may not expect to be billed.
  • Cross sell offers were closely managed utilizing strict standards to ensure appropriate offers.
  • A monthly query has been created for high chargeback clients and the team at iBill has worked with clients to customize reduction strategies.
  • Backend affiliate scrubs and check reviews were implemented.
  • A review of all affiliate payouts is now conducted before affiliates are paid.
  • The fraud score from the Internal Fraud Scoring System has been placed into the backend fraud logs and is now used as a method of identifying bad transactions.
  • iBill spider’s the Web for over 150 Keywords to find prohibited content.
  • Third party risk solutions have been implemented. These models are rules-based scoring systems that check multiple criteria of a transaction and determines the likelihood of fraud.
  • Third party negative databases have been implemented.
  • All iBill Complete client transactions must now flow through required iBill fraud filters: Negative databases of credit cards, emails, IP addresses and many more filters.
  • Consumers receive detailed email receipts at all stages in the subscription life cycle.  For example, at the initial purchase the receipt outlines terms & conditions, how the charge will appear on their credit card statement and how to receive assistance.
  • iBill provides consumers with multiple ways to access information and manage their purchase.  Consumers can contact iBill via web, IVR, live agent or email.  Service is available 24/7 in over 15 languages. 
  • iBill ensures consumers have a consistent experience by  rigorous quality assurance and call coaching program and associates are required to achieve minimum call quality scores.  Additionally, all calls are recorded.

Results
Through the implementation of the best practices listed above, iBill has been able to dramatically decrease its chargeback percentages, therefore better protecting its clients from fraudulent charges. For example:

  • iBill’s Visa chargeback rate is now only .78%, down from 3.1% last year. (Visa’s chargeback threshold changed from 2.5% to 1% in October of 2003)
  • iBill’s Mastercard chargeback rate is now only .66%, down from 2.76% last year. (Mastercard’s chargeback threshold rate is 1%)
  • Affiliate risk has been mitigated. Affiliate programs are now a significant factor in online sales as well as a significant portion of online fraud.
  • As a result of iBill’s ongoing client education on risk management strategies and immediate feedback to clients that are above or nearing association chargeback thresholds, iBill has been able to prevent individual clients from going over thresholds. In addition, iBill has been able to help reduce chargebacks proactively for those merchants over threshold.

When it comes to secure online transactions processing, iBill remains at the top of its game. During the last five years, iBill has successfully processed over $2.0 billion in online subscriptions, representing millions of consumer transactions. And within the last few months alone, iBill has signed several new merchants that will represent approximately $21.0 million in estimated new revenues during the next year.

Finally, iBill has formed a partnership with Retail Decisions, an international full-service provider of risk monitoring and management for high-volume consumer transactions. The partnership, effective June 2004, will enable iBill to even further reduce the number of chargebacks while at the same time maximizing approved transactions. We believe our risk management processes are superior at identifying and eliminating business models that put iBill and our clients at risk.

By using iBill’s services, thousands of iBill clients have proven the Internet to be an efficient, profitable and safe sales and subscription channel. The team at iBill remains committed to giving clients the confidence to accept payments and the peace of mind that the customer making the purchase is the legitimate cardholder. iBill will continue to take every precaution necessary in order to maintain the highest standards for efficiently processing secure online transactions.

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