Israeli web app, currently available in the US, aims to save consumers and banks from scams, bad billing practices, double charges and flat-out errors.
 The team behind BillGuard |
Yaron Samid, CEO of Israeli startup BillGuard, lives and breathes credit card fraud. No, he's not a heinous perpetrator. His company helps protect consumers from scams, bad billing practices, double charges, and errors that are costing the average American $300 a year.
Samid says that nine out of 10 people find it too time-consuming to go through their credit-card statements line by line and, instead, put their trust in the provider. Bad idea, says Samid. Credit-card fraud is currently a $7 billion-a-year business for scammers and upward of "10 million US cardholders get hit by some sort of fraud every year," Samid explains. "But banks only catch 30 percent of it themselves." The rest is up to you.
BillGuard's solution is both simple and sophisticated.
The simple part: After you sign up on the website, BillGuard scans your online credit-card statement daily, looking for fraud that the company has logged into its database from a wide variety of publicly available sources - complaint boards, discussion groups, blogs and even Twitter posts.
The sophisticated part: BillGuard applies the "power of the crowd" by enabling consumers to check a box when they see an incorrect charge on their statement. As soon as BillGuard senses a pattern, the dispute is added to its database and flagged for the next user. It's the same approach that's employed by web-based email providers that let users flag spam, which is then entered into a massive database of its own.
 The service provides an easy-to-read summary of its findings. |
Saved users $250,000
The results for the consumer are worth the extra effort: Samid estimates that, in the first two months of beta testing, BillGuard saved users more than $250,000 in refundable charges. That's good for the user and also for the banks, which can cut expensive customer-service phone time dealing with disputes (the banks eventually almost always eat the charges anyway).
The investment community has been highly supportive of the venture. BillGuard just announced a $10 million round in October led by Khosla Ventures. That comes on the heels of a $3 million investment in May 2011.
Samid describes the most common types of fraud that BillGuard catches. The biggest offenders are unwanted subscriptions, particularly those "free" credit reports you receive if you give a website your payment details. "What you might not realize is that only the first report is free; after that you're paying sometimes up to $15 per month," Samid explains.
Then there are hidden charges - the type where a cell phone carrier "bakes into the contracts miscellaneous SMS or ringtone charges," Samid says. You could cancel that extra $10 per month if you knew about it.
Finally, there are subtle frauds, like that $8.99 book purchase at AmazonRiver.com that you don't remember making ... but maybe you did? That's probably a hacker creating a fake website and scamming you. "It's a lot less noticeable if there are thousands of small charges than if a hacker is making single withdrawals for $8,000 each," Samid explains.
Do you really run the risk of being hacked? "If you've used your credit card to shop online in the last two years, the chances are your card is sitting on a hacker's platform now," Samid says.
Weeding out bad merchants
BillGuard originally proposed a business model where users would receive the basic service for free and pay a premium for extras. But at the TechCrunch Disrupt conference earlier this year, where BillGuard was a runner up for 2011 Top Startup of the Year, that model got shot down by the venture capitalist "judges." The consumer part of the service is now 100% free. The money comes from selling access to the BillGuard central fraud database to banks. "If we can weed out bad merchants faster, that brings down their costs," Samid says.
Samid also envisions creating a certificate program like you see online with McAfee Hackersafe. Merchants would receive a dynamic badge displaying their BillGuard score, essentially indicating "whether it's safe or not to shop there," Samid explains.
The Israeli-born Samid has had a back-and-forth life, shuttling between Israel and the United States. He eventually chose to live in New York, then decided to move back to Israel and now, with BillGuard really taking off, is relocating to New York for a second time. As with most blue-and-white startups these days, R&D will remain in Israel. The company has 12 people working in Herzliya and covers 5,000 issuing banks for US credit cards. With this month's new cash infusion, BillGuard will undoubtedly expand rapidly to other markets.
Ultimately, Samid says, BillGuard "is a people-powered movement. We simply structure the data that's already out there."
