Consumer fraud is not a major source of chargebacks

[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.

[Olivier]

Very good analysis and I think it makes sense.
I'm not running paysites, so I might not be right, but I think people are making chargebacks because they feel guilty to join a porn site, or their wife discovered it, hence your 81%.

Fraud must be eliminated and those people should face criminal charges.
Also, making people more open to porn, will help to avoid charbacks because of feeling guilty or because of the wife!

Cheers!

[Paul Markham]

I don't see why people would sign up, pay the membership fee and then not look at the site. Just seems crazy to me.

But I think with these new rules some sites are going to be in trouble. The ones that believe the surfer is an idiot, throw enough traffic at it and fill it with anything days are over.

[NetRodent]

Originally posted by Paul Markham
I don't see why people would sign up, pay the membership fee and then not look at the site. Just seems crazy to me.

Its crazy, unless its an affiliaet and not the cardholder signing up.

[quotealex]

Originally posted by NetRodent
Its crazy, unless its an affiliaet and not the cardholder signing up.

If you have a PPS program, a large percentage of the 81% could be rings of webmasters using cc to signup just to collect the $25-$45 referals....

[Taass]

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.

Aren't they getting their confirmation and login details in the mail after signing up ?
In that case i guess if they entered a wrong e-mail and never got the pass that could explain it

I wonder how many of them the wife or Girlfriend just came home earlier than expected

interesting post by the way

[Fyrflygrl]

I would place a hefty bet that these members are in the 'heat of the moment' group of visitors to your site.... someone whose mom, wife or husband was out for errands, etc... opening a perfect, but short lived, window of opportunity for a little personal time.

I also think you're 'right on' about monitoring new membership activity for a reasonably accurate way to intercept a charge-back.. question:

How will you do it? If the member hasn't logged in, will you simply cancel the membership yourself?

Thanks for sharing your brain waves