BillGuard, Backed by Khosla Ventures, Wants to Stop Sneaky Credit Card Charges

11/17/11Follow @jpruth

Yaron Samid, CEO and co-founder of BillGuard in New York, likens his company to Robin Hood and his merry band on a mission to return pilfered money to the masses. With $10 million raised in October in a Series B funding round led by Khosla Ventures, BillGuard has set out to further develop its technology, which combs credit and bank card transactions for suspicious activity. “Our big mission is to protect consumers from unfair and unauthorized charges,” Samid says.

BillGuard has been quickly gathering resources to pursue that goal. The company was founded in April 2010 and raised $3 million a month later in a Series A round. Other backers of BillGuard include Bessemer Venture Partners, IA Ventures, The Accelerator Group, Social Leverage, Founder Collective, SV Angel, Founders Fund, Innovation Endeavors, as well as individual investors Yaron Galai, CEO of content recommendation engine Outbrain in New York, and Joe Lonsdale, CEO of Addepar, a Mountain View, CA-based developer of a wealth management platform.

Samid says his company’s latest funding will support efforts to grow its user base and and sales in the United States, and to further business development. Currently BillGuard has a staff of 14 in Israel working on development and just two in New York. The company is hiring in marketing and sales in the States and is looking in Israel for more developers. “Roughly speaking, we’re going to double the size of the company in the next 12 to 18 months,” he says.

BillGuard identifies potential problems by comparing new transactions to complaints posted on the Web by other consumers about bogus charges. The system essentially crowdsources examples of fraud to screen for trouble, Samid says. “This is out there on Facebook, Twitter, complaint boards, and at the Better Business Bureau,” Samid says. “We structured and normalized the data and made it actionable.”

Other types of fraud protection on the market, he says, rely on algorithms and pattern analysis to detect suspicious charges. “No one has attempted to harness crowd knowledge,” Samid says. He says the challenges of collecting and processing such information have so far kept other companies from using such a method. Samid says the secret behind BillGuard’s technology is its team of developers, who previously served in the intelligence unit of the Israeli Defense Forces.

BillGuard is still working on a sustainable revenue model. BillGuard’s service is currently free for individuals who want to monitor charges associated with their credit and bank cards. Samid says he plans to sell BillGuard’s services to banks on a per-user basis. The banks would include BillGuard as part of their respective online services. BillGuard has not yet been adopted by any banks, though Samid says he hopes to see some placements next year.

For now, users can register their cards at BillGuard’s website, after which they will receive daily scans to discover billing errors, suspected scams, hidden fees, and other dubious charges. Users are alerted by e-mail if an item requires immediate attention, and they receive monthly reports with overviews of their transactions.

Hackers who steal credit card numbers are not the only culprits BillGuard monitors. Samid says some merchants add charges that customers are not immediately aware of when purchases are made. That can include payments for services the customer may not want. “Some merchants are taking advantage of consumers be employing deceptive billing practices that are meant to make us misinformed about what we are paying for,” Samid says. “That is over 80 percent of what we are finding so far.”

BillGuard also plans to offer a service merchants can use to verify that their transactions with consumers are legit. Samid says merchants incur chargeback fees when banks reclaim funds stemming from customer complaints. BillGuard is developing a certification system that provides real-time data to merchants when customers file complaints. The system will include analytics to corroborate the validity of the charges. That would give merchants the chance to resolve issues directly with consumers before banks get involved. “The consumer clicks a button and gets their money back; the merchant gets a loyal customer and also avoid the chargeback fee,” Samid says. “The bank wouldn’t be told.”

João-Pierre S. Ruth is the editor of Xconomy New York. He can be reached at jpruth@xconomy.com and followed on Twitter @jpruth. Follow @jpruth

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