A fraud protection service against scams targeting the elderly
True Link Financial has created a safe form of payment for seniors, adding a fraud protection layer to a Visa card that enables their family to help protect them against scams, fraud, and unwanted spending. Users can set limits on spending and withdrawals, block purchases from specific merchants and receive alerts of suspicious activity— all while maintaining seniors’ independence.
Keeping track of finances is one of the trickiest parts of caring for elderly parents and grandparents. Seniors are particularly vulnerable to credit card fraud and scams, but monitoring accounts is time-consuming for caregivers. And the subject is emotionally loaded, too—conversations about spending can be difficult for older adults who want to preserve their autonomy. The dilemma will affect more families in coming years—longer life spans and aging baby boomers combined will double the population of Americans aged 65 years and older during the next 25 years to about 72 million, according to the Centers for Disease Control and Prevention.
True Link Financial co-founder Kai Stinchcombe experienced the challenges in his own family. “Years ago, we discovered my grandmother was spending a third of her income donating to charities, many of which were fake,” Stinchcombe says. “Since then, we uncovered something new almost every week—a hearing aid scam, an unwanted magazine subscription, ‘free’ trials ordered from TV, money wired to someone posing as a relative.”
Stinchcombe and his co-founder and Chief Product Officer Claire McDonnell—who also watched two of her grandparents get scammed—have developed a debit card to head off those rip-offs. The result is a card that protects its users and keeps caregivers in the loop.
Protection with a personal dimension
Investment scams, fake charities, sweepstakes set-ups, phishing schemes, confidence games, useless medical gadgets and scammers posing as relatives can all drain the financial resources of the elderly. And identity theft experts say that senior citizens, especially those in retirement communities, nursing homes and senior-living centers are the most susceptible to credit card theft and fraudulent use of Social Security numbers. Credit card fraud alone has increased 87 percent since 2010, resulting in a loss of $6 billion annually, according to Javelin Strategy and Research. What’s more, many seniors don't regularly check credit-card statements, review credit reports, or monitor their bank statements closely enough to catch problems.
While scamming is widespread today, it doesn’t need to be tolerated, Stinchcombe says. “Why are we getting ripped off all the time? Since when did that become okay?” he says. “I think there will be a consumer movement.”
It’s a movement True Link hopes to lead by changing what’s in seniors’ wallets.
How it works
The True Link Prepaid Visa Card offers a customizable, personalized check against fraud to ensure that purchases and donations are intended—and recipients are legitimate. It’s a Visa card with built-in scam detector designed to provide security and peace of mind.
Each swipe of the card activates the Visa network, which routes the transaction to True Link, where the platform examines the transaction to see if it matches blocked or restricted categories, individually blocked merchants, or if it exceeds a certain spending limit. If it does, the user—usually a caregiver or family member—is alerted by text message or email and can accept or reject the transaction. True Link also keeps track of known scammers and suspicious merchants to head off any problems before any money is spent. The card has a $20 annual fee after the first free year.
Solving a problem that matters
“What gets me excited is solving a problem that really matters to people,” McDonnell says. “When people have this problem, they cry about it. I was talking to someone last week whose dad lost 75% of his retirement savings and will live for the rest of his life on a fraction of what he worked for forty years to save. This is a big, emotional problem for people.”
Senior scamming is something many of us know about, and yet “it’s everybody’s secret,” Stinchcombe says of the shame involved in getting tricked out of your money. “Elders don’t go to law enforcement. They don’t go to their families. … They feel stupid.” Concerned family members balance the need to preserve seniors’ dignity with the priority of financial security, often conducting painstaking review of bank statements and purchasing history.
Repeat entrepreneurs, McDonnell and Stinchcombe were friends for years before working together. Their experience is varied—McDonnell previously worked on a mobile nutrition company while Stinchcombe co-founded Aktana, a sales force effectiveness platform. After discovering the costly and tragic issue of senior scamming, Stinchcombe joined Lendup for a year to gain experience at a financial services company.
Ultimately Stinchcombe says he founded True Link Financial to safeguard his grandmother’s wallet and preserve his own peace of mind. “I do feel fortunate to have a job where I’m helping elderly people rather than ripping them off,” Stinchcombe says. “There’s somebody whose job is sitting in a call center eight hours a day getting calls from people upset about hidden charges on some product and telling them, ‘We can’t refund that.’”
True Link aims to help families while tapping into a growing market of the elderly—the founders hope to partner with elder care organizations down the line. “There’s a way to solve the problem through a solid business, and that’s a really special thing,” McDonnell says. “We’re taking an existing business model that works and improving the service dramatically through technology.”
What type of fraud do you protect against?
True Link protects seniors against outright fraud, as well as the kinds of everyday financial attacks against the elderly that are even more common.
Here's a typical example. An agency sends three free unsolicited issues of a magazine to an address in a retirement home, and then after three months they call and say that you've been getting this magazine and you haven't yet paid for it and now it's time to pay. A person with memory loss may not be in a position to insist that they never signed up for it – it's very easy to confuse that person and make them think they owe money for something they bought. And so the salesperson hasn't lied, it's more like they pushed the person toward buying the magazine rather than letting the free trial expire.
This type of sales process is very common in targeting the elderly. For example, about three fourths of telemarketing is to the elderly. Another typical example is high-overhead charities – that spend 97% of their budget paying for-profit "fundraising consultants" and scarcely donate a dollar to the causes they purport to care about. It's not illegal, but it's certainly wrong.
This type of "unwanted purchase" isn't covered by the fraud protection offered by your bank or card issuer. If you tell them your card was stolen and used to buy a blender with a $200 shipping & handling charge, they'll refund the money. If you call and say you bought a blender and didn't notice the outrageous shipping & handling charges in the tiny print, they'll suggest you call and ask for a refund. Our goal is to stop that unwanted transaction before it happens.
How do you acquire customers?
We see our customer as the person who helps manage the True Link account – take for example, a daughter helping with her mother's finances. We've found that this caregiver's escalating involvement in her mother's finances is characterized by spikes and new normals.
The events that cause a spike are (a) memory- or cognition-related diagnoses, (b) financial emergencies or irregularities, or (c) life transitions such as a change in housing, the loss of a spouse, or a fall or injury. Our approach is to communicate with the customer during these moments of increased involvement. We do this by understanding their search process – who they consult, what they're looking for, how they understand the problem, who they trust, and what "search keywords" they're using both online and offline – and then being a genuine resource for them.
In memory diagnoses, they are searching for help with managing a new and scary disease: they look at caregiver forums and resources, and join organizations like the Alzheimer's Association, for example. In financial emergencies, they're looking for a fix to a specific burning problem – how do I unsubscribe a person from all catalogs? how do I get my mom on the do-not-call list? how do I get a refund from the DVDs I ordered on TV? – and we approach this as long-tail search optimization and marketing. For life transitions, our goal is to be integrated into that transition process – for example, be in the stack of brochures the social worker or discharge nurse gives you at the hospital, or for the in-home caregiver or retirement home placement agent to mention our service.
In summary to get in the decision moment, it's content, social media, search marketing, and partnerships with nonprofits, retirement homes, financial institutions, etc.
Finally, we think there's a natural opportunity to be in the press and social media – and primarily by creating useful shareable content such as fraud alerts, and by telling the story of individual people who have been victimized by fraud and how you can protect yourself. This will put us "out there" so that when someone is in that moment of transition, they or a family member will be aware of the product and have a favorable impression.
How does the protection service work?
When you swipe the card (or give out the card number online, over the phone, or by mail order) the transaction is routed over the Visa network to our servers. There, we compare it to the spending profile of the cardholder, examine the merchant and its reputation, and decide whether that person is being scammed. In most cases it's clear as day, but if not we can send a text message to the caregiver, so she can decide whether it's wanted or not.
Who are your potential competitors? Why doesn't Visa just do this?
Visa is a partner of ours – they don't issue cards themselves. The natural competitor would be Chase, Wells Fargo, Citi, etc. – the big consumer card issuers. They typically don't build software themselves, but rather license it from vendors. If they want to offer this sort of protection to their customers, they would license it from us – there's no reason they would hire someone to build a competitor.
How will you make money?
Service fee – Our customers think of this as parallel to credit protection or identity theft protection, and expect to pay for this service on a monthly or annual basis. We're still experimenting to find the appropriate price point.
Processing fees – When you pay with a credit card, the merchant gets slightly less than the face value of the charge. This difference, called the "merchant discount" is how Visa, the merchant bank, and the issuing bank earn the money to pay for your frequent flyer miles and other value-add services. Our share is about 1% of the transaction.
Add-ons – For example, if we offer a bill-payment service.
What are your funding milestones?
We think of this investment opportunity in three stages. Our first round of investors, in February 2013, was betting that we could develop this product – integrate into the processing rails, get a card program approved, go through the necessary regulatory and diligence process. The current round of investors is betting that we can find a sustainable customer acquisition channel. At a Series A, the investors will be betting on whether we can scale that acquisition process.
How big is the market?
Card issuers currently earn $1.9b in processing revenue from 11m financially independent seniors with memory loss or mild impairment. If these seniors switch to using our cards, we will earn that $1.9b. But we see the market as much bigger, with natural extensions into teen cards, college students, alcoholics and addicts, small business owners issuing configurable cards to their employees, etc.
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