Chinese Anti-Black Card Alliance stops more than $1.5M in iOS scams

Just how much money are virtual currency “black card” scams costing Chinese iOS developers? The Chinese Anti-Black Card Alliance has stopped more than $1.5 million USD in fraudulent transactions in just six months.

Black card scams, so named because they use fake or stolen credit card numbers, operate mainly on Taobao — China’s eBay equivalent. Sellers on the site offer virtual currency at a steep discount, often 50 percent off the actual value. The currency is bought on iTunes accounts attached to fake or stolen credit card numbers from outside China, and then transferred to the buyer’s game.

These scams are the reason it’s increasingly common to see Chinese apps with no English language support on the upper reaches of the U.S. top grossing apps charts. Once Apple filters out fraudulent payments from a developer’s earnings, as much as 50 percent of a company’s revenues can vanish. Beijing-based Hoolai lost over $300,000 in one month alone due to the scams.

This is why CocoaChina, also known as Chukong/PunchBox, created the Anti-Black Card alliance last October. Made up of some of the biggest developers in China, the group’s member 14 companies include the likes of Kongzhong, Haypi, WiStone and Gameloft’s Chinese studios. The group employs a full-time employee just to monitor Taobao for fraudulent listings connected to games from the Alliance’s member companies and any apps published by CocoaChina. Since starting the program, the Alliance has issued more than 1,000 takedown requests, which has translated into Taobao removing over 30,000 listings.

With the sheer number of fraudulent listings, it’s hard to measure the true financial impact, but according to Lei Zhang, the U.S. general manager of CocoaChina/Chukong. Most listings were for the highest tier of in-app purchase, with average costs ranging from $49.99 to $99.99 each. At 30,000 listings, one can conservatively estimate the anti-black card alliance has shut down more than $1.5 million in fraudulent transactions.

Although the are time and resource intensive, the Alliance’s efforts are paying off. Members have seen their fraudulent transactions drop by 80 to 90 percent and one game even saw a 30 percent revenue increase after the alliance began. While Zhang couldn’t disclose the title of that game due to Apple’s restrictions, he did tell us the game has gone from earning about $38,500 a month to $50,000 a month.

The alliance also now has a special relationship with Taobao. Although the company’s standard policy is to remove fraudulent listings 15 days after a complaint in order to assess the claim, Taobao now removes any listings reported by the Alliance within 24 hours.

“This is a problem that involves loopholes of the entire ecosystem, beginning from the relatively easy access to fraudulent credit cards,” explains Zhang. “It’s not fair to portray Taobao as one of the main causes of this issue or even part of the scheme, they are in fact an active and important part of the solution.”

While Taobao may have the ignoble honor of being the most popular place for black card scams, it’s also not the only destination for fraudulent players. According to Zhang, Tencent’s (a Taobao competitor) also has similar listings, and there are still plenty of black card scams conducted off the easily monitored e-commerce sites.

All this means Chinese developers may still be losing millions of dollars in revenue every year, all while they’re still on the hook for the server and hosting costs of the fraudulent players. An article on the CocoaChina website states that some Chinese developers have reported more than 88 percent of their revenues turned out to be bad debts related to the scams. According to Zhang, the only way to truly stop the black card scams is an absolute crackdown — which is of course, easier said than done.

Because Apple doesn’t share detailed user payment information with developers, it’s extremely difficult to sort out legitimate users from fakes. Hoolai, which saw its game 胡莱三国 (Hoolai Three Kingdom) hit No. 10 on the U.S. top grossing app charts at the end of February, has tried to build algorithms to identify what it calls “strange payments,” but it largely comes down to guesswork.

Still, the best approach may be harsh penalties, even if developers aren’t able apply them universally. “Game operators need to clearly convey a message of zero-tolerance for fraud payment to players,” says Zhang. “This is especially important for MMOs and other high lifetime value games. [They need to decline] features or content to fraudulent players.”