The key to better CX: reinventing the dispute process

For financial services brands – incumbents and challengers alike – earning and keeping consumer trust is fundamental to competitiveness. Consumers have more options, and it’s easier than ever to open a new account or switch providers. But consumers are also facing higher prices for just about everything, which translates to greater financial anxiety. 

In this environment, customer experience is where you can make or break trust. How customers experience your brand, especially when they need help, matters more in financial services than almost any other industry, according to a 2022 report.

In fact, a bad customer experience is the number one reason consumers would stop using a financial services provider, the survey of 2,200 US adults found. What’s more, nearly 30 per cent of consumers said they would never use a financial services brand after a bad customer experience, and only 17 per cent would consider trying the brand again.

With such high stakes and fierce competition, financial services providers must rethink a critical area of CX. The one that drives the most complaints, presents the greatest risk of reputational harm and regulatory scrutiny, and boasts the highest servicing costs: transaction disputes.

Balancing seamless CX and security

The dispute resolution process for debit products has historically been slow and expensive. The typical waiting time to resolve a claim in the US can be up to 90 days, depending on the transaction type. However, Regulation E requires providers to issue a provisional credit within 10 business days (20 for new customers) for the contested amount while the claim is being investigated.

That’s when first-party fraud can hit. Sometimes banks issue credits and later determine that there was no error, but are unable to recover funds because the balance is zero. Often called friendly fraud, first-party fraud is when a cardholder disputes a legitimate transaction, either because they don’t recognise it or because they’re knowingly trying to commit fraud. As much as 75 per cent of transaction disputes can be attributed to friendly fraud. Meanwhile, another 2022 study cites first-party fraud as a leading driver of fraud losses.

Conventional wisdom has been to set write-off thresholds so you’re not investigating small-dollar claims that divert resources from higher-value, higher-risk transactions, while also prioritising claim resolution ahead of the 10-day provisional credit window. But for transaction types with chargeback rights, you might be waiting as long as 45 days before you get a merchant response.

Fraudsters take advantage of these policies, while customers with legitimate disputes can be left waiting for weeks if not months for a claim to be resolved. Balancing a seamless customer experience and mitigating fraud losses can be precarious, especially as the cost of managing fraud has ballooned to $4 for every $1 lost to fraud. 

We’ve been working with our digital banking clients to make the dispute process more customer-centric while protecting the business from undue losses. Here are four keys:

1. Finalise most claims within two to three days. Accelerating the investigation process has definitely improved the customer experience for our clients, who consistently rank high in Net Promoter Scores and customer satisfaction within the dispute process. But speeding up the investigation isn’t just a matter of moving faster. If you’re not careful, you could be facing significant losses and compliance errors. You have to move smarter, which brings me to the next three points.

2. Segment your teams by claim type (ATM non-dispense, P2P payments, unauthorised transaction, etc.) and by risk profile (geography, dollar value) to boost productivity and compliance. For some clients we’ve reduced overall headcount because of productivity gains. Just be certain to apply your segmentation across the board rather than at the customer level, which could violate Unfair, Deceptive, or Abusive Acts or Practices (UDAAP) rules.

Another word of caution. Artificial intelligence (AI) can have a role in dispute management, but if you try to use AI for claim decisions, you could create more problems than you solve. Regulators pay close attention to the dispute process, especially decision making. An algorithm can’t explain its decision for a specific claim, which means you won’t be able to either.

We see AI as a helpful tool in guiding agents to the right decisions, but the investigator should be the one making the final call – with proof points to back it up.

3. Invest in better forecasting. When you compress investigation time, volume forecasts can’t be monthly or even daily; they need to be hourly. To improve forecasting, take advantage of the data you have. Historical data should be used to create a baseline forecasting model. Higher transaction activity almost always precedes higher dispute activity, and can be used to adjust the historical model for higher or lower expected disputes.

4. Create dedicated teams. Depending on who handles your customer service and disputes, you might not have much flexibility to shape the process. And depending on your size, you could be dealing with shared resources. That’s not ideal for world-class CX, but it can be especially problematic for disputes.

Clients often come to us because they want to make the dispute process faster and more customer friendly, but we also know that if volumes warrant it, dedicated resources who know your business and the dispute process inside and out are always going to outperform shared teams.

It all comes back to trust

At the end of the day, customers want to know you’ve got their backs. If you make it hard for them to reach you or force them into channels they don’t like, that could cost you customers. But if you commit to making your dispute process as streamlined and customer-centric as every other part of your business, you’ll be more likely to keep your customers happy.

For more tips on improving CX, see www.ubiquity.com

by Corey Besaw, Chief Operating Officer, Ubiquity