Why the customer journey is crucial
Resolving disputed transactions is one of the biggest headaches in payments. Verifi’s landmark 2022 study, The Chargebacks Triangle,” described dispute resolution as “the industry’s $31 billion-dollar problem”, noting that three-quarters of disputed transactions end up being resolved by banks and cost more than $9.8 billion annually in the US and UK alone.
After COVID-19, organisations of all kinds are reporting an increase in disputed transactions, making the need for process improvements more acute.
According to FIS2, disputed transactions in some verticals rose by more than 300% during the pandemic.
While the company expects some normalisation as the dust settles, it seems high-dispute channels such as e-commerce will continue to grow and fraud will become more complex in general.
Historically, disputes have also been a financial problem for banks, in that once a fradulent transaction is identified, recovering funds accruing from fraud to reduce losses can, all too often, be an expensive, time-consuming and fruitless task.
Reviewing these challenges, it’s clear that there are massive opportunities to deliver better service in dispute resolution while dramatically reducing cost and improving efficiency.
For most consumers initiating a dispute is something that happens very rarely, and the consumer does not really know what is expected from them. In practice, initiating disputes means trying to find information on websites, calling your bank, filling in forms or visiting the issuer branch office – all while being in a somewhat distressed mood. Add to this the high likelihood of several different communications with the issuer before they have all necessary information to process the claim, and it’s easy to see how all this hassle might lead to the consumer rather using a different card next time they are paying.
While the current wave of digitalisation and automation has gone some way to improve matters for banks, merchants and consumers, all too often these improvements deal with automating internal bank processes for dispute handling, rather than focusing on the consumer experience. In most jurisdictions, consumers have between 30 and 60 days to register their chargeback, and doing so is no simple process.
The EU advises3 consumers to contact the merchant first, and only then to approach their bank, which at the present time usually happens either by telephone or in writing – meaning further laborious form-filling or time spent on the phone. In an earlier study4, we estimated that registering disputes can take a bank clerk up to 30 minutes for each dispute just to save the case into a case handling system. Thereafter, there will be additional work, including filling out online or paper forms, contacting call centres and more.
With Verifi’s research showing that 63% of users are less likely to shop at a merchant if they experience disputed transactions, the dispute resolution process needs to improve if merchant and bank profitability are to be protected. In what follows, we argue that banks must focus more on user experience and customer satisfaction in dispute management and resolution.
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