In this rapidly evolving digital landscape, there has been an unprecedented proliferation of payment methods, each designed to cater to ever-evolving needs for convenience and speed. However, this hasn’t come without its own set of complications – namely, the rise in payment disputes.
As fraud rates surge at an alarming pace, it has become imperative for businesses, financial institutions, and consumers alike to delve deeper into the nature and roots of these disputes. Now, more than ever, a comprehensive understanding is crucial, not just to address present challenges but also to preemptively tackle potential future issues.
Dispute Origins and Effective Resolution in Digital Payments
The most common dispute reasons are Fraud, Friendly Fraud, and Merchant Errors. Payment methods such as debit, credit cards and digital wallets using digital cards are
well protected against these issues.
While other payment methods like Account-to-account transactions (A2A) have their advantages, the hard truth is that they do not yet have a proper dispute process in place. This is why card payments, when it comes to dispute and consumer protection, are the winning payment method.
With card payments, the payment networks require banks to address customer disputes according to the standard rules defined by the schemes. So, there is little to no difference between banks when it comes to dispute rights for card payments. However, banks can have substantially different processes around how the customer should raise a dispute and how the process is managed at the bank.
Modern Approaches to Dispute Management
Some banks require customers to contact the customer centre and mail the necessary documents to the banks. Others might provide online forms that can be filled out and sent to the banks. What is rare today are banks that enable customers to raise such disputes via a virtual agent on the banking portal or in the app.
Such approaches would provide a much better user experience and make the process much more efficient for the bank to receive all the necessary information and documents. With a more modern approach (Cembra Money Bank in Switzerland is one example), the bank’s dispute teams can also easily reach out to customers via the digital channel to inquire for more information when needed, shortening the process and making it more efficient.
Conversely, failing to use such tools and inefficiently navigating dispute management can quickly spiral into a resource drain for banks. Delays, miscommunication, and even potential financial losses can pile up. When communication breaks down, the path to resolution becomes even more circuitous and strained.
New Fraud Frontiers
The subscription-based economic model introduces more layers of complexity. Due to the nature of subscription services, especially those billed annually, first-party and family fraud have emerged as chief culprits behind chargebacks. With easy, device-stored payment options, tracking purchases has become a formidable task for many consumers. First-party fraud in 2020 was responsible for
70% of all credit card fraud and cost the industry over $132 billion.
This is why banks and financial entities must pivot towards modern and innovative resolution strategies. Merchant information can become invaluable – and banks can either directly integrate with APIs from entities like
Ethoca and
Verifi or opt for pre-developed solutions that incorporate these APIs, such as dedicated fraud/chargeback dispute platforms.
Banks can also radically alter the chargeback landscape by ushering in a digital self-service module for cardholders. Through guided, user-friendly digital conversations, capturing important details becomes more straightforward, and validating claims sidesteps traditional, often cumbersome, channels. This method optimises communication and significantly curtails unjust disputes.
By leaning into such strategies, banks can significantly boost their fraud detection capabilities. By quickly notifying cardholders of suspicious transactions, banks ensure a faster reaction time, laying the foundation for future-proof fraud prevention frameworks.
In conclusion, as fraud rates continue to rise, the imperative for efficient dispute management has never been more critical. It is with strategic digital adoption and a proactive stance that banks can safeguard their reputations and customers.
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- Source: https://www.finextra.com/blogposting/25241/combatting-fraud-in-payments-essential-strategies-for-issuing-banks-facing-dispute-challenges?utm_medium=rssfinextra&utm_source=finextrablogs
