A brief glance in the rear-view mirror

With a new decade upon us, it pays to look back over the last ten years and reflect on how the world looked then versus now. Without question, and like many other industries in the global economy, the landscape of payments has changed dramatically. If we were to rewind the clock to 2010 here in the United States, we would find that:

• EMV was being hotly debated by issuers and merchants alike as an expensive endeavor with uncertain outcomes – and it literally took the entire decade to achieve industry-wide adoption and acceptance
• The dreaded Durbin Amendment was introduced at the dawn of a new decade and went into effect in 2011. The entire card issuing industry was turned on its side and forced into retooling how certain transactions were to be processed, and how transactional revenues were generated by issuers
• Digital banking and channel engagement was in its infancy, with most banks unveiling and refining its digital banking services and strategies – all of which would rapidly expand throughout the 2010s – thanks mainly due to startling advances in mobile computing and increasingly distributed technologies
• PCI and PA-DSS Compliance was all the rage in the preceding decade, and the focus on information security continued to expand in terms of scope and urgency as data breaches became increasingly widespread and severe
• Consumer protection emerged as perhaps one of the most profound behavioral changes, reinforced by government policies and directives, like PSD2, and regulatory agencies, like the CFPB

In terms of disputed payments, our focus here at Lean Industries, the industry saw perhaps the most dramatic and sweeping changes since – without exaggeration – the last century. Visa turned the world on its head when it unveiled the broad and sweeping changes we know today as Visa Claims Resolution. I remember first hearing about “VCR” back in 2015-16 while visiting a client in New Zealand. (A quick internet search at that time yielded only results about the machines most American families had in their homes in the 1990s to play movies on VHS tapes!) I won’t regale you with the excitement of having been one of the very first FinTech companies to have implemented the VCR changes in our Visa Resolve Online RTSI interface, but suffice it to say: it was exciting… but we made it work and got it into production.

Mastercard quickly followed suit in the twilight years of the 2010s and announced its Mastercard Dispute Resolution strategy and centered on a much-needed technology platform we know today as MCOM Claims Manager. Although the process changes of “MDR” were not as sweeping as those of “VCR”, it still took the Mastercard world by storm – one that still continues to surge. And here at Lean Industries, we find ourselves again at the helm of a ship navigating the complexities of implementing a new API that orchestrates the Mastercard chargeback process, consolidating image exchange, chargebacks and representments, and fraud reporting, long overdue.

I think the last couple of years of the 2010s were perhaps the most exciting. The processor landscape was completely reshaped through massive seismic M&A events: FIS acquiring Worldpay (who previously acquired Vantiv), Global Payments and TSYS (who had previously acquired Netspend) coming together, and First Data being acquired by Fiserv (who had in the prior year acquired Elan). The leading Payment Networks also reinforced their positions in what I would consider a “can’t beat ‘em, so let’s buy ‘em” strategy: Mastercard acquires Ethoca and Visa acquires Verifi. These last two acquisition targets had only started to gain critical mass 10 years ago, and now they are at the forefront of Mastercard and Visa’s dispute management strategies for the 2020s.

We also observed that banks, credit unions and financial services companies around the world could no longer stem the tide that is dispute management, in the face of growing pressures on the “customer experience” and “compliance” subjects.  While historically viewed as simply a cost of doing business, and one that for many preceding years warranted very little investment in terms of technology, managing disputed payments rose to the forefront of the industry. Self-service capabilities are still being unveiled across the industry, particularly coming out of the many enterprise-wide “digital transformation” projects that were started several years ago in the banking sector.

Why would this industry ‘backwater’ we call disputed payments all of a sudden become such a prominent area of focus? To name a few key reasons:

Pure Economics: the volume of disputes continues to grow at a rapid rate, even outpacing the growth in payments volume, while the cost of managing disputes is also rising both in terms of human capital and legacy technology costs.

Customer Experience: never before in human history can you gather and share information about an event so quickly, and people are not afraid to tell others about a poor experience – particularly when it comes to personal finance, like disputed payments. And with the powerful digital tools customers have in their hands and homes today, financial services companies must keep pace.

Integrated strategy: with rapid and significant advances in technology, in the form of artificial intelligence, machine learning, and data aggregation (to name only a few of the mega trends), financial services companies are deepening their understanding that various payment services cannot be offered and operated in isolation. Rather, they are part of a much broader, integrated ecosystem that historically has operated in silos (think fraud claims versus non-fraud claims, credit versus debit, fraud operations versus dispute operations, etc.)

If you are a fan of electronic payments, were the 2010s exciting? Absolutely. Are the 2020s going to be exhilarating? You better believe it. Will managing disputed payments be a problem that we solve in this decade? We think so. We, as an industry, are getting better and better at it each year – and the solutions we offer here at Lean Industries are quickly being recognized as the vehicle that can get us there.

Here’s to the 2020s: the decade we conquer the problems of disputed payments!