Managing Disputed Payments Using Straight-Through Processing Techniques
In the 15 years that I have been working in the payments technology industry, I’ve had the pleasure of working with some of the largest and most progressive financial services companies in the industry. Some of these companies often position themselves at the forefront of optimizing their back office and customer support operations, all with the goals of continuously enhancing their customer’s experience while controlling costs. This is particularly true when it comes to managing disputed payments.
From a customer’s standpoint, there are really three main areas of focus:
- They want their story to be heard
- They want to be compensated for the error
- They want resolution to the matter quickly
Having to dispute a payment with their financial services provider is an emotionally-charged experience. Most people in the world are not financial services experts in that they do not understand the intricacies and complications of processing electronic payments. They just know that something went wrong, or something happened that they do not agree with. The responsibility of the financial services company is to hear their story and to document that story so that the company can help its customer to resolve the issue.
In terms of wanting to be compensated, the customer simply wants his or her money back. In many cases, customers may be prevented from living their lives if funds are tied up in dispute – and this could have dire consequences in terms of caring for loved ones, purchasing much-needed goods and services, paying utility bills, or paying rents and mortgages. Many countries around the world have instituted legislation around this, such as Regulation E or PSD2, to ensure that individual consumers can continue to operate their daily lives while a payment error is corrected.
Once a customer tells their story, and once they receive temporary credit back to their account or line of credit, the customer simply wants the issue to be fully resolved. Sometimes, this may not happen since a merchant may wish to refute the claim and substantiate their side of the story, thus causing the issue to drag on for weeks and months.
Financial service providers are increasingly keen to attempt to engage with their customers and provide fast – if not immediate – resolution to the issue. And, in doing so, they also want to do this at an acceptable operating cost to themselves. As such, these companies seek out technology that can be leveraged to perform the requisite functions to quickly resolve a customer’s dispute. Furthermore, this technology is often utilized to implement what many call “straight-through processing”.
To give you some examples, one client I work with has created a workflow process where, once a particular type of dispute is raised by a customer – in this instance, a claim against a recurring payment, the technology will automatically perform the required actions to rectify the issue with the customer and to push the error out to the other party to that payment transaction. Our technology will immediately post an adjustment to the customer’s account, send the customer a notification that such an action was performed, and prepare and file the required information with the payment association. These types of claims represent approximately 30% of their overall merchant dispute, or non-fraud, claims volumes. Imagine that: 30% of their volume requires no intervention from an analyst in order to resolve the claim – and the customer is made whole right then and there.
In another example, one financial services company has implemented a straight-through process that takes claims against e-commerce transactions that were raised due to some form of fraudulent event and immediately issues credit to the customer. Then, the process sends the required notifications to that customer, and prepares and files the outgoing dispute through the association back to the merchant. In this instance, these claim types represent upwards of 60% of their total claims volumes – and again, the customer is made whole almost immediately, and the financial service provider did not have any employee perform work against that claim.
These are just two impressive examples of what is possible when technology and operations come together to address the needs of customers. At Lean Industries, we are continuously collaborating with our clients to ensure they are able to provide a best-in-class service to their customers at the lowest possible cost. We provide the technical mechanisms that enable our clients to implement processes that require little to no user intervention in what can often be a complicated, recurring problem.
The industry is rapidly evolving. The major payment associations have been making substantial changes and investments in their dispute processing platforms and rules. Value-added service providers, like Ethoca and Verifi, are enabling constructive dialogues between financial services providers and merchants. Group service providers and processors are also seeking out progressive improvements to their support services for their client base. All of these movements are gradually enabling financial services companies to implement more robust, streamlined, cost-effective dispute processes.
Just as the industry advances, Lean Industries stands at the forefront with our clients to bring the best payment products and services to the market – and our solution is focused exclusively on the problems all financial services companies face when it comes to disputed payments.