Disputed payments are a growing problem across our industry. In fact, research shows that payment disputes cost card issuers $12 billion annually, with 45 percent of all consumers filing at least one dispute a year – and 25 percent filing more than one dispute.
Consider that for every dollar in dispute, the average fees to process a chargeback exceed the transaction value: with $0.43 going to management costs, $0.37 in chargeback fees and $0.70 in labor costs.
“Dispute recovery functions, such as chargebacks, are historically labor-intensive, multi-step processes often requiring a specialized knowledge base and use of multiple, disparate systems. Compound these challenges with the fact that the rules for chargeback processing change twice a year, and the problem can become unbearable without the right tools,” said Lori Kastrick, Vice President, Industry and Back Office Services, for CO-OP. “This dynamic puts a credit union’s staff in constant training mode and heightens stress for employees.”
At the same time, CO-OP’s Member Journey research revealed card disputes to be a particularly sensitive point among members, leading to higher feelings of stress and anxiety. “Members typically feel a sense of urgency when they discover an unauthorized charge on their account,” said Kastrick. “It’s a service experience that the credit union has to get right. When the member has a dispute, they want their money returned to them quickly. When that is not the case, the credit union can lose that member over it.”
Partnering With Lean Industries on a New Industry Chargeback Solution
Solving the issue of chargebacks was the number one issue identified last year by CO-OP’s client advisory Co-Creation Councils. CO-OP quickly assembled a Chargebacks and Disputes team under Kastrick. And, the company is now partnering with Lean Industries to make available a new enterprise chargebacks solution. As a CO-OP strategic partner, Lean Industries will apply advanced workflow automation technology to streamline and simplify the entire dispute resolution process, from intake through to resolution.
For credit union employees, that means reduced time and labor involved in resolving payments disputes; for credit union members, that means faster dispute resolution and improved clarity about the status of a dispute as it is being resolved.
“We provide both a workflow tool and automation,” said Jim Schlegel, Vice President of Sales and Delivery, for Lean Industries. “Our solution orchestrates the dispute management process with other technologies involved in each phase of the process, providing a single point of user interaction and a platform of extensive integration. This allows CO-OP and its credit unions to avoid costly and cumbersome procedures, many of which are performed manually today.”
Having one system to manage all aspects of the dispute lifecycle benefits credit unions and members in five key areas:
Streamlining the Intake Process
According to Schlegel, the intake process for a single dispute can take up to 15 minutes by phone – and when fraud is the underlying cause, it is common for the member to dispute more than one transaction.
“Once the dispute is initiated, the case information is relayed to the back office where another employee assesses the case and decides on a resolution plan” he said. “During that resolution plan, various communications with the member are generated, with financial adjustments being made to the member’s account. And, then the arduous process of recovering funds from the merchant begins. However, if the intake process fails in any way, the entire resolution process is jeopardized.”
The new system, adds Kastrick, will guide members through a standard series of questions, allowing CO-OP to capture all the information needed up front, when the member initially reports an incident, thereby eliminating any errors or omissions during the intake process.
“These improvements to the intake process will also greatly reduce any callbacks to members, which can be a frustrating member experience,” she added. “Plus, with a digital workflow, the chargeback process is much more transparent, allowing the credit union and member to easily access information on where a particular claim stands at any point in time.”
The new CO-OP solution will provide a customized experience for credit unions and members as well. “The flexibility of the system, for example, will enable personalized profiles to be built for each member and credit union served,” said Kastrick. “This is important because every credit union has specific requirements and exceptions to be handled. Having those processing parameters stored and managed directly in the application will allow us to work the chargebacks in a much timelier fashion, and evolve the process as business and market dynamics demand.”
Lowering Operational Costs
Disputed payments tie up human resources and requires staff to be diverted from other, revenue generating tasks. CO-OP’s new solution will automate several manual processes and will also include an alerting function to prompt employees when a decision needs to be made or a new action taken. From the contact center to the branch and the back office, the time employees spend recouping costs adds up quickly. “One of the major benefits of this platform is that it will eliminate the need to manually key information into a various systems,” Kastrick notes. “Instead, critical case data will be systematically retrieved rather than relying on analysts to perform clerical functions – a major efficiency gain.”
Ensuring regulatory compliance is another hidden and complicated issue within chargebacks and disputes. There are multiple governmental and industry regulations that impact the chargeback process today and one violation can result in anything from an employee being terminated to the credit union losing its very charter. The new platform will ensure that all chargebacks are resolved in accordance with the latest regulations, eliminating the need for manual case reviews.
Finally, and most importantly, the new solution will aim to provide a better member experience by resolving disputes and chargebacks faster.
“Card disputes can have a measureable impact on the reputation of your credit union,” says Kastrick. “Our new solution is designed to help mitigate that risk and ensure members feel that their needs are being met quickly.”
Disputes and chargebacks are an important part of the member service experience. Read CO-OP’s latest whitepaper to discover how service expectations are shifting in the digital age and what you can do to ensure your members’ needs are met: