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March 11, 2010

Self Service for Cards Dispute Resolution – A means to increase profit margins and customer satisfaction

by Vinod Nag

A “dispute” in the context of credit cards pertains to questioning the validity of a card transaction. Most dispute complaints begin in a similar fashion - the card holder communicates with the card issuer bank through one of the channels – telephone, e-mails, direct mail (posts) etc. The customer service representative will then collect the necessary details and determines how this enquiry has to be dealt with.

It is common for dispute cases to be processed by the back office, which involves identification of appropriate reason codes, analyzing validity of dispute, requesting additional documentation, processing chargeback and re-billing, finally closing the dispute case or taking it to arbitration. Back office agents spend a good amount of time resolving disputes, however, they sometimes ends up forwarding cases to another agent for analysis and closure. Banks aim to minimize excess fund spent on resolution, charges/fees and write-off disputed amounts in favor of their customers. It is seen that a huge number of small value write-offs totals to a big amount which is a loss to the issuer bank. Similarly, the time spent on dispute investigation and fees/charges paid to a third party for transaction retrieval and document processing will also account for a reduction in profit margin. It’s been a challenge for banks to minimize write-offs and reduce the dispute resolution time to increase profits.

At the same time, a card holder who has raised a dispute will be not sure of processes and reversal of disputed amount. He will be in a fear of losing dispute case and unaware of the prevailing status of the dispute case. Thus any unclear communication or delays caused can irritate the customer and become concerns for customer experience.

On the other hand, the merchant involved in a disputed transaction is required to furnish details/documents if he thinks the presentments (bills produced to the Issuer bank through merchant bank called Acquirer) are correct. In such a situation, the merchant need to spend time in verifying reason codes, transaction details, related documents etc and represent them to his bank to stand by his initial presentment. Merchants are at a risk of losing the disputed amount if representments are not made on time and details verified are incorrect. The merchant then not only loses the disputed amount, but he will end up paying a service fee/penalty to the acquirer. He will also have the risk of fraudulent transactions and cases getting ended up in arbitration.

While attempting to please all the parties involved in disputes case processing, is it not a good idea for banks to expose some of the dispute resolution processes to card holder and merchants? Online dispute processing can work smoothly for onus-onus transaction wherein a bank is acting as an Issuer and acquirer for a given disputed transaction. Enabling online processing may be a challenge if the merchant bank is different from the issuer bank as he will be represented by his acquirer bank.

Following is a representation of what steps/processes can be exposed to the card holder:


Issuer banks can invite card holders to submit their disputes on a secured portal. This portal can be supported by integrating with the existing CRM system with a little customization for case management for tracking and update purpose. To help a card holder respond to the required questions, forms should be made available on the portal which should be driven by a decision engine for foolproof data entry and assignment of correct reason codes.  There should also be a facility to upload documents and images supporting dispute. With this, a customer can easily raise a dispute case, continuously monitor the status and respond as required. The back office will review this and request the customer for more details, decide whether the card holder is liable and if otherwise, route it to merchant for chargeback.  The merchant with a notification would review and respond quickly. This would also minimize his paper work and the time spent in correspondence with his acquirer.

Listed below are a few benefits that might set banks thinking on the lines of externalizing some of the steps involved in dispute resolution and increase its satisfied cardholders segment.

Benefits to Issuer

• Reduced time for data capture, analysis, validation, routing and decisioning
• Elimination of misinterpretation during data capture
• Increase in back office productivity of
• Efficient communication and correspondence system
• Reduces expenses on documentation processing and management
• Satisfied customers
• Increased customer trust with the issuer bank
• Reduced number of write-offs
• Controlled number of Chargeback initiation
• Possibility of externalizing the back office tasks (off shoring or sub contractors)

Benefits to Card holder/ Merchant

• Customer understands the importance and relevance of the data being furnished
• Card holder knows what went wrong better than analyst – a feeling that he was able to express his concerns completely
• Provides clear and required details even for low value disputed transactions
• Cost and time saved as case is created electronically – no posts, re-posts, confirmations etc.
• Transparent processes appreciated by card holder
• Right status at any time across all communication channels (email, web, telephone…)

With an online support system, it is possible to fast track dispute cases, reduce the time and money spent on dispute investigation, reduce write-offs and minimize cases getting into arbitration, and increase customer satisfaction and loyalty. Will such a provision for interaction not be beneficial to both cardholder and merchant besides improving customer experience?

About the Author

Vinod anchors the Chordiant Centre of Excellence within the Enterprise Solutions unit, besides being involved in presales. He has managed offshore delivery of projects for major North American banks, achieving high customer satisfaction in these engagements. He has also been active in initiatives for competency development. Vinod will blog on marketing, campaign management, and various aspects of CRM.

Data streaming and MDM

Data streaming, so what does this mean? What does MDM means for data stream? Good question read on.

Data stream is an entirely new concept, which effectively means do not query onto a consolidated data set, but stream the data through a set of query to obtain the result. Too complicated to comprehend. Let me explain this through a diagram.                                                                 data streaming 
Good. An image typically describes this better than 1000 words. So where can this be applied? Well in Master data management, most of us would have heard about a concept called Identity resolution (please refer to my previous blog for additional details). It means effectively identifying positively relationship between two individual based on who you know? and whom your relationship (network) know through direct or indirect interactions? There are specific tools in the market which does this especially to perform risk profiling, calculating risk delinquency etc.

So where does, MDM fits in? Master data management implemented in a transactional style of implementation may have to pass the data stream at real time for providing the business insights. This could be based on the domain the implementation is done. In case this is for a health care provider it may be to quickly collate whether a prenatal baby is subjected to higher risk incidence of a particular type of disease or not.

How is this implemented? Well a prenatal baby that is tagged into the emergency ICU will have probes that captures various vital signs at real time and pass this data to a correlation engine where the disease and risk incidences are profiled and reported. This effectively means lower effective work load on doctors and helps to detect medical conditions in advance to that of an experienced nurse. The advantage of data stream on top of MDM systems are

  • obtain real time insights from data in motion
  • sufficient level of nimbleness in decision making 
  • support for mission critical applications

The opportunities are unlimited and the possibilities are constrained by our limitations to imagine. So the aim of this blog is to identify possible business scenario, to collaborate and develop this solution?

March 9, 2010

Could CRM lead to innovation?

For companies to innovate, it is largely understood that there are two components involved: exploiting existing internal repository of knowledge and secondly, exploring new ideas, some of which can be directly adopted from external sources including customers, suppliers, partners etc. On one hand, managers may experience a cultural inertia on the idea of customer as a collaborator; on other hand, there is also an access issue - how do you make relevant customer feedback flow through the organization?

Lego, for example, used a virtual platform legoclick.com to invite customers to suggest new product features and the company rewarded those whose ideas were marketable. Others like Dell are collaborating with customers through online forums, helping it identify new avenues for growth. SAP has a formal program for inviting "expert" customers (or partners) to test out new functionalities in SAP products. At the end of the testing session, partners are required for fill out an online feedback form on areas including usability, performance, functional completeness and correctness.

An IBM study reveals that collaborative partnership with customers makes sound business sense - it not only reduces overall costs, but also helps increase revenues by approximately 40%. Moreover, customers tend to be better retained (loyalty) and enjoy a close partnership with the company.

Which brings me to the question: Is CRM the untapped avenue for innovation? Customer-led innovation can occur when CRM system essentially captures ideas from customers by engaging them in a community-like forum, and some of these ideas could be pursued by the company and tracked through the CRM system. Nowhere this is more relevant than in context of social CRM, that attempts to use external social conversations for business benefit. Customer roles in such an engagement can be broadly formalized into conceptualization, design, testing, support and marketing stages. However, currently, CRM systems are not equipped to incorporate customer involvement in the first three stages. CRM vendors need to explore the possibility of modifying existing capabilities to fit in new ones - for example, in conceptualization, which includes suggestions for new products or for product improvement, the current opportunity management could be modified, the key difference being the change from sales-driven approach to a value-driven one. Linking to other areas of CRM such as loyalty management should also be explored.