Business Process Services. White Paper. Four Effective Ways to Optimize the Credit Card Dispute Resolution Process

Transcription

1 Business Process Services White Paper Four Effective Ways to Optimize the Credit Card Dispute Resolution Process

2 About the Author Balamurugan Soundararajan Balamurugan Soundararajan is a domain consultant for credit (consumer and corporate), debit, virtual, and prepaid cards dispute resolution processes. He has been with Tata Consultancy Services (TCS) for over seven years, and has managed dispute operations for diverse clientele in the Asia Pacific, European, and Middle East regions. Balamurugan is an engineer and has a Master's degree in Business Management. He is also a certified Six Sigma Green Belt.

3 Abstract With increasing dispute volumes, changing customer behavior, frequent changes in payment card association guidelines, and the emergence of new card products, the conventional dispute resolution model has lost its relevance. It is now necessary for banks to streamline their current operating models and improve overall process efficiency to adapt to the ever changing needs of the ecosystem. Most banks are undertaking process transformation to better align their dispute resolution process with the current industry trends and demands. This helps them optimize operations and reduce operational costs. Dispute operations generally involve long resolution timeframes, high cost of operations, increased manual work, fraud and operational write-offs, and poor customer experience. Issuing and acquiring banks must also adhere to the guidelines issued by card associations such as Visa, MasterCard, and American Express to resolve disputes relating to card transactions. This white paper focuses on four measures that can help banks streamline their current dispute resolution processes, and make them more effective and efficient. These measures involve breaking up processes into smaller steps, implementing standalone tools, constituting an expert support team, and ensuring effective customer contact management.

4 Contents Handling the Intricacies of Dispute Resolution 5 Breaking down the Process into Smaller Steps 5 Improving Process Efficiency with Standalone Tools such as Merchant Portals 7 Creating an Expert Support Team 10 Ensuring Effective Customer Contact Management 11 Enhancing Dispute Resolution to Meet e-commerce and m-commerce Challenges 12

5 Handling the Intricacies of Dispute Resolution Managing cardholder disputes is integral to ensuring effective customer relations. The dispute resolution process is highly complex, involving various stakeholders such as cardholders, merchants, card issuers, and acquiring banks. One of the key challenges in resolving disputes is tracking and implementing changes made by card networks, including card issuers such as Visa and MasterCard. These networks provide unique remedial and reduction strategies for specific business issues through chargeback reason codes. The member bank must comply with the card associations' rules for dispute processing, such as Regulation Z in the US. Third-party banks are also required to demonstrate a strong understanding of association guidelines stipulated in Regulation E to avoid transaction liabilities as well as financial losses due to non-compliance. Another concern is the high resolution timeframes. Typically, banks adopt conventional strategies for dispute resolution. It involves making repeated requests for documents and additional information from cardholders. This leads to process delays, and negatively impacts customer satisfaction. High inexecutables also extend the time taken for case resolution. Furthermore, the inherent complexity of the dispute resolution process calls for increased reliance on skilled and experienced resources. Dispute processing is a niche area and tapping resources from the market to fulfill this function can be difficult and expensive. As a result, creating a strong talent pool through effective knowledge management plays a vital role in the sustenance of the process. Banks can accelerate their dispute resolution process, and reduce write-offs and losses by taking the four measures discussed in this paper. Breaking down the Process into Smaller Steps The dispute resolution process can be split into smaller steps and assigned to the respective dispute teams. Figure 1 depicts the 'first level of disputes', which is usually handled end-to-end by a group of agents. First Level Disputes Processing Investigate disputes as per association guidelines End-to-end activities performed by the same agent Process temporary credit and send communication Create copy request and chargeback in host system Submit documents in Visa and MasterCard systems Outputs produced at the end of processing 5 Figure 1: Conventional dispute resolution process based on continuous processing

6 For instance, A only investigates incoming disputes. On receiving the handover from A, B performs actions resulting from the initial investigation, for instance, processing of temporary credit. B then sends relevant communication to the cardholder. This way, agents perform a limited set of tasks resulting in a faster learning curve. The process is controlled through a workflow mechanism, which acts as a control against any lapses on the part of the two agents. A similar approach can be adopted for the 'acquiring and issuing disputes' process by breaking complex processes into simpler activities, leading to a simplified and effective disputes operational model. In the batch processing approach illustrated in Figure 2, agents perform only specific pockets of tasks in the first level of disputes assigned to them. Team A Team B Team C Team D Investigate disputes as per association guidelines Process temporary credit and send communication Create copy request and chargeback in host system Submit documents in Visa and MasterCard systems Outputs produced at the end of processing Output in Batches Figure 2: Simplification of the process through batch processing Batch processing offers the following key advantages: Greater specialization: As complex processes are broken down into simpler activities, employees gain expertise in a limited set of tasks, resulting in a significant increase in productivity. Faster on-boarding of agents: Bringing agents up to speed on the end-to-end dispute process typically takes around three to four months. In the batch processing model, agents are required to learn only limited portions of the entire process. So they can start contributing to the dispute resolution process in two to three months, leading to a reduction in the on-boarding time. This improves employee utilization rates and reduces training or learning curve cost. Greater accuracy: Simpler process steps lead to improved first pass yield (FPY) and greater accuracy. Organizations can reduce operational losses resulting from erroneous processing, and also improve the overall fraud recovery rates. Efficient skill-based work allocation: The most critical function in the dispute resolution process is the 6

7 investigation of cases. Other activities predominantly involve data entry work. Therefore, investigations can be allocated to experienced resources, while other activities can be assigned to relatively less experienced team members. Batch processing thus facilitates efficient skill-based allocation, leading to higher productivity and increased accuracy. Improving Process Efficiency with Standalone Tools such as Merchant Portals Many banks follow resource-intensive dispute resolution processes. The legacy systems they use are not effectively integrated with other applications, and therefore hinder straight through processing (STP). Due to lack of effective interfaces between processes, handovers are predominantly manual. This necessitates cumbersome data entry into multiple spreadsheets for accurate tracking of cases. s also switch between multiple legacy systems to process incoming disputes, duplicating work across overlapping systems. Traditional dispute resolution processes are therefore error-prone, leading to low fraud recovery rates, high operational write-offs, and increased cost of operations. Instead of making investments in updating the existing legacy systems, banks can adopt effective standalone tools to streamline their existing dispute resolution processes. These can be implemented quickly at lower costs based on process requirements and card association guidelines. Such tools may include decision support systems for decision automation, knowledge management portals for storage of knowledge-centric documents, and independent query management tools to enable queue-based processing. Banks can enhance the acquisition component of their dispute resolution process by implementing a merchant portal that can be easily accessed by merchants through multiple channels, including mobile devices. By adopting a merchant portal, banks can realize the following key benefits: Improved productivity through process automation Currently, banks and agents use spreadsheets to track and record all the incoming chargebacks and outstanding cases. They also use standard letter templates to manually send communication, including reminders and follow-up s. Apart from handling the core functions such as representment processing, associates process multiple tasks manually to produce the output. As a large part of their effort is spent on non-core activities such as tracker updating, the time available to conduct core operations is proportionately reduced. This leads to backlog and impacts productivity. A merchant portal simplifies the process, enabling agents to focus on core activities instead of performing ad hoc tasks. An effective merchant portal helps automate multiple process steps, as shown in the process flow diagram in Figure 3. 7

8 Incoming Receive chargeback incoming received chargeback by dispute by dispute application application from from association systems Upload incoming chargebacks manually to the merchant portal Generate automated merchant communication Send merchant communication through the integrated merchant portal A M A A Upload the veri ed documents and represent the case. Send automated communication to merchant based on the action taken through the portal S Correct M Has the document been validated? Incorrect Enable agent to download the merchant documents from the merchant portal Yes S Yes Has the merchant responded? No A Enable merchant to submit the documents again S Initiate merchant communication S A Has the merchant responded? Send automated reminders to merchant A M Has the document been validated? Incorrect No Debit the merchant in the host system M Send automated communications to the merchant A Correct Upload the veri ed documents and represent the case. Send automated communication to merchant based on the action taken S *Shaded portion pertains to straight through processing Figure 3. The process flow for acquiring chargeback using a merchant portal These steps are completed without any manual intervention resulting in enhanced STP rates. This is possible even though the merchant portal does not have any interface with the core cards platform. The five boxes in the blue shaded portion of Figure 3, marked A, represent straight through processing (STP), which leads to increased productivity, accuracy, and customer satisfaction. The process steps marked as 'S' (semi-automated) are partially automated and require minimal manual intervention, ensuring that they are completed in a shorter unit processing time (UPT). These process steps do not include any paperwork, manual image backups, or data entry. Seamless processing through a workflow engine Traditionally, handovers, allocation, information management, and priority instruction processing are handled manually, while tracking, monitoring, and reporting are spreadsheet based. On the other hand, 8

9 a merchant portal with an in-built workflow engine eliminates manual work and assists in seamless queue based processing. It supports efficient allocation of cases and processing of priority instructions, and generates automated real-time reports. The portal can support various configurable queues based on the actions taken by the processors in the acquiring bank. Tasks are assigned to people with appropriate skills, thus eliminating the flaws in generic allocation. The workflow also assists in automatic routing of cases to the relevant teams or individuals. Priority queues can be created and customized based on the agent, transaction value, customer profile, and so on. The workflow engine also assists in reporting and monitoring the cases based on key performance indicators (KPIs). Process managers can thus ensure effective SLA management across various queues. Effective digital servicing The portal can be used as an effective digital servicing channel since it provides the required audit trail. For instance, customized and periodic reports can be made readily available to the merchants through the portal. Inquiries to the contact center can be reduced by encouraging merchants to use the self-service portal. This portal can provide information on disputed transactions relating to fees, refunds, transaction debits, reversals, incentives, and settlements. By enabling end-to-end tracking of each disputed transaction, the portal also provides complete process transparency to the merchant. Merchants can use the unique reference number (URN) created for every incoming dispute to get details for every transaction. Many customers prefer live chat to resolve their queries and problems. The merchant portal facilitates this in real time, thus improving customer satisfaction. The process is also resource efficient, as live chat representatives can manage multiple chats at the same time. 9

10 Creating an Expert Support Team As the dispute process is prone to continuous changes, the support team plays a critical role in managing the process effectively. The support team must comprise skilled and experienced chargeback associates who focus on the four crucial areas of disputes processing, as explained in Figure 4. Complex Case Resolution Induction and Refresher Training Quality Management Change Management Investigate complex high value cases and provide resolution according to card association guidelines Review all arbitration and compliance cases to improve the bank's success rate Create and manage the training framework for induction and refresher training Create and update training documents according to the latest card association mandates Conduct training sessions, manage assessments, and provide feedback Create and manage quality framework for acquiring and issuing dispute operations Perform quality checks on the disputes processes Adopt a statistical approach to perform root cause analysis for all errors and reworks Prepare in-depth rework and error analysis reports to prevent re-occurence and improve quality scores Circulate analysis and findings to a wider audience through case studies to prevent reoccurrence Ensure process alignment based on the lastest card association guidelines Train the team on the card association amendments Create and circulate newsletters and articles on the latest industry trends Figure 4 : The four core areas in disputes processing managed by the support team By creating a well-structured dispute resolution team of experts, banks can: Ensure business process continuity: During periods of increased volume of disputes or other exigencies, an expert support team can offer value-added services such as assistance on complex cases. In times of uncertainty, the expert group can also adopt efficient stopgap measures. Enable knowledge and resource management: The team can facilitate the creation and sustenance of a strong talent pool through effective training and knowledge management. Enhance the success rate: With effective quality control for all outgoing transactions, banks can improve the success rate of their dispute processing. 10

11 Ensuring Effective Customer Contact Management Effective customer contact management is vital for a smooth dispute resolution process. Cardholder calls customer support to file a dispute case Day 1 Day 1 Customer support sends blank forms to the cardholder through fax or Day 4/5 Statement of disputes is received from the customer Day 5/6 In a few instances, additonal information is requested Day 9/10 Temporary credit issued or chargebacks is done post receipt of relevant details 10 days turnaround time for processing High in-executables Figure 5: The conventional customer support process Figure 5 depicts the typical process flow adopted by most banks that results in longer timeframe and high number of in-executables. Usually, the customer contact center acts as a 'router', working in a silo without understanding the big picture. It is therefore unable to participate in or add value to the dispute resolution process. It requests for documents from customers irrespective of the type of dispute, even though the card association does not mandate any documents for initiating chargeback. This leads to unnecessary movement of documents. Cardholder calls customer support to file a dispute case Customer support team gets details from cardholder Cases are routed to the disputes team Temporary credit is issued or chargeback is done Day 1 Day 1 Day 1 Day 2 2 days turnaround time for processing Least number of inexecutables Figure 6: Effective customer support through a customer centric approach 11

12 Figure 6 shows a schematic of customer support through a customer centric approach. Ideally, the customer support team should be integrated with the operations team to handle inbound and outbound calls related to cards disputes. Once the cardholder initiates the dispute, the customer support team must get all the relevant information from the cardholder at the first point of interaction using a checklist. It must route the information to the operations team for processing the case. This will help flatten the W effect while reducing the turnaround time and the in-executables. Banks can enjoy the following benefits by establishing an efficient customer contact team: Enhance quality of dispute resolution: The quality of outbound calls improves as the customer support executive is able to articulate the requirements more effectively, and get the relevant information or documents from the cardholder. This reduces the need for repeated follow-ups with the customer, and improves the quality of dispute resolution. Unnecessary documentation requests can also be eliminated, leading to faster dispute resolution and paperless processing. Ensure customer satisfaction: Visa and other associations continue to refine their chargeback process so that they can reduce the required documentation and promote faster dispute resolution for merchants, acquirers, and issuers. Knowledgeable customer support executives can support this process, further improving customer confidence in card usage and generating more business. Gain understanding of customer challenges: The customer support team can provide process owners critical insights into customer pain points and help the bank keep pace with the latest business trends. Reduce dispute volumes: A strong customer support team contributes to a significant reduction in the incoming disputes volume. For example, the customer may initiate a dispute that does not come under the purview of the card association guidelines. The customer support team can reject such disputes and request the cardholder to resolve them directly with the merchant. Instances when a merchant might have processed credit for a disputed transaction can be directly closed by the contact center instead of being routed to the dispute operations team. Enhancing Dispute Resolution to Meet e-commerce and m-commerce Challenges Even as e-commerce and m-commerce continues to grow at an exponential rate, uncertain economic conditions and technology advancements heighten the possibility of fraudulent activities. Given this scenario, the number of card disputes is estimated to increase substantially. To ensure that disputes and chargebacks do not impact productivity, customer satisfaction, and the bottom line, organizations need to address issues in their dispute resolution process. Many issuing banks are replacing their legacy systems with standalone solutions to realize greater efficiencies. Others are partnering with experienced service providers to leverage scalable, flexible, and secure platforms and solutions that deliver value in terms of superior customer experience and reduced 12

13 costs. They are also adopting a structured case management approach to quickly resolve disputes and ensure a win-win situation for all stakeholders. By strengthening their dispute management strategies and practices, banks can build sustainable customer relationships and operate profitably within the changing economic and legal frameworks. 13

14 About TCS Business Process Services Unit Enterprises seek to drive business growth and agility through innovation in an increasingly regulated, competitive, and global market. TCS helps clients achieve these goals by managing and executing their business operations effectively and efficiently. TCS' Business Process Services (BPS) include core industry-specific processes, analytics and insights, and enterprise services such as finance and accounting, HR, and supply chain management. TCS TM creates value through its FORE simplification and transformation methodology, backed by its deep TM domain expertise, extensive technology experience, and TRAPEZE suite of solution accelerators and governance enablers. TCS complements its experience and expertise with innovative delivery models such as using robotic automation and providing Business Processes as a Service (BPaaS). TCS BPS unit has been positioned in the leaders quadrant for various service lines by many leading analyst firms. With over four decades of global experience and a delivery footprint spanning six continents, TCS is one of the largest BPS providers today. Contact For more information about TCS Business Process Services Unit, visit: ( bps.connect@tcs.com Subscribe to TCS White Papers TCS.com RSS: Feedburner: About Tata Consultancy Services (TCS) Tata Consultancy Services is an IT services, consulting and business solutions organization that delivers real results to global business, ensuring a level of certainty no other firm can match. TCS offers a consulting-led, integrated portfolio of IT and IT-enabled infrastructure, engineering and TM assurance services. This is delivered through its unique Global Network Delivery Model, recognized as the benchmark of excellence in software development. A part of the Tata Group, India s largest industrial conglomerate, TCS has a global footprint and is listed on the National Stock Exchange and Bombay Stock Exchange in India. For more information, visit us at IT Services Business Solutions Consulting All content / information present here is the exclusive property of Tata Consultancy Services Limited (TCS). The content / information contained here is correct at the time of publishing. No material from here may be copied, modified, reproduced, republished, uploaded, transmitted, posted or distributed in any form without prior written permission from TCS. Unauthorized use of the content / information appearing here may violate copyright, trademark and other applicable laws, and could result in criminal or civil penalties. Copyright 2015 Tata Consultancy Services Limited TCS BPS Design Services I 04 I 15