The combination of an evolving regulatory roadmap for the financial sector and the effects of modern technological developments have altered the way customers interact with banks and the services that they expect. Overall, this is a positive trend for the development of financial institutions in the digital age. However, consumers can find banking disputes to be a cause of frustration and inconvenience. As card transaction volume increases, so have the number of dispute-led transactions (as well as incidents of fraud), putting enormous stress on the operating backend systems and millions in cost.

Modern banking: The need to limit regulatory risk appetite

Today, compliance plays a significant role in how FIs (financial institutions) operate. There are norms for pretty much anything –  from how a bank should interact with its customers to the language they need to use. Some of the complexities and critical obstacles with banks still anchored in traditional processes are:

• Complicated operating models: Many financial institutions operate with stringent budget controlled departmental structures that lack clarity in providing holistic dispute-management experiences. Disjointed models such as these lead to delays in the overall dispute handling processes. As disputes can be scattered anywhere across the world, this exacerbates the pressure on operational costs (especially if most tasks are manual).
• Over-processing of disputes: Regardless of the dollar amount or the disputed history, banks tend to duplicate processes to solve conflicts end-to-end. As a result, the dispute volume rises, putting additional and unnecessary pressure on dispute squads, raising costs, and the number of regulatory infractions.
• Over-dependence on case management systems: Traditionally, case management systems used to drive down costs for institutions. Yet, most FIs only realized negligible improvements in the speed and efficiency of the grievance redressal. Without effective integration, sole reliance on these systems can leave systemic blind spots and ineffective dispute investigations.
• Growing regulatory scrutiny: Regulations in the United States are tightening timelines/TATs for resolving disputes – increasing pressure on dispute teams to resolve the issue and deliver credit faster.

Compliance norms such as Electronic Funds Transfer Act (EFTA) and Regulation E are now making banks rethink the way they manage disputes while being cost-effective, quick, and ensuring the same with lower regulatory risks. Moreover, from a legal perspective, given that Reg-E is a federal framework, Financial institutions would need to take this seriously.

Making the most of disputes with RPA  – Turning dispute compliance from weakness to strength

Traditionally, banks have tried to enhance their dispute resolution process through technological investments that enable process tweaks – something that leads only to marginal profits. If banks treat disputes as a patchwork or consider only firefighting issues to minimize it, they miss the opportunity to strengthen customer relationships.

Robotic Process Automation (RPA) serves as an intelligent (and virtual) workforce to automate redundant/time-consuming aspects of the resolution process. RPA deployment in banks has led to a dramatic reduction in the dispute resolution cycle and human errors, boosting operational efficiencies, and improving the overall customer experience.

Reduction in the average handling time of every dispute has three significant benefits:

1. Ability to efficiently handle large volumes of claims within a given timeframe
2. Freeing-up resources from manual processes to invest in other high-priority banking activities
3. Increase in the accuracy of the operations without any penalties for non-compliance

Yet the most significant benefit is the overall improvement of the customer experience. Some have taken the process and improved them by 99%[1], while others have seen 100% accuracy with no manual errors, and a reduction of the average handling time from 9 hrs to 2 hrs a day. Mckinsey has estimated that almost $3 billion is spent (combined) by the top 15 banks in the United States on just processing disputes. At a macro level, almost 50-100 million disputes occur every year in the US. Deploying RPA and AI-led technologies have proven to reduce OpEx by ~25 – 40%[2].  It could, therefore, lead to a multitude of operational, resource and cost benefits

Banking on bots for a quality banking experience

Dispute resolutions are cumbersome and result in the loss of consumer trust. As the scope of regulations focuses on how quickly and efficiently payment disputes are resolved, the onus falls on banks to better manage their internal processes while maintaining end-to-end compliance. While banks seek to improve their dispute resolution processes, they can go beyond making incremental changes and re-evaluate the entire customer journey roadmap.

Critically identifying which processes to automate will not be a simple exercise, requiring everyone across the board to be invested in working with an AI-workforce. If the evidence from global success stories is any indication, the rewards, however, are sure to be significant.