As 2024 begins, the banking industry is challenged to instill greater confidence among consumers as institutions that carefully handle customer deposits. Recently, the Consumer Financial Protection Board (CFPB) announced Reg E enforcement actions that highlight the importance of a compliant payment dispute resolution system. This highlights why 2024 is the year for financial institutions of all sizes to consider payment dispute automation. 

Here are the top 4 reasons to automate payment disputes this year: 

1: Stay Ahead of Compliance Requirements

Payment dispute compliance requirements consist of a myriad of rules including Reg E and an array of requirements surrounding new electronic payment methods as they emerge to support mobile, online and P2P payment methods. Manual dispute processing is simply not sustainable as the payment ecosystem becomes more complex.

Automation is the key to managing a growing landscape of payment dispute scenarios and improving compliance. The risk of non-compliance in payment disputes can be extremely costly. A recent CFPB Reg E fine against a regional bank was $1.2 million, plus an additional $5 million allocated for customer resolution purposes. Each Reg E violation noted by the CFPB results in a $1,000 fine per violation, not to exceed 1% of the FI's assets.

By implementing payment dispute automation, FIs can see an average of 25% reduction in claim-related write-offs and loss. It is clear that payment dispute automation pays for itself in reduced financial and compliance risk.

2: Re-Design Your Compliance Audit Preparation Practices

Inaccurate or incomplete information capture is a common feature of manual payment dispute processing methods. Much of this is the result of disparate systems and rekeying of data on the same dispute. As a result, compliance audits become more time-consuming and difficult to prepare for in advance, leading to non-compliance fines or reputational risk.

With automation, compliance preparation time and effort is significantly reduced as payment dispute activity history is recorded with each step in the dispute process with centralized access to the data. The FINBOA Payment Dispute solution also offers multiple-user, role-based access, including for the compliance auditor role. Once FI teams experience compliance audits using the FINBOA Payment Dispute solution, they tell us it is a game-changer for the back-office and compliance audit preparation.

3: Digitize the Dispute Management Process 

As the banking industry seeks to instill greater consumer confidence, the digitization of payment disputes is a key component of trust-building. Digitized and streamlined banking services and document handling are an expectation of consumers in 2024. A manually-based payment dispute may signal to account holders that an institution cannot handle their data or money effectively.

Payment dispute automation delivers freedom from the disconnected manual dispute tracking methods involving paper, email and spreadsheets. Instead, dispute processing is performed with operational efficiency, providing greater accuracy, speed and transparency. This digitized, streamlined dispute management process can enhance consumer confidence and is an impactful part of the overall customer experience. 

4: Eliminate Costly and Counterproductive Stop-Gap Measures to Handle Surges

By working with hundreds of banks and credit unions, FINBOA has learned dispute automation can dramatically reduce losses related to stop-gap practices employed to alleviate surging volumes of pending payment disputes. 

To deal with payment dispute surges, some institutions have opted to handle increased payment dispute volumes by simply increasing the under-business minimum amounts. This meant that instead of setting the under-business minimum at $20 or $25 they may increase it to as much as $100, taking up to $80 loss risk on a potentially fraudulent payment dispute claim. Enough of these fraudulent claims and the bank realizes significant losses in under-business minimum write-offs. 

With a process automation solution, a dispute submitted by a fraudster (identified initially as a repeat claimant) for an under-business minimum amount, can be flagged for further research.  Additionally, if the payment dispute amount is very large, the system can flag it for manual handling and prevent automatic crediting from the system. With this intelligent automation, potential fraudsters exploiting the minimum-business amounts and automatic crediting can be quickly identified, making  investigation of fraudulent claims more efficient. 

Volume capacity is greatly improved with automation of payment disputes. Surges in payment disputes can happen quickly and unexpectedly, for example a hacker incident, a new payment scam emerges, a skimmer installed in a local area. Any surge can paralyze a back-office dependent on manual dispute processing. Automation allows FIs to remain competitive and profitable, by enabling FIs to scale dispute processing to address surges and increased overall demands. 

2024 is the Year of Automated Payment Disputes

As banks and credit unions seek to instill greater confidence in their account holders, automation is a key component that can lead to reduced compliance failures, an improved more transparent digitized payment dispute process and better handling of increased payment dispute volumes.

A shift to an automated process can greatly reduce risk of compliance fines and increased regulatory oversight. Automated financial calculators, GL provisional crediting, alerts and letter-generation improves accuracy and minimizes negative consumer experiences in the dispute management process. 

2024 is the year to transform payment dispute processing to improve operational efficiency, compliance, and the customer experience.  Contact FINBOA for more information about our banking-centric payment dispute automation solution.

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