Evolution of dispute processing

This video shows when and how a payment dispute arises.

Consider the following business scenario: Sara Connor wants to buy a book from an e-commerce website. She visits the website and looks for the book that she wants. She finds the book and adds it to the cart. Then she proceeds to check out. During the check-out process, she enters her mailing address and submits the order. She then receives the prompt for payment.

Here, Sara Connor is the customer; the seller who sells the book on the e-commerce website is the merchant, and the e-commerce website is the point-of-sale (POS) system.

Sara enters her credit card details and initiates the payment. The e-commerce website contacts the card network. The card network transmits the credit card details to the issuing bank (issuer) along with the billing amount to seek authorization. The issuer bank provides its approval once it has verified the customer details and credit limit against the billing amount. The card network then receives the approval of the issuer bank and informs the e-commerce website of the same. After this, the e-commerce site confirms the order and prepares the book for shipping.

Sara Connor sees the order confirmation message on the e-commerce website and logs out. Sara Connor waits for the book to arrive at her mailing address. Unfortunately, even after a month, Sara did not receive the book delivery. She gets concerned and reaches out to the merchant. But the merchant says that it shipped out the book. Sara tries to track her shipment but fails to get any satisfactory response from anyone. This situation gives rise to a dispute.

Sara Connor reaches out to her issuing bank and raises a dispute on the payment made to the merchant for the book.

The issuing bank reaches out to the card network to seek a resolution for the dispute raised by the customer. The card network reaches out to the acquiring bank, which in turn reaches out to the merchant for clarification and evidence. The merchant responds to the dispute inquiry, which is again conveyed back to the customer through the acquirer, card network, and issuer. Depending on whether the customer is satisfied with the merchant's response, the customer might decide to pursue the dispute further. If the bank finds the dispute to be valid, the issuer might reverse the transaction.

This scenario is just one example of a dispute. Several other kinds of disputes can also arise. For example, when the credit card details of a customer are stolen, someone else makes financial transactions on behalf of the customer without his knowledge or consent, and the customer can file a dispute. Different disputes involve different stakeholders and different processes.

You have reached the end of this video. You have learned:

• When and how a payment dispute arises.

Before automation of dispute processing, the involved parties must manually go through the physical records, which is error prone and communications among the stakeholders occur through the mail, which might take days to weeks. If the situation arises for the stakeholders to meet, it involves face-to-face meetings and other logistics. If the stakeholders are located across the globe, the situation becomes more complex.

This process is tedious, time-consuming, and expensive.

With the advent of information technology and internet services, banks have increasingly automated dispute processing.

Sara can raise the dispute by filling in a web form that is available on his bank's website, through chat messaging, or by calling the customer service contact center. The dispute requests then reach the banks digitally. Verification of documents is a bit easier because the banks can cross-check against their digital records.

Automating the dispute process helped ease the process, but there are still many concerns. Stakeholders still manually follow up and drive the process. After the dispute request reaches the bank, a bank employee still must open the request, check for its adequacy of information manually, validate it manually against digital records, contact the card networks by email, attach the digital proofs of the transactions, and so on.

The automation of dispute processing is not a robust or end-to-end solution.

A huge leap in the automation of dispute processing happened in 2017 when the card network Visa offered a range of application programming interfaces (APIs) that can assist in automating and streamlining the dispute processing workflow.

With advancements in technology and the introduction of solutions like Pega Smart Dispute Agentic Automation, businesses can now automate various tasks and streamline dispute resolution processes, such as automated dispute initiation, real-time updates, comprehensive data access, and integration features. Businesses that implement the Pega Smart Dispute Agentic Automation solution can see improved efficiency, accuracy, scalability, and customer satisfaction.