Even if a bank wins a dispute, it often loses time and money — while merchants wrestle with their own rising tide of
Banks have been coping with increasing volumes of card transaction disputes that require labor-intensive processes to resolve within bank industry regulations and card network rules. And one of the ongoing fallouts from the pandemic-accelerated shift to digital payments was a surge in all kinds of
The new new AI-powered tool is designed to smoothly orchestrate transaction disputes across fragmented bank, merchant and card-processing systems using technology from ServiceNow, a Santa Clara, California-based cloud software firm. Visa and ServiceNow, with more than 22,000 employees globally, have formed a five-year alliance, the companies recently announced.
The product, called "ServiceNow Disputes Management, Built with Visa," aims to streamline the dispute management process. This includes helping automate the process for determining whether banks or other parties are liable for card fraud disputes, whether it's an accidental purchase from an online retailer, a fraudulent credit card charge, identity theft or an incorrect payment to a canceled subscription.
One analyst said the service could be a game-changer for banks currently juggling up to three different systems to determine who is liable for contested transactions.
"For card issuers, transaction dispute management can be incredibly complex and fraught with challenges due to the need to comply in a timely manner with Reg E [for debit transactions] and Reg Z [for credit card disputes] to comply with cardholder protection rules," said David Mattei, a strategic advisor at Datos Insights.
The new service could also be a threat to card processors, which generate revenue from their chargeback systems which often act as intermediaries between the bank and the card brands, he said.
"This integration between Visa and ServiceNow could potentially cut card-processing firms out of some revenue flows," Mattei said.
Visa's new partnership evolved when ServiceNow — whose platform provides AI-guided digital workflows for companies across diverse industries — began getting requests for help managing disputes from banks,
"[ServiceNow's] bank clients had asked for and been interested in some of the dispute services that we provide," McInerney said. The co-developed product is part of Visa's growing menu of value-added services, he added.
ServiceNow will integrate directly with the card network's existing Visa Resolve Online dispute-management system, providing a shortcut for banks' customer service agents, virtual agents and chatbots to access data about a disputed transaction on a single screen, instead of pulling data from several sources, said Vidya Balakrishnan, vice president and general manager of financial services at ServiceNow.
"Up to now, a bank customer service agent would typically start investigating a disputed transaction in one software program, then swivel over to Visa Resolve Online, and use other systems to gather answers to multiple questions about the transaction, with a lot of manual input," she said.
The new product will consolidate relevant transaction data needed to investigate a dispute to determine whether it's eligible for a chargeback before it's submitted to Visa, eliminating manual labor and improving the accuracy of disputed transactions banks contest, according to Balakrishnan.
"All of the questions bank employees need to answer when managing disputed Visa transactions are now embedded within our software, which will automatically include any changes in Visa's transaction-dispute and compliance policies," she said.
As payments have become more diverse, the chargeback process for banks and merchants has grown increasingly complex over the years, involving many participants all using different systems and tools, Mattei said.
The dispute often flows to the card network through a card processor, which supports multiple card brands and EFT PIN debit networks, each with unique chargeback rules, he said.
"The dispute system used by card processors often needs to support 15 or more dispute management or chargeback systems, and manage semi-annual compliance updates from the card brands, plus ongoing education and training for back-office staff, with the need to determine if the cardholder initiating the dispute is a serial disputer or if first-party fraud is being committed," Mattei said.
ServiceNow is currently developing additional generative AI tools to reduce some of this friction and manual labor by automatically summarizing the history of each transaction dispute, cutting steps out of an existing labor-intensive process that requires bank employees to research and cross-reference transaction details across disparate systems, Balakrishnan said.
"GenAI will simplify deeper investigations with summaries, so a middle manager or back-office agent at a bank doesn't have to go through and review hundreds of questions about each transaction to see who is liable," she said.
Many organizations still use legacy systems for handling dispute management, and Visa's ServiceNow collaboration could shift some of the workload to systems from bank employees, said Rodrigo Figueroa, chief operating officer at Chargeback Gurus, a Plano, Texas-based technology firm that helps merchants handle a rising tide of chargebacks from customers.
Figueroa notes that despite the overall increase in bank transaction disputes and merchant chargebacks in recent years, 99.5% of all transactions never see a dispute, so ServiceNow's impact on processors' revenues from dispute-management may be muted.
