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Settling the score – how fintechs can help settle fraud disputes between banks


Following the 2008 financial crisis, fintechs stepped in to provide the banking industry with much-needed solutions. After more than a decade, payment providers and issuing banks are facing a new set of challenges, exacerbated by chaotic legacy systems, changing consumer behaviour and complex appraisal procedures.

Changing Tides

The last few years have seen a rapid increase in payments fraud globally. According to LexisNexis research, $1 of fraud now costs U.S. retail and ecommerce merchants $3.75, which is 19.8% higher than the 2019 study figure. 

This general trend has been exacerbated by the sophisticated methods fraudsters are using to trick cardholders into access payment details. As card-not-present (CNP) transactions become more common, fraudsters have used a range of tactics such as phishing emails, fake parcel scams and authorised push payment fraud (APP) to trick cardholders to access personal and finance information.  In the UK, payment card fraud accounted for 45% of the total £1.26 billion in financial fraud losses reported by UK Finance in 2020, followed by APP scams (38%).

Banking institutions are consequently under additional pressure to manage chargeback processes, and both cardholders and regulators are pressing for stricter mechanisms to address the issue. 

Meeting the Challenges 

Issuing banks face many difficulties as a result of the rise in payment fraud. The allocation of resources for resolving fraud chargebacks and recovering the money is one of the more significant problems. The first step in this process is a cardholder statement which customers must complete and sign in order to declare that they have not performed the transaction. Because follow-ups and additional information are often required, the response time can be further prolonged. 

Due to the vast backlog of cases, issuing banks run the risk of missing the deadline for filling chargebacks and recovering funds. The manual nature of how these disagreements are typically handled—often through post-mail and/or customer call centres—is fraught with inefficiencies. Banks also use relatively outdated tools and technologies to process and manage disputes, which further degrades the user experience for cardholders. Issuing banks suffer significant losses if fraud chargebacks are not processed promptly because in most cases they must still refund cardholders.

In addition to fraud cases, card payments also offer cardholder protection when there is a dispute with the merchant. However,the majority of cardholders are unaware of their cards’ protection privileges (whether Mastercard, Visa, Amex, etc). And most banks have concerns that they cannot manage the additional chargeback volume (whether for fraud or cardholder disputes with merchants) with their current, outdated systems. As a result, banks normally do not market this service and cardholders being unaware of this turn to other payment services that promote buyer protections (example, PayPal). 

Promoting cardholder protection (in case of fraud or dispute with merchant) together with offering an easy process for the cardholders to dispute a transaction can be a strong Unique selling point (USP) of a card which can position the card as top of the wallet. Being able to promote such a USP would help issuing banks stand out from their rivals in the market.

Fintech as the Solution

Fintech solutions can help deliver smoother efficiencies and a better cardholder experience to cardholders. They can also be used to improve current technological processes that issuing banks have been using for decades, when online payments were not the primary use case for card payments and thus fraud and dispute volumes were not as high as they are today.

A good dispute process allows cardholders to dispute a transaction directly from the banking app, eliminating the need to fill out multiple forms or contact customer service. Chatbots that collect cardholder statements as well as all of the information and documents required by the issuing bank to process the dispute and recover the funds can provide such an experience. Instead of using traditional methods such as mail or phone calls, bank employees can use such digital channels to contact cardholders when additional information is needed.

This can result in speedy responses and follow-ups and enable the banks to meet the timeline to recover the money. Not to mention that providing such a user experience increases cardholders’ trust in their banks and, therefore, cardholders’ loyalty and top-of-wallet position for the card for future transactions.

Improving cardholder experience

Digitalising the current manual procedures cardholders use for disputes can be an important part of improving cardholder experience and increasing bank efficiency. Fintech products, in particular, can significantly contribute to the arsenal of fraud protection and recovery strategies that banks and payment providers may employ. Using all available technological resources would result in a faster, more efficient procedure that would help banks fulfil their trust promise. This can only be beneficial in a competitive market where innovation is critical to success.


By Fatemeh Nikayin, Co-Founder of Rivero — a privately held company based in Switzerland, with a strong focus on the payments and card industry. It provides SaaS solutions for all players in the card payment ecosystem such as issuers, acquirers and fintechs.

This article is part of a paid partnership with social impact media firm Ecology Media, which is running a special editorial series called A Better View to explore the ethical and diversity challenges that exist in the world of innovation – and the ways they can be fixed.

For partnering opportunities, contact [email protected].

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