Reimagining Dispute Resolution: Strengthen Customer Relationships and Cut Costs
Reimagining Dispute Resolution: Strengthen Customer Relationships and Cut Costs
An article published by McKinsey & Company highlights the critical opportunity for banks to enhance customer relationships while reducing operational costs.
Although payment disputes occur in less than 1% of transactions, their impact on customer trust and loyalty is profound. The article mentions that by reimagining the dispute resolution process, banks can not only mitigate the frustration and inconvenience associated with these disputes but also seize a valuable chance to strengthen their bond with customers.
Key challenges in dispute resolution:
➤ Complex Operating Models: Traditional structures create a fragmented chain of responsibility, leading to customer dissatisfaction and inefficiency.
➤ Overprocessing of Disputes: A one-size-fits-all approach to disputes, regardless of context, increases volumes and pressure on teams, affecting efficiency and regulatory compliance.
➤ Over-reliance on Case-Management Systems: While case-management systems were expected to reduce costs, their effectiveness is limited without integration into broader systems for a streamlined resolution process.
➤ Increasing Regulatory Focus: Tightened regulations demand quicker dispute resolutions, pushing banks towards faster credit provision without addressing root causes.
According to McKinsey, leveraging automation can reduce dispute-resolution cycle times, boost operational efficiency, and improve the overall customer experience. Here is how:
➤ Dispute Management: Automation can streamline the entire process, from initial complaint to resolution, ensuring a smoother, more efficient pathway.
➤ Dispute Processing: Automated systems (e.g., Virtual Agents/Chatbot) can gather necessary information and prepare cases for human processing, streamlining the initial stages of dispute resolution.
➤ Post-Dispute Processing: Handling the issuance of credits and communicating updates to customers, improving the post-resolution experience.
➤ Dispute Support: Intelligent support tools, such as virtual agents or chatbot functions in the bank’s app or portal, to resolve customer queries during the dispute-research process.
Furthermore, McKinsey underscores the financial and relational benefits of refining the dispute resolution process. Quick resolutions and provisional funds can transform negative customer experiences into loyalty-building moments. This not only solidifies customer relationships but also offers substantial cost reductions. The top 15 US banks spend about $3 billion annually on dispute processing, and McKinsey suggests that implementing next-generation operating models could reduce these costs by 25 to 40 percent. By simplifying and automating the process, banks can achieve better outcomes, reducing the incidence of incorrect dispute resolutions, which affect up to 10 percent of cases for some banks.
Redesigning the dispute resolution process, though challenging, holds the potential to significantly enhance customer loyalty, operational efficiency, and financial performance.
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Source: McKinsey & Company Payment disputes in banking: A pathway to deeper customer relationships