The demand for real-time payments is on the rise. With that increase in demand comes an inevitable rise in disputes. While managing disputes is relatively straightforward for card-based transactions, that is not the case for real-time payments. As consumers continue to flock towards real-time platforms, the need for better dispute processing is becoming more apparent.
To learn more about the need for real-time payment dispute management, PaymentsJournal sat down with Cheryl Fitzgarrald, Senior Project Manager at BHMI, Nathan Churchward, Head of Product – Emerging Services at Cuscal, and Sarah Grotta, Director of Debit and Alternative Products Advisory Service at Mercator Advisory Group.
Real-time payments are gaining traction in the U.S.
In the United States, there are a few networks that can be used to facilitate real-time or near real-time payments, including The Clearing House’s RTP Network, Mastercard and Visa push payments, and the Zelle network.
There are several use cases seeing widespread adoption by consumers and experiencing rapid growth: B2C activity for emergency payrolls, payroll adjustments, gig worker payments, account-to-account transfers, and P2P real-time transactions.
“From what we’re hearing regarding adoption rates and learning about what’s happening in those various segments that do provide some [transaction] reporting, we believe that the growth rates for real-time payments in total are somewhere in the range of 40% to 50% year-over-year, and we’re certainly seeing some pockets that are growing faster,” said Grotta. Looking into the future, even more real-time payment growth and new use cases should be expected.
Real-time payment vs. traditional card-based transaction disputes
P2P payments represent a real-time option for transferring funds between parties but settling or moving funds between parties in P2P transactions differs greatly from settling historic payment transactions using credit, debit, and checks.
With historic payment methods, the payer’s financial institution sends money to a card network or other FI via a settlement method that may take multiple days to complete. While this does result in a longer wait time before being able to access funds, the disputes process is more well-established.
“Traditional payment methods have been available for decades. As a result, the disputed transactions for these programs are very well-defined, and updates to the programs are released at set intervals. Most people using these payment methods understand the risk and financial liability involved and have a high degree of trust that disputes will be resolved,” explained Fitzgarrald.
With P2P payments, transferring funds between the payer and payee is much faster—nearly instantaneous. The challenge here is that it may take longer for a consumer to recognize a transaction as fraudulent, which increases the risk of not being able to settle a dispute.
“P2P is relatively new in the marketplace, and the dispute regulations and procedures being created by the different P2P networks are in the early stages of development. Their update cycles are not well-defined. People using these payment methods may not be aware of who has the financial liability for the dispute until they are involved in one,” Fitzgarrald added.
In the U.S., the total time required to research and return P2P funds is similar to that of traditional methods, even though P2P money transfers occur in near real-time. Fortunately, this does not have to be the case. For example, certain payment providers in Australia are successfully resolving disputed New Payments Platform (NPP) transactions close to the time the actual payment occurred.
Australia’s Cuscal: A real life success story for real-time dispute management
One organization that has stepped up to the challenge of real-time payment dispute management is the Australia-based payments provider Cuscal. Cuscal provides processing and settlement services to more than 50 banks in Australia, from small credit unions to some of the largest banks in the country.
Launched in 2018, Australia’s NPP, is a faster payments system that makes near real-time funds availability a reality. NPP is owned by 13 Australian banks, including Cuscal, and is a distributed model with the payment clearing and settlement infrastructure operated by those participants. Cuscal has established itself as a leading enabler of real-time payments, processing almost 20% of all NPP payments.
As one of Australia’s top payment-solution providers, Cuscal has successfully faced the challenges of transforming its back office to address dispute management for real-time payments. When establishing the rules for NPP, committee members made the decision that all dispute investigations and payment returns must be handled using the ISO messaging standard as close to real time as possible.
“This was a bold move, as this level of integration and high-bar expectation hadn’t been attempted in other payment systems. The rules include having a system that can accept an investigation request in real time, in line with the principles of being able to accept a payment in real time,” said Churchward. Beyond messaging, Cuscal needed to have the ability to enable its clients to meet the obligations for responding and actioning.
“The way we provide a self-service managed process for disputes is now one of our competitive advantages and has saved our clients from considerable development and operational overheads compared to others who have not delivered the same level of servicing or integration to meet their real-time obligation,” he added.
Improving dispute management flows with Concourse – Disputes
Companies like Cuscal have selected BHMI’s Concourse Financial Software Suite to transform their back offices and meet the demand for real-time payments. One of the modules within Concourse, Concourse – Disputes, can be used specifically to manage real-time payment disputes.
“Concourse – Disputes is a workflow management system that manages the dispute’s lifecycle from the initial claim entry to final resolution. The system can manage disputes from both an issuer and an acquirer perspective. For example, it provides real-time loading and viewing of transaction history and disputes related to any type of electronic payment. This makes it easy for companies to quickly research transactions, manage disputes, and track all dispute activity in real time,” explained Fitzgarrald.
BHMI goes above and beyond by configuring NPP-specific dispute plans as new updates come out, ensuring Cuscal can handle all disputes in a compliant manner. But that’s not all. “One other reason I want to mention that makes Concourse so well suited for real-time payments is that it provides direct connectivity with the payment networks’ dispute systems,” added Fitzgarrald.
Concourse also allows Cuscal to systematically send and receive information directly from Visa VROL, dramatically speeding up and automating the communication process between Cuscal and the payment networks.
The time to modernize legacy dispute systems is now
Despite the rising demands of the modern world, many companies still rely on back-office dispute systems that were built decades ago and not designed to handle newer payment methods like P2P. “For these companies, an option is to transform their outdated systems with a nimble and flexible solution,” advised Fitzgarrald.
Another suggestion is to increase the use of intelligent workflows to process disputes and reduce manual processing as much as possible. “When you consider the negative impact that disputes have on the customer experience, implementing processes that give control to clients to understand the status [of their dispute] and take action themselves has a huge payback in customer satisfaction and retention,” concluded Churchward.
