Uncertainty in the Consumer Economy: Will Dispute Volumes Rise?

The global health situation is causing significant uncertainty in the marketplace for everyone – businesses and consumers alike. Recently, many people have had to cancel or adjust their vacation plans and other leisure activities – many of which were previously booked and possibly paid for in part or full. As a result, many merchants have had to deal with increased inquiries from their customers regarding refunds and credits. This means that merchants are facing a difficult challenge: whether or not they should enforce standard refund or cancelation policies, or to make special accommodations for customers so as to not lose future business. For example, we have already seen the airline industry and other companies that provide travel and leisure services have to take special measures to temporarily adjust standard practices.

Inevitably, banks and financial services companies will become involved in the equation. Consumers will explore all options available to try and recover their money for goods and services they may no longer be able to use. This means that customers will be attempting to file disputes against prior transactions, and banks will be in the unenviable position to receive the claim and process it – with the unfortunate outcome in some situations that the claim will be denied.

This scenario presents three significant challenges for banks and financial services providers:

• They will be in a very similar circumstance as the merchants who sold the goods or services initially; should the bank take action to honor the claims from their customers to accommodate the difficulties these customers face?
• Dispute volumes will temporarily spike since customers will turn to their financial service providers to intervene and take action; all of this is happening while many companies are invoking elements of their business continuity plans to have employees work from home or remotely to limit the spread of illness.
• Individuals are reluctant to go out socially due to health and wellness concerns; in some cases, local and national governments are encouraging (or even requiring) people to stay at home. This does not mean that people will suspend purchasing of goods and services, which means we will likely see some interesting growth in e-commerce (CNP) payment transactions. These types of transactions can be prone to fraud (friendly or not) and thus may result in increases in dispute volumes.

These situations will pose significant difficulties for each participant in the electronic payments world in the short-term. One certain outcome from the current global health crisis is that banks and financial service providers will quickly realize the deficiencies of their current payment systems and operating procedures. Once we get through these difficult times, I expect that global economy will once again return to making targeted investments in technology that supports automation and mobility.

In the meantime, stay calm, safe and healthy!