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The Hidden Cost of Fraud Disputes Is Hitting Banks Hard
Fraud disputes are one of the fastest ways for banks to lose customers—and one of the least prioritized parts of the business. Despite the high costs, many institutions still treat them as a back-office function rather than a decisive point in the customer relationship. Beyond immediate losses—such as chargebacks, write-offs, and investigation expenses—banks also lose revenue when an engaged customer no longer keeps their account top of wallet. In a PaymentsJournal Podcast, Steve Durney, Vice President of Partnerships and Alliances at Quavo, and Suzanne Sando, Fraud Analyst at Javelin Strategy & Research, discussed the hidden costs of fraud disputes. It’s a problem that will only intensify as AI and agentic commerce evolve. Customers Are Willing to Move On Banking industry recovery rates for fraud average around 64%, leaving more than a third of disputed dollars unrecovered. For most banks, disputes are an expensive process, with operating costs eroding already thin margins. Research suggests that if a fraud issue or dispute isn’t handled effectively, 60% to 70% of customers will move to another bank. Notably, the outcome doesn’t always have to favor the customer, as long as the process is managed transparently and resolved efficiently. Once customers feel they aren’t being treated fairly, it’s difficult to restore trust. Accounts may be quietly abandoned, and products go unused. Even without formally closing an account, customers often disengage entirely. “We’re seeing growing numbers of consumers who are willing to close an account and walk away when they have a bad experience with their account,” said Sando. “Setting everything back up with a whole new financial institution—like bill pay or getting all your accounts linked to whatever other financial accounts you were linked to—it’s a tremendous hassle. If you’re willing to go through all of that, that says a lot for how important security and customer service is throughout a process like this.” Modernizing the Dispute Process Several aspects of the dispute process need modernization to improve efficiency and recover lost value. Because dispute teams rarely receive priority budget allocation, banks often underinvest in technologies that could significantly improve performance. Organizations that ignore these inefficiencies and continue to deprioritize back-office enhancements only prolong the problem. Five years from now, they are likely to be facing the same challenges. “The inefficiency rea...
Fraud Prevention | American Bankers Association
Texas National Bank amplifies fraud prevention with Abrigo Fraud Detection How Mitek helps banks protect against U.S. Treasury check fraud Key Considerations When Outsourcing Fraud Prevention Support for Fintech Companies The Check Fraud Kill Chain: Moving from Detection to Prevention Phishing for trouble: What's the key to navigating fraud?
Financial Crime, Fraud Prevention & Detection, & RegTech News | The Paypers
The Paypers covers the latest global news, analysis and insights on financial crime, fraud prevention and detection, RegTech and identity verification.
The Proactive Fraud Prevention: Leveraging Behavioral Analytics and Red ...
The proactive fraud prevention approach is essential in today's digital era, leveraging behavioral analytics to identify and counteract suspicious activities before they escalate into significant threats. Complacency is the enemy of effective fraud fighting.
