Process Inefficiencies are Costing Card Programs Millions
This is a sponsored post by Kate Firuz, Product Director, PayTic
It seems that every day, a new credit, debit, or prepaid card product hits the market, each one with more bells and whistles than the last. While this is fantastic for the card holders who are collecting points and tapping their way into cash back, the work and procedures that are required to maintain the program remain largely archaic. Manual invoice reviews (or lack thereof), manual data reconciliation, and you guessed it, manual dispute filing can result in millions of dollars wasted a year and missed growth opportunities, even for small to medium size programs.
Card programs are a result of the partnering between three key players – the card network, the issuing processor, and the sponsor bank (BIN Sponsor). Only with this tri-party handshake can a fintech, credit union, or bank launch a new program, either via physical or virtual cards. So, what does it take to ensure that the program is a success? That it brings value to card holders and share holders alike.
The key to longevity, and ironically where most card programs are the weakest, is in data management. When more than one party is involved in even a single transaction, creating a transaction system-of-record to keep everyone in sync can be a challenge; and when millions of transactions run through a card program every single day, you will quickly find that you have a program that will not scale. When the data doesn’t align, and the story looks complicated, it means three things for card programs:
- Excessive operating costs
- Compliance and data reporting challenges
- Inefficient dispute processing
Every month, the card networks send an invoice, billing the card program for their activity and any additional services they may have. This sounds simple enough, but mixed in with the standard line items, are often non-compliance penalty fees levied against the program. You may wonder how card programs that under-go so much vetting can act in a non-compliant way – the truth is that most of them are not even aware of the issues. The non-compliance fines are often related to data reporting and improper reconciliation. There is one simple fact that all programs must know – if your reported numbers don’t match the network’s numbers, there’s a fine for that. These “numbers” refer to a very specific set of reporting requirements including transaction count, credits, debits, chargebacks, and fraud cases just to name a few. Remember that every single action runs through at least 3 parties – the network, the issuing processor, and the core banking – each with their own file types, reporting cadence and data structures. Our clients, who represent a range from fintech to credit unions and traditional banks, have all struggled to align their data without the help of an automated system to match and parse data.
Let’s summarize the situation – in addition to customer service, dispute resolution, fraud monitoring, AML and KYC, a card program is responsible for ensuring that all their data is accurate and reported on time. When this doesn't happen, fines result in higher than necessary invoices, and complicated invoices mean that the fines can go unnoticed, allowing the cycle to perpetuate for years.
The last, yet critical piece impacted by poor data flow is dispute management. No card program can function without proper fraud and dispute handling procedures. The data required to locate, investigate and submit a transaction for a dispute follows the same path as any transaction, plus the additional layers of going to the acquiring bank and merchant for their input. The traditional dispute lifecycle takes at least 45 days and is riddled with blind spots as the claim enters the review process. When access to transaction meta-data is available in real time and therefore the right questions are available to the processing agent, a dispute can begin and end within a matter of a few days, and usually in the favor of card program. The result of the dispute then needs to be updated in the card programs ledger, accounting system, and quarterly report. Again, delays in processing lead to delays in reporting and result in fines – the theme of the situation is quite clear!
More and more issuing institutions are turning to 3rd party technology providers that can break through the noise and paperwork of payment program management. Automated systems that can collect, analyze, organize, and produce exceptions in seconds are showing financial institutions a freedom and confidence that was once thought impossible. With the burden of data management lifted, card programs can focus on growth and card holder value, instead of manual back-office work.
Visit the PayTic booth at FinovateSpring 2023 to learn how our automated invoice, data and dispute modules mean time and money saved instantly for your card programs.