LEAN INDUSTRIES I n c o r p o r a t e d

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LEAN INDUSTRIESI n c o r p
o r a t e d

• Debit and Credit Disputes
• Challenges and Opportunities
• Presented at S1/Postilion
• UK Conference
• October 12 2005
• Bjorn Larsen
• President, Lean Industries

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• Disputes ?
• Cardholder issuer disputes (debit, credit, ATM,
  check deposit, eCommerce, ACH)
• Adjustments generated by acquirer (ATM errors,
  merchant problems)
• Network reconciliation exceptions
• ATM balancing exceptions

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• Industry Statistics ()
• Chargebacks equal 0.2-0.3 of card transaction
  volumes worldwide, costing industry US50/dispute
  on average to process
• Credit card firms spend US8 (US)-US12
  (worldwide) Billion/year handling disputes
• Costs can be reduced 25-40 annually by new
  systems and use of the Internet
• Edgar Dunn Company, March 2003

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• Realities of EFT
• Increasing transaction volumes in every product
  area, especially signature-based products
• Smarter and more discriminating consumers are
  scrutinizing products and purchases more
  carefully
• Fraud increasing with eCommerce/Internet
  purchases (card-not-present transactions,
  identity theft)
• Massive outsourced processing centers invite
  hacker software and cardholder information theft
• Technology allows counterfeit cards to be
  produced faster and more funds stolen prior to
  detection and card cut-off
• Large increases in disputes

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• Industry Challenges
• Business Issues
• High volumes, clerical labor
• Little integration between departments (PIN
  Debit, Signature Debit, Credit cards, Check
  Deposit, ACH, ATM Balancing, Network Recon)
• Settling to multiple diverse networks (US-based
  processors can settle with up to 18 national and
  regional networks)
• Slow customer service, multiple points of entry
  for the cardholder
• High staffing costs and low claims-per-FTE ratios

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• Industry Challenges
• IT Issues
• Disparate technologies and formats, redundant
  data entry
• Paper-based systems, manual tracking
• Multiple, proprietary interchange adjustment
  systems
• Workflows not yet common in the dispute
  application
• Dispute resolution not viewed as customer-
  centric, revenue generating process

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• Industry Challenges
• Consequences
• Financial losses from lost claims, discretionary
  write-offs, fraud and un-recovered fees
• Low claims-per-FTE ratios, high personnel costs
• Multiple legacy systems, high support costs
• Cardholders customer experience suffers

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• Opportunities
• Card Issuers
• ATM Drivers
• Processors/Outsourcers
• Merchants

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• Opportunities - Issuers
• Single call center interface for cardholder
  phone calls
• Do-it-yourself disputes over the Internet
• Contextual question/answer technologies to ensure
  correct info captured by call center and
  cardholder
• Image capture and auto-exchange with Visa and
  Mastercard
• Automated UsOnThem and ThemOnUs disputes via
  electronic interchange links
• Automated processing of the simple disputes
• Lower discretionary claim amount limit due to
  lower costs

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• Opportunities - ATM Drivers
• Do-it-yourself disputes over the Internet for
• terminal owners
• Automate UsOnThem and ThemOnUs disputes
• via electronic interchange links
• Armored carrier cash residual reporting over
• the Internet, feeding exceptions to adjustment
• system

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• Opportunities - Processors
• Do-it-yourself disputes over the Internet for
  processors customer base (customer-processor)
• Unify network interfaces for both transactions
  and images
• Reduce dependence on dispute analysts specific
  network knowledge
• Automate image capture and transfer of all
  documentation
• Automate fee re-capture
• Offer dispute services to customer base as new
  revenue source (customer-cardholder)

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• Opportunities - Merchants
• Automatic processing of incoming chargebacks
• and draft requests
• With automatic access to Draft Image system, can
  automate draft retrievals/RFC requests and
• fulfillment process
• If no imaging system exists, create one
• Automated, computer-generated representments
• Image interfaces for fulfillment requests to Visa
  
• and Mastercard

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• Benefits
• Lower costs
• Improve customer/cardholder service
• Minimize write-offs

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• How to realize benefits
• Identify all areas dealing with disputes and
  adjustments
• Identify customer dispute touch-points
• Identify appropriate software packages
• Implement common dispute system architecture
  across all areas, with access from all call
  centers, to provide unified customer account view
• Tailor workflows to product types and
  departmental needs

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• Software vendors
• Lean Industries (Canada)
• ACI (USA)
• EFT (Belgium)
• TrinTech (Ireland)

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External Switch Data Sources
DB/CR/DP TRAN History
CID Customer
Network Recon Exceptions
ATM Balancing Exceptions
Enterprise Portals
VRO MCOM OPSNet
WEB Browser Clients
IMAGE/ Manager
WEB Services
CLAIMS/Manager Work Flows
LAN Browser Clients
CASES/ IMAGES
Fax Server Scanners
Network Transactions/ Adjustments
Report Manager
DDA/ Settlement
Network Adjustment Systems
Legacy File Interfaces
RDF/ADF Managers
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LEAN INDUSTRIESI n c o r p
o r a t e d
Summary Opportunities to

• Improve Financial Performance
• Improve Staff Performance
• Improve Customer Service
• Provide Management Certainty