By: Praveen Krishna Dev, Chief Executive Officer, Backspace Tech
Artificial Intelligence (AI) is no stranger to efficiency and automation. It is no longer a buzzword that you often hear and come across on various platforms. AI is now becoming the norm in every conceivable aspect of life and its results are out to be seen by all. With increasing digital payment volume year on year, AI is now rampant in many forms, like KYC validation, customer segment targeted product selections, and fraud detection in the banking and payment industry.
In fact, a recent study by PWC identified that the Indian digital payments volume is set to reach 411 billion transactions in FY 2026-27 from 103 billion in FY 2022-23. And this volume encompasses a heavy contribution of UPI to almost 75 percent as per the report.
While all this sounds exciting, there is a serious hiccup rising in the parallel that made the Reserve Bank of India (RBI) take notice and it was the lack of a swift and seamless dispute resolution system for online payments. So, as history dictates, RBI announced the introduction of the Online Dispute Resolution system on 6th August 2020.
This system was defined for handling consumer complaints and disputes involving digital payments through a rule-based and system-driven mechanism with little or no manual intervention. It also translates to the fact that every payment system operator must be equipped with a robust dispute resolution system that will reduce complexities involved in this process. That’s where AI comes to play, as RBI wanted to deploy a completely unbiased intervention when it comes to digital payment disputes, commonly known as chargeback.
If AI were to be deployed within the ODR mandate as stated by RBI, the chargeback or dispute process becomes seamless. The current process is manual from end to end, right from the time a cardholder files a dispute until its resolution. Every document that passes through this channel is manually handled and not to mention the fact that there are separate teams for different kinds of documents, like images, transaction receipts, etc. This action is difficult and taxing as it involves the management of larger teams and rising operational costs.
While there is an increasing use of AI, deployed by many fintechs and financial institutions across the country to streamline and secure transactions, especially digital payments, however manual processes still reign supreme in the chargeback industry as they involve too many conversations, documents, and protocols. If you are wondering, why the need? It is because these documents hold sensitive data and any leakage could lead to potential data breach. Not only that, in case the system captures the data wrong, then the whole dispute will go for a toss.
In a typical chargeback scenario, there are too many documents, images and form submissions that need to be sorted and fed into the system for a proper dispute resolution. These documents flow from both sides, that is, the cardholder and the merchant, via their respective issuer and acquirer respectively.
What if this whole scenario is now handled by AI?
With the rise of technology like camera quality, today’s documents, images, and form submissions are now of the highest clarity. There is no room for a blurred or damaged resolution. AI can now effortlessly read these images and capture the required data that is needed to resolve the dispute. So, when a cardholder tries to file a dispute with the issuer, all they need to do is access their mobile or internet banking, answer a few questions describing their dispute and it gets filed with the right reason code.
In case a need for pre-arbitration for fraud or a chargeback decision occurs, the cardholder need not spend hours on the phone with the customer support team or operations team and doesn’t need to scramble to find and scan every document associated with it to continue the process. The AI model deployed within the ODR system will effortlessly inform, record and retrieve the information needed to handle the pre-arbitration process.
Likewise, every step of dispute resolution can be automated with AI as directed by RBI. Nevertheless, there is still much to be expected and seen on how AI will really transform the ODR system as we are still in the nascent stages of adoption. Financial institutions are slowly opening up to embrace AI in ODR as it is now a necessity rather than a comfort. But once ODR is completely implemented with AI as its driving force, operation teams can better focus on customer service and support instead of the arduous process of manually resolving disputes.