Fraud Is Inevitable. Cardholder Attrition Doesn’t Have to Be.
Research shows that 66% of fraud victims would consider switching banks after a slow or frustrating dispute process, while 70% report diminished trust in other bank services following a poor resolution experience. Yet many institutions still take up to two weeks to resolve cases that customers expect to be handled in real-time.
By Nicole Volpe, Contributor at The Financial Brand
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For most financial service providers, fraud resolution exists on the periphery of their core mission and operations. This approach might be summarized as one of minimization — minimizing losses, minimizing incidents, and minimizing the attention and budget devoted to handling them.
To be fair, such objectives aren’t wrong. But the make-the-problem-smaller model reflects a fundamental flaw: it ignores how customers actually experience fraud and the process of disputing the charges and transactions that result. In fact, providers that stop to consider the customer side of the equation will uncover a broader set of risks, including that you may fall short in your customers’ eyes when you are most needed. And in a similar vein, you may be missing a significant opportunity to build trust and loyalty where competitors fall short.
While your institution is likely willing to absorb some level of direct fraud losses, its broader commercial impacts often run deeper. In a marketplace where acquisition costs are high and primacy is hard to earn, mishandled disputes can quietly drive attrition; they’re a revenue leak hiding in plain sight. Add to that the reputational and regulatory risks, and the case for raising your dispute management game becomes hard to deny.
Want more insights like these? Check out Quavo’s content hub: Building Trust: Best Practices in Fraud Response and Resolution
What Financial Institutions Underestimate
The scale is bigger than you think: Fraud disputes are a daily reality across the banking landscape. “Nobody’s immune to it,” says Joe McLean, CEO and cofounder of Quavo Fraud & Disputes, a provider of AI-enabled dispute management solutions for financial institutions. In the U.S. alone, roughly 650 million disputes are filed each year, according to Quavo’s analysis of data from the Federal Reserve, Auriemma Roundtables, and others.
That equates to nearly two per consumer annually, on average. At roughly $90 per dispute, that’s tens of billions of dollars in direct exposure. More importantly, dispute activity touches a wide cross-section of your customer base, in ways you might not expect. Younger consumers are more likely to report card fraud or transaction issues. Older consumers are more vulnerable to scams and coercion. And underserved populations — often already navigating financial precarity — tend to be disproportionately affected.
The churn factor is real: While most institutions track direct fraud losses, few fully account for the downstream effect on customer retention. Yet the data is striking: according to a Quavo study of 1,000 credit card fraud victims, 66% of customers say they would be highly or extremely likely to switch banks if the dispute process is slow or frustrating. A separate 70% say their trust in a bank’s other services declines after a poor fraud resolution experience with one of its products. (The converse is also true: For example, 86% of consumers surveyed by Quavo said they were likely to continue using cards that efficiently handled their disputes.)
It’s a reputational risk multiplier: Historically, a dissatisfied customer might voice their frustration at a branch, or quietly withhold future business. Today, frustration goes viral. Bad dispute experiences are shared across social media platforms, ratings sites, and peer networks. This isn’t just anecdotal. In many cases, potential customers are making product and provider decisions based on exactly these types of public complaints. One unresolved case can quickly turn a long-time customer into a vocal detractor, damaging brand equity in a space where trust is hard to earn and easy to lose.
Regulatory scrutiny is intensifying: Disputes also account for a large share of regulatory complaints. According to McLean, poor dispute handling is the number one source of CFPB complaints across many institutions. But the stakes don’t stop at reputational cost. Regulation E requires prompt investigation of reported errors, limits consumer liability for unauthorized transactions, and places the onus on institutions for provisional credit and more.
Under Regulation Z, institutions that consistently mishandle disputes may face direct supervisory consequences — including growth caps. McLean notes that in some cases, regulators have capped account acquisition at banks until they demonstrate that their dispute resolution practices are compliant and effective.
A growing challenge: first-party fraud: Adding to the complexity is the rise of so-called first-party fraud — cases where the dispute is initiated by the account holder themselves, often under questionable circumstances. Sometimes it’s an honest mistake: a shared card, an unrecognized transaction, or simple buyer’s remorse. But in many cases, it’s intentional. By one estimate, first-party fraud accounts for as much as 70% of total fraud claims across institutions.
That complicates resolution strategies: institutions must discern between victims and perpetrators, often within the same customer base. Striking the right balance — protecting legitimate customers while limiting abuse — requires better data, better workflows, and a more nuanced approach than most current systems allow.
What Customers Experience
When customers report fraud, they aren’t thinking about internal workflows or compliance checklists. They aren’t particularly grateful that you staved off an incident’s negative impact on their account. What they want is for their problem to be solved quickly, clearly, and with minimal hassle. They likely are preoccupied with other aspects of their lives; they may be caring for a newborn, or coping with job loss, or facing a do-or-die deadline at work.
According to Quavo’s research, 62% of respondents say their trust in a financial institution depends more on how fraud is resolved than how it was discovered. This distinction is critical. Proactive fraud detection matters, but it’s the experience that follows — the steps taken to correct the issue — that shapes long-term loyalty.
Timeliness is central to that experience. Nearly three-quarters (71%) of consumers report losing trust in their bank if the resolution process takes too long. Yet regulators permit financial institutions as much as two weeks to investigate a complaint. For customers (who likely assume their financial institution runs on modern, real-time technology), that kind of delay feels both outdated and unreasonable. And for those facing cash flow pressures — or accruing interest on a fraudulent credit balance — it can feel punitive. Institutions that can shorten this window — ideally to less than a day — are earning trust when it matters most.
Clarity also plays a major role. Customers want to know what’s happening, when it will be resolved, and what’s required of them — without jargon to decode or new web pages to visit. In the study, 74% said they value clear, step-by-step communication during fraud investigations. “Don’t over-communicate about regulations and chargebacks,” McLean said. “We’re all busy — just give customers what they need and don’t make them fill out a form they didn’t ask for.”
Poor handling has consequences that extend far beyond the disputed transaction, including by contributing to your silent attrition rate. Financial institutions may take pride in industrywide retention rates of 75% or more, but that overlooks the ~25% of customers who leave — many without a formal complaint or clear signal. Silent attrition likely includes the 70% of consumers whose trust in other products erodes after a poor fraud resolution experience. It also includes the 66% of consumers who say they would consider switching banks altogether if the process is slow or frustrating. For institutions investing heavily in primacy and lifetime value, that’s a critical failure point — and one that’s entirely within reach to fix.
How Do You Show Up?
Marketers often talk about how the most-valued brands “show up” — the critical touchpoints, the moments that matter in shaping and sustaining customer relationships. For banks rethinking their approach to fraud, the breakthrough comes with recognizing that dispute resolution is one of those moments.
Fraud resolution is one of the rare situations in banking where “the customer has done nothing wrong,” McLean says. And yet, without thoughtful handling, the experience can still leave them feeling blamed, burdened, or dismissed. That’s why institutions need to shift their mindset from treating fraud resolution as a back-office chore to seeing it as a frontline loyalty driver. The goal isn’t just to recover funds. It’s to leave the customer feeling better off than when they picked up the phone.
Clarity, speed, and accuracy form the foundation of that experience. They’re what make a customer feel seen, respected, and supported in a moment of high stress. That’s the opposite of a minimization mindset. For many customers, a fraud dispute is the only direct interaction they’ll have with their bank all year. It can either deepen the relationship or unravel it.
