Why Top-of-Wallet Loss, Not Account Closures, Is the Real Churn Risk
By Suman Bhattacharyya, Contributor at The Financial Brand
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Card disputes can be the most emotionally fraught interactions customers have with their banks. They’re often traumatic: a stolen wallet, a phishing scam or a nefarious online transaction. Customers quickly file disputes, forcing them into an opaque, bureaucratic process that usually amplifies their frustration and anger.
A June 2025 Cornerstone Advisors survey commissioned by Quavo and led by Cornerstone Chief Research Officer Ron Shevlin found that 57% of 2,127 U.S. consumers rated their fraud resolution experience a C or lower.
How a bank handles fraud affects customer trust; poor handling can damage the relationship. Some experts warn that a more immediate risk is losing top-of-wallet status, cutting into interchange fee revenue from credit card spend.
Need to Know:
- Disputes are emotional events, not routine service calls. Fraud claims often begin with loss, fear or betrayal — and clunky, opaque processes amplify that stress fast.
- Bad dispute handling erodes trust — and spend. Customers rarely close accounts, but they do demote cards from top-of-wallet, quietly draining interchange revenue.
- Speed and transparency matter more than policy perfection. Long timelines, poor communication and repeated handoffs push customers to use a competitor’s card.
- Technology gaps are the hidden culprit. Fragmented systems and outsourced chargebacks limit visibility for both staff and customers, fueling frustration.
- Disputes are becoming a retention battleground. Leading FIs are reframing dispute resolution from a compliance obligation into a loyalty and revenue protection strategy.
When banks mishandle fraud incidents, customers often relegate a credit card to backup status rather than closing it, moving everyday purchases to another issuer, says Jennifer Lucas, EY Americas’ payments consulting leader.
When customers don’t feel like they’ve been taken care of, “we see a top-of-wallet replacement,” Lucas says. “They may not close their credit account because it will impact their credit score, but they’ll go dormant.”
Below, we’ll look at how inefficient dispute resolution damages customer relationships, why many processes fail and what FIs can do to protect their position as the card customers use most.
When Every Dispute Feels Personal
Inefficient dispute management has lasting effects on customers, prompting them to either churn or change their default payment method. A Quavo survey of 1,000 cardholders found that about two-thirds said they would consider switching banks because of lengthy or complicated dispute-resolution processes.
A customer’s intent to exit a relationship may sound alarming, but it doesn’t always lead to account closures. Cornerstone Advisors’ June research shows that poor dispute resolution is more likely to reduce card usage than to prompt customers to close their accounts. The research firm found that 21% to 29% of respondents who rated their fraud experience a D or F said they used the card less frequently, while 17% of those who gave an F rating said they stopped using the card altogether. Just 2% to 7% of respondents who rated their experience an A or B reported using the card less.
Even among respondents with the worst experiences, account closures are rare. Only 13% of consumers who rated their fraud experience an F said they closed the card or account, Cornerstone found.
Dig deeper:
- Building Trust: Best Practices in Fraud Response and Resolution
- Fraud Is Your Loyalty Test: Win It or Lose Customers
- Strategic Prompts Can Unlock Hidden Upsides in Dispute Management
David Benavides, vice president of digital design and member experience at Alliant Credit Union, says the longer it takes for a dispute to get resolved and for a new card to get provided to members, “the more likely it is that they’re just going to pull the next card out of their wallet start using that,” he says. “So that’s what we’re really trying to focus on.”
Where the Relationship Breaks Down
Laws and regulations prescribe what should happen after a customer initiates a dispute, but for customers already stressed by fraud or a missing paycheck, long, drawn-out processes with minimal communication can chip away at loyalty.
“There’s a profound sense of betrayal … most consumers expect their bank to protect their money from being stolen,” says Trace Fooshée, strategic advisor at Datos Insights. “It’s hard to get past that as the number one irritant and cause for anguish.”
A lack of clear communication about a dispute’s status, with customers repeatedly passed between representatives, erodes trust and contributes to the risk of churn and top-of-wallet loss.
“You call in and you have to reauthenticate, you talk to three different people before someone can help you,” says Sara Seguin, principal advisor for fraud an identity risk at Alloy. “Your account’s in the negative, and no one can tell you when you’re going to get money and you have bills due.”
There can also be multiple interlocutors involved. Many institutions outsource the chargeback component of the dispute to third-party processors, which contributes to a lack of visibility customers have into case status, says Shanthi Shanmugam, CEO of dispute automation platform Casap.
In many cases, that breakdown traces back to technology. Customer friction can be because of outdated, fragmented platforms that don’t communicate with one another. At many banks, Shanmugam says customer data, transaction histories and merchant information can be spread across as many as 40 separate systems, leaving institutions without the technical capacity to bring it all together.
These failures rarely feel like isolated missteps. They accumulate, turning a moment of vulnerability into a lasting impression of whether a bank can be trusted when it matters most.
Turning Disputes Into a Retention Tool
For banks and credit unions, dispute management can no longer be treated as a back-office compliance task. To protect top-of-wallet status, financial institutions are starting to rethink dispute processes as retention engines, emphasizing speed, transparency and personalization.
At Alliant Credit Union, that means reducing the time it takes to get members back on their feet after fraud. The credit union rolled out a vendor-based dispute management platform that replaced manual handoffs and allows staff to manage deposit and card disputes end to end. They’re also planning to roll out real-time digital card issuance for existing members, so customers can keep transacting even after their card is shut down due to suspected fraud.
“It’s giving them transparency, setting expectations on process [through] open and honest communication,” says Benavides.
Indeed, quick updates on resolution status is key to retention and is consistent with digital-first customer expectations, notes Shanmugam.
“We live in a world where people order pizza at Domino’s, and they know … when it’s going in the oven. That’s the level of visibility and transparency that customers have come to expect,” she says.
Pulling together data from disparate systems to improve fraud resolution is a practical use case for AI. Shanmugam says AI embeds investigative logic into dispute platforms, giving frontline staff the tools to evaluate claims with far greater rigor. It can guide them through customer history, transaction patterns and the follow-up questions an experienced fraud investigator would ask.
With AI, “you can empower your team to be world-class fraud investigators … because that expertise can actually be in the platform versus needing to be in someone’s head,” she says. “Most people outsource it because they are not sure how to handle it.”
Agentic tools can take action based on that logic. “Maybe it might even automate a credit if you get to the tenth business day to keep you compliant,” she says.
A Balancing Act
Disputes sit at the intersection of fraud prevention, regulatory compliance and customer trust, a combination that makes them inherently difficult to get right. Financial institutions face pressure to move quickly and reduce customer pain, while protecting themselves from abuse.
“Friction is among the many concerns that FIs have about disputes,” says Fooshée. “It would be inaccurate to say, though, that FIs approach this in a binary manner, [for example] ‘we must completely eliminate friction’ or ‘we must maximize friction.’ It’s a balancing act.”
That tension helps explain why dispute experiences often lag behind customer expectations, even as banks invest in new tools and processes. Many fraud teams are focused on controls, loss avoidance and regulatory timelines, while the downstream effects on engagement and spending are harder to measure in real time.
From the customer’s perspective, difficult moments in the fraud resolution process can strain the relationship with their financial institution. Fooshée acknowledges that FIs are aware of these risks, even if they don’t always drive decision-making.
It is an approach, he says, “that generally seeks to make it as easy for consumers as possible without making it so easy that it promotes frivolous, baseless or outright fraudulent claims.”
