South African banking sector There is a demand for its modernization Danger Make better use of dispute processes and existing fraud intelligence as digital banking scams continue to rise and customer complaints reach record levels.
According to recent industry data, digital banking fraud incidents increased by 86% in 2024 compared to the previous year, resulting in losses of approximately R1.9 billion.
65% of reported incidents were caused by banking applications, highlighting the increased risks consumers face digital banking Adoption accelerates.
At the same time, the banking division of the National Financial Ombudsman Scheme registered more than 15,000 complaints in 2024, its highest volume on record. Nearly 80% of those cases were decided in favor of the banks.
Industry experts believe the growing disconnect between fraud victims and financial institutions is rooted not in the fraud itself, but in how disputes are handled after the incident.
Peter de Swardt, senior vice president of Global Customer Success at Entersect, said many consumers feel frustrated by dispute processes that are largely manual and time-consuming.
“Although most major banks have digital fraud dispute reporting channels, the actual fraud dispute process remains cumbersome and largely analog. It is not surprising that there is a growing perception among local consumers that the system is rigged against them,” he said.
De Swardt said banks already collect extensive information when processing transactions, including device fingerprints, geolocation data, behavioral biometrics, authentication results and risk scores generated by fraud detection systems.
However, most of this information is used only once when determining whether to approve or reject a transaction.
He said, “Most intelligence is currently used to decide whether to allow, challenge or refuse a payment. This data is effectively lost to dispute teams, who are forced to reconstruct what happened after the fact.”
He argued that banks should consider dispute resolution as an extension of risk-based authentication rather than a separate administrative process.
By doing so, financial institutions can provide customers with more detailed transaction information through banking applications and online platforms, helping them identify legitimate transactions and avoid unnecessary disputes.
“Where merchant names are unclear, banks can display additional data such as merchant category, location and even past spending patterns to help customers identify legitimate payments and avoid unnecessary disputes,” De Swardt said.
He said the same evidence used during transaction authentication, including behavioral biometrics, device data and geolocation information, should be made immediately available to dispute resolution teams.
He believes that this can improve transparency as well as significantly reduce investigation time.
“By redefining disputes as part of risk-based authentication, not just an admin queue, disputes become a continuation of the same risk-based logic, using the same signals, models and audit trails, but with much greater transparency for customers.”
The need for better transparency is supported by international research. A study conducted by researchers at the University of Notre Dame and Carnegie Mellon University found that customers who experienced fraud were more likely to leave a bank because of poor communication during the dispute process than because of the fraud itself.
The study also found that when banks were able to identify the fraudster responsible for an incident, the number of customers dropped significantly.
According to De Swardt, existing analytics systems can also be used to provide clients with provisional results and regular updates during investigations, which will create greater confidence in the process.
However, he cautioned that banks must strike a careful balance between transparency and security.
“Providing more context about transactions in digital channels helps avoid unnecessary disputes, but exposing internal signals data could give sophisticated fraudsters clues about how to evade controls,” he said.
As fraud techniques become increasingly sophisticated, De Swardt believes banks already have many tools in place to improve outcomes for customers.
“The data and decision engines banks already operate for fraud prevention provide them with a ready foundation for a faster, more personalized and more transparent dispute journey,” he said.
“Experience shows us that better use of risk and contextual signals is a way to lower management costs, better ombudsman outcomes and, perhaps most critically in a high-fraud environment, rebuild trust in digital banking.”
As digital fraud continues to rise and consumers increasingly rely on online banking channels, industry observers say improving dispute resolution may be as important as preventing fraud.
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