Fraud isn’t new. But the stakes have never been higher.
Record-high transaction volumes and a surge in first-party fraud are putting immense pressure on credit unions to do more with less—especially when it comes to resolving disputes. Many think of fraud as an exclusively financial problem—and it is an expensive one. 79% of credit unions and community bank leaders reported direct fraud losses exceeding $500,000 in 2023, and this doesn’t include operational costs associated with processing these dispute claims.
But the risks of fraud aren’t limited to financial losses.
How credit unions respond to and resolve dispute requests can have a significant impact on member loyalty and retention. One consumer banking survey found that poorly handled fraud incidents are the most likely reason people would switch banking service providers. And with many disputes taking 45-90 days to resolve, it is no surprise that members could become frustrated by extended processing time of their legitimate fraud claims.
For credit unions looking to strengthen member loyalty, these incidents can also present an opportunity to build trust. When handled effectively, resolving fraud-related issues can transform a negative experience into a moment to build lasting trust with members. According to a J.D. Power Survey, members who feel supported and protected during fraud incidents are far more likely to remain loyal, with 92% of members saying they are likely to stay with their financial institution after experiencing a fraud issue and having it resolved.
This statistic underscores how credit unions can turn a pressing challenge into a competitive advantage. Here are three proven strategies to reduce financial losses and deepen member loyalty in the face of fraud.
1. Distinguish fraud from legitimate disputes quickly
First-party fraud, where members dispute legitimate charges to avoid payment, is blurring the lines between real and false claims. The faster your team can separate legitimate disputes from fraudulent ones, the quicker you can resolve issues, reduce losses, and deliver a white-glove experience to members who truly need support.
How to implement:
- Use data from past cases to identify the most relevant questions to help differentiate legitimate disputes from fraudulent claims as early as possible.
- Avoid generic fraud resolution processes and tailor your process based on the transaction type and the member’s account history.
- Implement AI tools to analyze transaction data in real-time and provide actionable insights to quickly identify patterns that indicate fraud and focus on resolving genuine claims more efficiently.
- Automate common processes to streamline identification of fraud across similar cases and get to accurate outcomes quickly.
2. Keep members in the loop while ensuring swift resolutions
When it comes to fraud resolution, two critical elements can make or break the member experience: clear communication and efficient resolution. Members appreciate transparency and honesty, especially during sensitive situations like fraud incidents. While they understand the need for verification steps to confirm fraud, the process can either build or erode trust depending on how it’s handled. Prioritizing a quick and seamless resolution process also minimizes disruptions to their financial lives, fostering stronger loyalty.
How to implement:
- Notify members promptly when potential fraud is detected, even if the investigation is ongoing.
- If introducing friction (e.g., additional verification steps), explain why it’s necessary to protect their account.
- Clearly outline the steps members need to take to resolve the issue and provide a realistic timeline.
- Streamline fraud resolution with AI-driven platforms or dedicated support teams to ensure quick turnaround times.
- Automate repetitive manual processes while keeping members informed about the status of their case.
3. Continuously improve fraud prevention with data
Modernizing your fraud prevention process is not a one-time fix, it requires continuous refinement to keep up with evolving tactics and trends. Data can be your best ally in identifying weak points in your processes and improving efficiency—by analyzing past fraud cases and member feedback, credit unions can identify patterns, fine-tune their systems, and adapt their strategies to stay ahead of fraudsters while enhancing their member experience.
Here’s what you can do
- Analyze fraud trends regularly to identify emerging patterns or weaknesses in your current detection methods.
- Determine what information would have helped you more quickly identify a dispute as being fraudulent or legitimate–closing this feedback loop can make you more efficient in similar situations.
- Leverage AI platforms that evolve with each fraud case, refining detection algorithms and improving decision-making over time.
- Use surveys or interviews to gather insights on member experiences with your fraud resolution processes, and apply these learnings to make adjustments.
- Pilot new fraud prevention strategies or workflows on a small scale before rolling them out across the organization, using performance metrics to evaluate their impact.
Fraud is an inevitable challenge for credit unions, but how you respond to it can set you apart. By implementing strategies to quickly identify fraud, manage member expectations with transparency and speed, and use data to refine your processes, you can transform fraud resolution from a cost center into a trust-building opportunity. These moments, when handled with care and efficiency, strengthen member loyalty and set the foundation for long-term, trusting relationships.
Here’s how Casap would help
Casap helps credit unions implement these strategies with intelligent automation and AI-powered dispute resolution. Our platform reduces operational lift, accelerates resolution times, and strengthens member relationships at scale.
