Chargeback General Ledger- UDM Version
I’m the business’s memory, not for birthdays or cheer,
But for every penny spent or earned throughout the year.
What am I?
Any guesses?
It’s none other than the business’s fingerprint, the General Ledger (GL).
Let’s get into the crux!
General Ledger (GL)
Imagine your household finances: you have a notebook where you write down all your income and expenses.
General ledger aka GL is a big version of that notebook, but for a company or organization. It’s a central place where all financial transactions are recorded, like sales, purchases, salaries, and bills. Each transaction is listed with details like the date, amount, and what it’s for.
Basically, it’s a detailed record of everything money-related that happens in a business, helping to keep track of from where the money comes and where it goes.
Why is GL important?
- Financial Reporting: It forms the basis for creating financial statements such as the income statement, balance sheet, and cash flow statement, which are crucial for stakeholders like investors and regulators.
- Compliance and Audit: Ensures compliance with accounting standards and regulations. It also facilitates audits by providing a detailed record of financial transactions that auditors can review.
- Monitoring Cash Flow: Helps monitor cash flow by tracking revenues and expenses, ensuring there is enough cash to meet financial obligations.
- Decision Making: Provides management with accurate and up-to-date financial information, aiding in decision-making processes such as budgeting, forecasting, and investment planning.
- Detecting Errors and Fraud: Helps in identifying errors, discrepancies, or potentially fraudulent activities by comparing accounts and transactions.
- Facilitating Tax Filing: Provides the necessary financial data for preparing and filing tax returns accurately and on time.
- Internal Control: Supports internal control processes by segregating duties and ensuring that transactions are properly authorized, recorded, and verified.
- Benchmarking and Performance Evaluation: Enables benchmarking against industry standards and evaluating the financial performance of the company over time.
Alright!
We’ve detailed the importance of the general ledger in a typical business or organizational setting.
But why is it relevant to us, especially in Dispute Management?
Let’s see!
Importance of GL in Dispute Management
- Provides a detailed audit trail for each disputed transaction.
- Facilitates reconciliation, allowing banks to identify discrepancies that lead to disputes.
- By analyzing historical data, banks can uncover trends in disputes and implement preventive measures.
- Supports reporting, enabling banks to track dispute volume, types, and outcomes for evaluating their dispute management strategies.
Finally, a well-organized GL fosters transparency within the bank, ensuring efficient dispute resolution through quick access to relevant information for involved departments.
The above facts sound appealing, don’t they?
But now, let’s see the reality!
The Reality Check
Banks and financial institutions maintain GL for loans, interest, and deposits. However, when it comes to the crucial matter of dispute and chargeback management, this is often overlooked.
Approximately, 90% of banks neglect to maintain a dedicated general ledger for chargebacks, and even among the 10% that do, it is often done manually.
Seems pretty serious, doesn’t it?
But what if we say there’s a solution to this?
Indeed…indeed…it’s none other than the Unified Dispute Management (UDM).
UDM’s GL Page illustration:
Scenario 1:
When the cardholder dispute is valid, the card network credits the fund to the issuer, who in turn credits it to the cardholder’s account.
Scenario 2: Provisional Credit Scenario
(Provisional Credit: Temporary funds issued by the issuer bank during the dispute process. It provides immediate relief to the cardholder by crediting their account with the disputed amount while the investigation is ongoing. If the dispute is resolved in favor of the cardholder, the provisional credit becomes permanent.)
UDM’S GL
Here’s how the issuing bank aka issuer benefits from UDM’s GL feature:
Tracking Chargeback Costs:
Chargebacks incur fees for the issuing bank. The GL allows them to track the associated costs of each dispute, including chargeback fees and any provisional credits issued to the cardholder. This data helps the bank assess the financial impact of chargebacks and identify areas for improvement in fraud prevention or other services.
Analytics and Risk Management:
By analyzing historical trends in the GL, issuing banks can identify chargeback patterns and proactively mitigate risks associated with them.
Reduced Confusion:
Maintaining a GL for cross-border payments (CBP) clarifies the multitude of fees involved — bank fees, cross-border fees, currency exchange fees, and taxes — ensuring accurate financial management.
Enhanced Operational Efficiency:
The centralized repository of chargeback information empowers the operational team to efficiently manage disputes, make informed decisions swiftly, and enhance communication with cardholders regarding chargebacks.
Want to know more? Let’s talk
