Banks are always working to modernize for competitive advantage and to keep up with customer expectations, but it’s no easy task. Artificial intelligence (AI) promises to be a game changer to simplify processes, boost decision-making and improve efficiency. But many banks are hesitant, unsure about the right time to jump in or how to use it without running into trouble. Figuring out how to smartly evaluate and pick the best AI tools is becoming an imperative.
With first-party fraud costing the industry $132 billion annually, dispute operations provide a great example of where AI could be beneficial. Dispute management requires precision, speed and compliance. As fraud grows more complex and dispute volumes increase, banks cannot afford untested prototypes or vaporware. They need proven solutions that work.
Using dispute management as a lens, here are five key questions bank leaders should consider when evaluating AI solutions.
1. How Does the AI Solution Enhance Process Efficiency and Key Outcomes?
AI should do more than automate tasks — it must measurably improve outcomes and free staff to focus on higher value work. In dispute operations, manual processes are slow, error prone and costly, while AI can streamline intake, investigation and resolution.
Top banks have streamlined manual dispute work by as much as 80% with automated processes, according to Quavo’s research. In top-performing operations, 49% of cases require no manual intervention at all. The same study found that institutions using modern dispute technology produce a nearly 40% boost in dispute resolution productivity monthly.
Due diligence tip: Request case studies and performance metrics from vendors that are relevant and taken from live, real-world installations. Dispute operation metrics might include user productivity, recapture rate, time-to-resolution improvements and error rates.
2. Is the AI Technology Proven and Scalable?
AI must demonstrate reliability in high-stakes environments. Institutions need systems that can handle surges during economic shifts or fraud spikes without sacrificing accuracy. Effective AI must manage large case volumes while meeting strict regulatory requirements, such as Regulation E’s deadlines, and adapting to surges in first-party fraud.
Due diligence tip: When evaluating vendors, rigorously inspect their experience with institutions of similar size and scale. Request metrics on accuracy, case resolution times, and compliance outcomes to validate performance.
3. Does the AI Ensure Regulatory Compliance?
Dispute management software must go beyond just processing claims. It must ensure compliance at every step to account for evolving regulations and strict timelines. The ideal solution bakes regulatory adherence into its foundation. When combined with built-in regulatory timers, automated task management and up-to-date compliance requirements, AI can accelerate routine decisions, flag exceptions, and support documentation and audit trails.
AI enables same-day automation for straightforward disputes, while banks constrained by legacy systems can take up to 11 days, running against Regulation E’s tight 10-day requirement to resolve a reported error.
Due diligence tip: Ask vendors to demonstrate how their AI platform maintains compliance in live production environments, not just pilots. Dig into the configurability of the systems to see if they are adaptable to your organization’s policies today and tomorrow.
4. What is the Impact of Inadequate Processes?
Inadequate processes in dispute resolution and customer service can significantly erode profitability through waste, customer churn and regulatory penalties. Poor communication and prolonged disputes damage loyalty. Seventy-three percent of customers say their trust suffers under such conditions, according to Quavo’s research. With 62% of customers valuing how issues are resolved more than the incident itself, AI-driven systems can reduce attrition, delivering measurable return on investment and long-term strategic value.
Due diligence tip: Quantify both the costs of current inefficiencies and the expected ROI of AI solutions. Request vendor-provided metrics on reductions in manual effort, resolution times, customer churn and regulatory exceptions.
5. Does the AI Solution Fully Address the Problem?
Many AI tools focus on narrow tasks, such as basic automation, but fail to address end-to-end needs. Banks should prioritize holistic solutions that integrate workflows. The ideal solution is a single platform that manages the entire dispute lifecycle: from claim intake and automated routine steps to faster investigations. Think of it this way — you wouldn’t hire a pilot who can only take off. You need someone who can take off, navigate turbulence and land the plane safely.
Due diligence tip: Evaluate whether the AI platform truly covers the full dispute lifecycle. Ask vendors to demonstrate end-to-end workflows, including intake, investigation, first-party fraud detection, customer communication and regulatory reporting.
A Strategic Imperative for Banks
AI can be a game changer for banks, modernizing processes where efficiency, accuracy and trust are imperative. Fraud disputes exemplify how thoughtful evaluation mitigates risks and unlocks value. By asking these questions and completing effective due diligence, banks can harness AI in a meaningful way while tackling the risks that deter adoption.
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