MidSouth Community Federal Credit Union has tapped AI-driven dispute-management provider Casap to enhance its operational efficiency and weed out fraudulent claims. 

Casap’s AI-driven solution helps the $730 million bank in registering a consumer’s dispute, conducting a background check, inputting all information in relevant dispute management portals and investigation of the dispute by streamlining how the bank contacts the merchant and acquires evidence of transactions, Shanthi Shanmugam, founder and chief executive at Casap, told FinAi News.

By deploying Casap’s solution, the Dothan, Ala.-based bank expects to save $110,000 in operating costs by the end of the year, exceeding the bank’s expectations, John Mays, card services manager at the credit union, told FinAi News. 

“Casap has already paid for itself in our own operational savings,” Mays said. The ROI is not just about costs saved but also the quality of the output as the tech has helped in reducing the bank’s fraud loss ratio by 51% this year, he added. 

The $730 million MidSouth can process nearly 300 disputes per month while remaining compliant, compared to 150 per month before working with Casap, Mays said. 

The fraud 

There are generally two scenarios for the dispute-related fraud the bank sees. One is a customer claiming they don’t recognize a charge and asks for a refund. The second is when a customer initiates a payment and then seeks a refund, Mays said. 

“In both of these situations, they could file a dispute,” Mays said. “Since the pandemic, we have been seeing a huge increase in dispute volume, and that’s really driven by awareness around disputes, No. 1, which is good, but also, No. 2 is it’s now being abused.” 

These dispute scenarios, also called first-party fraud, occur frequently as consumers are learning how to scam banks online by making purchases and then filing these claims, Mays said.  

“I call it the ‘Tik Tok School of Business.” — John Mays, MidSouth Bank

Financial institutions must follow Reg E of Consumer Financial Protection Bureau regulations to investigate every dispute, Mays said.  

Reg E protects consumers in electronic transactions — involving debit cards, ACH, ATMs and the like — by limiting liability for unauthorized transfers and requiring error resolution within strict timelines, according to the CFPB. 

While opening a new dispute claim, a bank investigator has to acquire information from the customer, create a case, contact the merchant, evaluate the evidence and then reach to a conclusion if the dispute is valid or not within a specified time period, Mays said. 

“And because those processes are usually very manual, the team has to go in eight different [locations] to manage a single claim, which is very time-consuming,” he said. 

AI’s helping hand 

The New York-N.Y. based Casap’s AI dispute management platform automates many manual tasks that dispute investigators must complete, Shanmugam said. 

The AI platform can run background checks on clients to see if they have been banned by other FIs or have a history of filing multiple dispute claims, Shanmugam said. The platform also allows investigators to track cases throughout the process. 

“Casap’s platform does the intake of the dispute via phone call or online and inputs the information in relevant fields of different portals,” Shanmugam said. “The platform does the intake usually in under 2 minutes, which used to take much longer.” 

The company has raised $33.6 million since it was founded in 2023, according to Crunchbase. Shanmugam declined to disclose other banking clients of Casap.

MidSouth Bank deployed the Casap tool in March and has seen quantifiable ROI, Mays said. 

Mays declined to disclose how much the bank saved on fraudulent transactions, and how much it paid Casap. 

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