Resolving more than 60m disagreements between buyers and sellers around the world every year.
The Resolution Center (originally launched at eBay, but now expanded to PayPal as well) resolves disputes in 16 different languages around the world, in areas as diverse as item payment, item receipt, and item condition. Buyers and sellers who have never met each other face to face can use the Resolution Center process to reach amicable agreements that are enforced immediately. More than 90% of the disputes filed are resolved without requiring the intervention of a third party to render a decision. This system saves time, money, and increases customer satisfaction and trust in transactions.
1. Can you briefly describe the innovation, the problem it tries to solve and why it is necessary?
eBay and PayPal support the world’s largest ecommerce marketplace. As with offline marketplaces, disputes can arise – even when neither transaction partner intended to do anything wrong. Before the Resolution Center, disputes would frequently escalate out of control, damaging the buyer’s trust and frustrating sellers with wasted time. Miscommunications were common, and disputes were very hard to resolve, because there was no coordinated process for working them out. The Resolution Center tries to address this challenge by providing a prominent redress channel for buyers and sellers, keeping track of all communications and agreements, and ensuring rapid resolution for any transaction issues that arise.
2. What makes your innovation unique?
eBay and PayPal are uniquely positioned in global commerce. eBay sells nothing, and holds no inventory – its job is to keep the marketplace running smoothly. As such, it is a very effective neutral third party – it has relationships with both the buyer and the seller, and has no interest other than ensuring issues are handled quickly and painlessly. This positions eBay perfectly to appreciate the value of online dispute resolution, and as such eBay has been the leader among high tech companies in ODR ever since. The Resolution Center is by far the largest ODR system ever constructed, and it is the only system to handle more than a million disputes in a year. It is also the only system that has automated so successfully, which enables faster and more effective resolutions that can scale down to very low value disputes.
3. What triggered the development of the innovation?
eBay partnered with a third party company called SquareTrade in the late 1990s to resolve its disputes, but the SquareTrade/3rd party solution could only scale so much. But working with SquareTrade helped eBay to understand that resolving issues was core to its role in the marketplace. As a result eBay decided to move their systems in-house in 2003. Colin Rule was brought on to lead this development, and he then built the Resolution Centers for both eBay and PayPal, which are still in operation and growing today.
4. Which persons and organisations were involved in the development and what role did they play?
Ethan Katsh, the Father of ODR and a Professor at UMass-Amherst, created the first ODR pilot for eBay in 1999. It was that pilot that grew into all ODR on eBay. Colin Rule and various teams within eBay and PayPal launched the Dispute Console, the Resolution Center, the Unpaid Items process, the Item Not Received process, the Significantly Not as Described Process, the Independent Feedback Review process, and the Community Court process between 2003 and 2011. As those processes were built out they turned an intractable and expensive problem for eBay into a manageable one that actually built customer loyalty over time.
5. What kind of resistance have you encountered and how have you overcome it?
There have been several arguments encountered during the roll out of the resolution resources at eBay. The first argument was that all of the issues were caused by bad guys, so we needed an enforcement process more than a resolution process. The original buyer process was called “Fraud Alert” – but that doesn’t make sense when it’s just a misunderstanding. The original seller process was called “Deadbeat Bidder Report” – but that doesn’t make sense when the buyer is trying to pay but can’t for some reason. Renaming these processes in line with a resolution perspective made them much more effective. The second argument was that if we just got all of our policies clear we would have no disputes. This was also disproven – disputes happen no matter how clear policies are, and there’s always gray areas, even in the clearest policies. The last argument was that we can just use an insurance model and pay off the buyers, because they don’t care about fair resolutions. This “customer is always right” perspective made direct negotiation seem like a waste of time. But it is now clear that buyers want justice in addition to refunds.
6. How did you make the goals realistic and attainable, and at what time will which quick wins be available?
For every project we ran a full set of simulations and customer focus groups, and we had to estimate the impact of each process on costs, headcount, satisfaction, and the like. Before a project is green lighted at eBay a full cost-benefit analysis must be completed, including the NPV of all the expenditures to compare against the likely benefits. We always tried to be realistic in our estimations, and in several projects we were right on (in some others we were a low, but we did our best.) We now know that the benefit of these platforms stretches into the tens of millions of dollars, and that they have been enormously valuable in helping eBay and PayPal retain customers.
7. Will the innovation have an effect on other organisations in the chain and if that is the case, how will it affect them?
eBay’s platform was such a success that PayPal decided to adopt it as well, and then eventually Marktplaats adopted some elements. All the sites within the eBay ecosystem want advanced resolution tools now. And because there is such demand for these tools outside of eBay, Inc, a company has been created (modria.com) to meet that demand by using some of the advanced tools developed within eBay/PayPal and adopting them to other kinds of disputes (e.g. reputation, privacy, public matters, etc.)
8. How was the development funded and what were reasons for the financing organisation?
eBay paid for all development on the eBay side, and then PayPal paid for all development on the PayPal side, funding those payments out of revenues generated by the marketplace as a whole. eBay made the investment because they were very clear in their understanding that without trust eBay would fall apart overnight, and effective resolution systems are a crucial part of maintaining trust.
9. Can you name 3 to 5 characteristics of the innovation that are most essential to making it work?
- Scalability. The Resolution Center must be able to handle millions of cases per month. In that respect, the software must be well designed and easy for users to navigate.
- Instant enforcement. Outcomes in the Resolution Center take place immediately. It is not enough to decide a dispute, the decision must have an immediate effect in order for it to satisfy the disputants.
- Reframing. The Resolution Center pays a lot of attention to which party gets to communicate and through what channel. Aggrieved parties are more likely to make threats and insults, so it’s better for respondents to have the first opportunity to communicate in open text. The first message often sets the tone for the whole negotiation, so better to collect the filing through structured forms and let the respondent post the first message, to establish a productive tone.
10. How do you measure whether it is a successful innovation?
- How many cases resolved,
- We send out hundreds of thousands of user surveys every month to gauge user sentiment,
- We examine buyer re-activation metrics for buyers who have and have not gone through the systems,
- We track buyer and seller losses,
- We monitor closely for buyer abuse. We get immediate and instantaneous feedback from our millions of users every day, so we know how people are feeling about our tools.
11. How many people or organisations benefit from this innovation now?
eBay has 250m global users, PayPal has 160m, and we have 60m filed cases per year. So definitely tens of millions of people benefit from this tool every year.
12. How many people or organisations could potentially benefit from this innovation today and in the future (scaling-up)?
Every organization needs a resolution center, in my opinion – from government agencies to ecommerce sites to search engines to hospitals to courts. That is why we have licensed this technology from eBay and PayPal, started a new company (Modria.com) to build these systems – they will live at resolutioncenter.com, which is still in development. But we hope that one day billions of people around the world will look to resolutioncenter and tools like it as their primary means for getting access to justice, either over the computer or over their cell phones.
13. Can you quantify the financial benefits? (Cost savings, additional income or otherwise)
The year PayPal launched its Resolution Center it saved more than $7.3m dollars in customer service costs alone. The buyer loyalty that comes from these systems earns eBay and PayPal tens of millions of dollars in additional profits each year. Also looking at the prevented buyer losses, individual eBay and PayPal users are protected to the tune of hundreds of millions of dollars worth every year that they would otherwise be exposed to losses for. So it’s clear the financial benefits are extremely large and global.
14. Is the innovation financially viable and sustainable and if yes, how?
Yes – eBay and PayPal are covering the costs for these services out of their profits, and the return they make from the service far exceeds those costs. So there is no question that these services will continue (and evolve) as long as eBay and PayPal are in business.
15. Can or will the innovation be used internationally and how will you overcome cultural differences?
All of our resolution flows are translated into 16 languages and localized by country teams to be appropriate for the needs of that particular region. We have different resolution approaches in different areas around the world (e.g. mandatory returns acceptance in Europe within two weeks of purchase, mandatory payment escrow in Korea, etc.) but the basic principles of transparency, ease of use, and access to protection and justice govern the system in all of its different incarnations.
16. What lessons did you learn along the way that could be useful to others?
It’s not enough to talk about resolving disputes—companies need to know how resolutions impacts the bottom line. Trust has a dollar value, so that’s the way to make the case for building these systems. Also, trust is not just about resolutions – it’s also about getting the bad guys, protecting privacy, and other things, so resolution systems need to fit seamlessly into these other components of trust. Users want a quick and effective resolution – we found users were happier with a quick resolution where they lose than a resolution that takes a long time and they win. So don’t make the perfect the enemy of the good—you can design a resolution system that is procedurally unimpeachable but too onerous on the users, and they will hate it. Better to deliver “rough justice” that is appropriate to the needs of the users than to build a system that is overkill for their needs that they will not like.