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Mastercard First-Party Trust Program: Addressing Chargeback Misuse

Boaz Gam

Boaz Gam


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Article content
  1. Why Is Mastercard’s New Program a Much-Needed Step?
  2. What Is First-Party Trust All About?
  3. Who Can Become a Part of This New Program?
  4. A New Chapter for Chargebacks

Mastercard’s Latest Solution Against Chargeback Abuse

Based on a study conducted by Mastercard, first-party chargeback misuse, commonly known as friendly fraud, accounts for 75% of all chargebacks reported under the fraud reason code. This means that in two-thirds of cases, cardholders and issuers file false claims of fraud either deliberately or by mistake even though they have genuinely participated in transactions.

To address this issue, the payment industry giant designed the First-Party Trust program that is set to roll out already this year starting with the US market. Let’s take a closer look at how this initiative aims to help merchants defend themselves against suspected cases of friendly fraud and reduce unnecessary hurdles during the resolution process!

Why Is Mastercard’s New Program a Much-Needed Step?

With friendly fraud presenting significant challenges to merchants, the First-Party Trust program is a much-needed step toward a safer global commercial scene. Here are some of the key reasons why this solution is expected to be in high demand among business owners:

1. Lower Risk of Financial Losses

Friendly fraud can lead to considerable revenue losses for merchants. After all, each chargeback not only reverses the transaction amount but also incurs additional fees and potential penalties. Thus, by addressing false claims more effectively, the First-Party Trust program is forecast to drastically reduce such financial setbacks.

2. Improved Fraud Detection and Prevention

The First-Party Trust program is designed to enhance the accuracy of fraud detection. By differentiating between genuine fraud and its “friendly” counterpart, Mastercard aims to provide issuers and merchants with better tools and data insights to identify and prevent false claims.

3. Faster Dispute Resolution Process

Resolving chargeback disputes has traditionally been a time-consuming and complex process for merchants. The First-Party Trust program’s goal is to simplify it by establishing clearer guidelines and support mechanisms. This not only reduces the administrative burden on merchants but also accelerates the resolution timeline, leading to quicker and more reliable outcomes.

4. Enhancing Trust Between Stakeholders

By addressing friendly fraud more effectively, the First-Party Trust program will promote transparency among all stakeholders in the payment ecosystem, including cardholders, issuers, and merchants. It will also encourage accountability and help ensure that all parties involved take their responsibilities seriously.

What Is First-Party Trust All About?

Mastercard’s Latest Solution Against Chargeback Abuse

First-Party Trust shares similarities with Visa's Compelling Evidence 3.0. Its key operational principle involves enabling merchants to utilize key data elements to prove to card issuers that a cardholder legitimately made a transaction, thereby invalidating false fraud claims.

For instance, if a consumer files a chargeback claiming a purchase was fraudulent, but key data elements such as shipping address, email, or IP address match their previous transactions, the claim can be invalidated.

In contrast, before this update, merchants could only present this evidence in an advisory capacity, which cardholders or issuers could decide to ignore. Once Mastercard First-Party Trust goes live in October 2024, a fraud chargeback will be disqualified if the seller meets the transaction data requirements.

Who Can Become a Part of This New Program?

To be able to benefit from the Mastercard First-Party Trust program, a merchant must have these two key elements in place:

  • Robust data management and fraud detection systems. These systems should be capable of collecting, securely storing, and sharing detailed transaction information with issuing banks in real time.
  • Enrolment in the Consumer Clarity platform. Essentially, it is a secure channel for sharing transaction data with issuing banks. By utilizing Consumer Clarity, merchants can forward all the details necessary to resolve disputes swiftly and securely.

It’s also crucial to note that Mastercard hasn’t officially released the exact requirements for transaction data yet. However, sellers will need to submit records from previous, undisputed transactions with multiple matching data points to verify the consumer’s identity.

Specifically, merchants are expected to have data from at least two transactions that were not previously reported as fraudulent. Besides, these purchases should be between 120 and 365 days old. Business owners will also most likely need to provide evidence from three of the following categories:

  • Device identity. This could be such data points as device fingerprint or IP address.
  • Delivery factor. Data like shipping address or email will be accepted.
  • Additional factor. This category entails data like login ID, phone number, device location and name, shipping and billing addresses, and so on.

With that said, while the Mastercard First-Party Trust program will provide a great deal of support to merchants, it doesn’t guarantee the dispute resolution to go in their favor. Therefore, sellers need to keep their reporting and data collection processes in check to make the most out of this opportunity.

A New Chapter for Chargebacks

Overall, Mastercard’s First-Party Trust program is a significant advancement in combatting friendly fraud. Besides, by providing merchants with better tools, clearer processes, and stronger protection, this initiative addresses a critical pain point in the payment ecosystem.

Additionally, a more secure and efficient payment environment will inevitably have a positive impact on the broader market by encouraging growth and innovation. After all, sellers are more likely to invest in new technologies and expand their operations when they are confident in the integrity of the payment system.

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