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First-Party Trust Programme to Help SMEs Against Friendly Fraud Announced by Mastercard

At the start of the year, the Merchant Fraud Journal predicted that first-party fraud would cost merchants over $100million. Small and medium-sized businesses (SMEs) are the ones feeling this the most. As a result, Mastercard has announced its First-Party Trust programme to protect organisations. The First-Party Trust program aims to create greater transaction transparency by giving merchants the opportunity to submit pertinent insights to counter first-party fraud.

First-party fraud is where genuine transactions are mistakenly or intentionally challenged by cardholders. Datos recently revealed that 75 per cent of fraud experienced by digital businesses was first-party fraud. With current global e-commerce levels on the rise, increased safety and transparency of payments is a necessity. The Mastercard First-Party Trust program gives merchants the opportunity to submit pertinent insights to counter first-party fraud.

John Drechny, CEO, Merchant Advisory Group
John Drechny, CEO, Merchant Advisory Group

This is particularly helpful for SMEs as it assists them with previously burdensome time and resource-intensive issues. For example, researching and addressing claims. Issuers will be able to more accurately determine what is a third-party fraudulent transaction as opposed to first-party fraud. It will have more reliable information when discussing disputes with their cardholders.

“With the First-Party Trust Program, Mastercard is transforming the dispute experience and streamlining transactions for everyone involved. We’re pleased to see this significant leap forward. It reinforces trust as the bedrock of the relationships between merchants and small businesses, issuers, acquirers, and most importantly, consumers,” said John Drechny, CEO, Merchant Advisory Group.

Enhancing dispute resolutions

The First-Party Trust program is a global program, with the rollout starting with the US in 2024.

Mastercard will provide two paths for the sharing of enhanced insights between a merchant and card issuer. Merchants can send the enhanced data directly as part of the transaction. Alternatively, they can do so post-transaction as part of the disputes process.

Julie Fergerson, CEO, Merchant Risk Council
Julie Fergerson, CEO, Merchant Risk Council

“Mastercard’s new program is an important step in combatting the misuse of the disputes system.  Including feedback from our extensive base of merchant members, our partnership with Mastercard to develop this service will positively benefit merchants of all types. We look forward to continuing this partnership in the coming months to help transform the dispute experience and streamline transactions for everyone involved,” said Julie Fergerson, CEO, Merchant Risk Council.

The program will also enhance the resolution of such disputes by providing:

  • AI and risk modelling to help identify genuinely fraudulent (third-party fraud) transactions and signal those that carry the highest levels of trust
  • enhanced signals for issuers enabling greater insight into the cardholder’s purchase history, device, delivery information, identity elements, and geographic location
  • new rules defining compelling evidence to help recognise genuine purchases and prevent unnecessary flawed disputes, including merchant chargeback protection for disputes that meet First Party Trust data sharing requirements
Keeping the peace between merchant and consumer as digitisation accelerates
Ajay Bhalla, president of cyber and intelligence at Mastercard
Ajay Bhalla, president of cyber and intelligence at Mastercard

“As more of our spending happens digitally, it has never been more important to reduce friction in the transaction process for the benefit of all parties involved. That’s why we are bringing our world-leading AI, identity and dispute resolution technologies to enhance the experience and reduce risk to businesses. Through our technology, banks and merchants can retain trust with their most vital constituents: their customers,” said Ajay Bhalla, president of cyber and intelligence at Mastercard.

Linda Kirkpatrick, president, Mastercard, North America
Linda Kirkpatrick, president, Mastercard, North America

“Businesses – big and small – have seen an immense pull forward in digitisation, which is fueling new ways to pay,” said Linda Kirkpatrick, president, Mastercard, North America. “It’s imperative that we empower the entire ecosystem with peace of mind. Not to mention the right tools and technology to combat fraud, while maintaining protections that consumers have come to expect.”

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