How Mastercard’s First-Party Trust program will combat the surging trend in first-party fraud
First-party fraud, also known as “friendly” fraud, is a growing problem, impacting issuers, merchants and alike. So insidious is this “friendly” fraud, recent research reports that 75% of fraud experienced by online businesses is first-party fraud. (1)
To combat this surging trend, Mastercard has announced its First-Party Trust program to assist merchants and issuers in proving purchases are genuine and preventing false claims and flawed disputes.
What is Mastercard’s First-Party Trust program?
Mastercard’s First-Party Trust program has been developed in collaboration with industry groups, including the US Merchant Advisory Group and Merchant Risk Council.
In our introductory blog, we defined first-party fraud. Mastercard’s new program aims to set a standard definition for first-party fraud and establish minimum data requirements to enable a shared industry definition. Ultimately, the program aims to simplify and enhance the dispute resolution process and validate genuine purchases by facilitating better data sharing between merchants and issuers. This, in turn, will not only reduce instances of first-party fraud and chargebacks but also reduce cardholder confusion and improve trust among merchants, issuers and cardholders.
How does the program work, exactly?
To encourage this data sharing, Mastercard offers participating merchants two pathways; the sharing of enhanced data as compelling evidence at the time of transaction (pre-authorization) or pre-dispute.
Merchants can participate by pursuing one or both options to provide data. Regardless, the data elements shared must come from each of the following categories:
- Device identity: IP address, device ID, fingerprints
- Proof of delivery: shipping address, email
- Additional ID factors: account ID login, phone number, email, address, IP address – if it is different from the previous two data categories provided.
Upon receiving this evidence from the merchant, Mastercard validates it against previous consumer transactions and, in turn, can identify if first-party fraud is afoot. We then share our findings with the issuer, enabling them to have a more informed conversation with their cardholder and determine next steps.
By providing enhanced insights during both the pre-authorization and dispute stage, we empower merchants and issuers to spot cases of first-party fraud. This leads to better approval rates, reduced chargebacks and a more secure payments ecosystem for all.
Who can participate?
First-Party Trust will launch in the United States in October with other regions to follow. Any merchant can participate in the program in the regions where it is currently available. Issuers who are part of the Mastercard network automatically participate as part of their Mastercard agreement.
What about consumers? Can they appeal?
The cardholder is welcome to appeal a declined chargeback, or work with their bank to provide alternative documentation affirming that they did not make the purchase, . Once this affidavit has been signed, the issuer may resubmit the chargeback claim to the merchant who, in turn, may seek additional proof from the consumer.
Ultimately, whether a consumer mistakenly or intentionally challenges a purchase, Mastercard’s First-Party Trust program employs enhanced data and insights, artificial intelligence and risk modelling to empower merchants and issuers alike to reduce risk to their business without impacting the consumer experience. This promotes a more secure and trustworthy payments ecosystem for all parties.
To learn more about our First-Party Trust program, visit our website.
Footnotes:
1. Chargeback trends and outlook 2023 Report, Ethoca, 2023
