Mastercard’s new platform promises to minimise chargeback costs

by Monica Eaton

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Mastercard is set to rollout Mastercom Collaboration in early 2023, an enhanced version of its current platform that enables merchants and acquirers to settle payment disputes before it becomes a formal chargeback.

Everyone operating in the payment ecosystem will recognise chargebacks as a major pain point.

The operational costs associated with each chargeback range from $20 to $100 per incident. This is in addition to the lost revenue and product costs borne by the merchant, plus longer-term threats to the business’s sustainability, reflected in the merchant’s chargeback rate. Overall, merchants stand to lose more than three times the amount of the transaction in question per chargeback issued.

There is a glimmer of hope on the horizon though, in the form of the Mastercom technology platform from Mastercard. This is the company’s end-to-end dispute resolution platform.

While Mastercom has been available to issuers and merchants for years, by early 2023, Mastercard is expected to rollout the enhanced version – Mastercom Collaboration.

This new version will introduce solutions that allow merchants to rectify disputes before they become formal chargebacks. The new Mastercom is all about collaboration, providing better functionality and information sharing capability.

Growing real-time collaboration to shrink chargebacks

Before the platform’s latest enhancement, merchants were able to participate in collaboration – a process by which different parties could try to resolve disputes through cooperative interaction – through the Ethoca Merchant Network and Ethoca Alerts.

Participating issuers could alert merchants of a pending cardholder dispute in real time. If the dispute is fraud-related, the merchant can simply refund the cardholder and stop fulfilment of any merchandise or service not already provided.

Transaction and purchase information can also be shared between the merchant and issuer. Mastercard’s Consumer Clarity, powered by Ethoca, provides enhanced on-demand data to issuing banks and their cardholders, directly from the merchant. This assists in identifying transactions and subsequently preventing chargebacks.

Mastercard always intended for the rollout of the collaboration process to be phased. There’s certainly been some success in reducing chargebacks and the associated costs up to now. However, while the functionality has been limited thus far, this will change with the full rollout outlined here.

Segmenting abuse from genuine chargeback claims

The upcoming changes will see participation in the Mastercom Collaboration workflow be mandated for all issuers. This can be done either through Ethoca, or through Mastercom directly.

If the merchant and/or acquirer are connected to the collaboration tool, they can decide how they want to respond to the dispute before it becomes a chargeback. Issuers will be unable to process a chargeback directly through Mastercom without giving the merchant the opportunity to resolve it beforehand.

In summary, merchants will be given the opportunity to choose whether to resolve the dispute prior to a chargeback. This is a vital move because a substantial portion of chargebacks issued by banks are invalid disputes.

Consumers don’t often understand the damage that false chargeback claims do. But then again, why would they? Buyers just want to recover their money with as little effort as possible.

Banks have struggled for years to walk a line between serving their customers and facilitating chargeback abuse. It has often been forced to err on the side of their customers to maintain trust. With Mastercom Collaboration in place, though, it will be much easier to segment abuse from genuine chargeback claims.

How will collaboration work?

Collaboration will depend on whether the issuing bank has a direct relationship with Ethoca or not. If it does, it will initiate the collaboration request directly through Ethoca. If the merchant is part of the Ethoca network, the request will pass to them. If not, the request will pass to the acquirer.

The acquirer then views the case from the relevant queue in Mastercom and will either contact the merchant for instructions on how to respond or will respond on the merchant’s behalf based on a predetermined agreement.

If the issuer has no direct relationship with Ethoca, then the collaboration request is initiated through Mastercom. At this point, the request is either sent to the merchant via Ethoca if a relationship between the two exists, or it goes to the acquirer. In the latter case, the acquirer will respond on the merchant’s behalf through Mastercom.

Whatever route the collaboration request takes to reach the merchant, the result is the same. The merchant will now have the benefit of making an informed decision on a dispute before it becomes a chargeback. This saves them the subsequent cost and the hassle of engaging with the dispute resolution process should they choose to do so.

Although, merchants and acquirers must remember that there is a firm time limit for the collaboration process. The merchant has 72 hours to respond. Otherwise, the paused dispute will be rejected automatically, resulting in a chargeback.

What response options are available?

There are four response options for merchants (or acquirers, acting on a merchant’s behalf):

  1. Accept the dispute and request Mastercard to refund the issuer.
  2. Inform Mastercard that the disputed transaction has already been refunded.
  3. Accept the dispute with notice that a refund will be processed to the cardholder by the merchant.
  4. Reject the dispute; issuer can then respond with a chargeback if warranted.

Of course, the 72-hour grace period could provide the merchant enough time to consider whether they have sufficient compelling evidence on hand to fight the claim. The merchant could then choose option four and challenge the dispute through representment.

Mastercom Collaboration through Mastercard will be a sea change in dispute resolution. It promises to balance the process and give merchants the much-needed opportunity to influence the progression of a dispute before it becomes a fully-fledged chargeback. While adapting to this new ruleset may mean that the payments space faces some growing pains, it will ultimately make for a stronger, more resilient process.


Monica Eaton is the founder of
Chargebacks911 and Fi911.

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