Mastercard Unleashes AI-Backed First-Party Trust Program to Tackle ‘Friendly’ Fraud Surge

Mastercard’s First-Party Trust program, powered by AI insights, aims to combat the growing issue of first-party fraud in digital transactions. The initiative enhances transparency and security, offering merchants, including small businesses, tools to counter first-party fraud. By providing enriched data and dispute resolution capabilities, Mastercard intends to streamline transactions and build trust in the payment ecosystem.

23 October 2023 – Mastercard has unveiled its innovative First-Party Trust program, enriched with AI-powered insights, to address the growing challenge of first-party or ‘friendly’ fraud, where authentic transactions are mistakenly or intentionally disputed by cardholders. This collaborative initiative, developed in partnership with industry organizations such as the US Merchant Advisory Group and Merchant Risk Council, aims to provide increased transparency and security for digital businesses, particularly small enterprises, amidst the surging global e-commerce landscape.

According to recent data from Datos, an alarming 75% of fraud encountered by digital businesses is attributed to first-party fraud, underlining the urgency for improved safety and payment transparency. Small businesses stand to benefit significantly from the First-Party Trust program, as it assists them in addressing previously time and resource-intensive challenges related to investigating and resolving claims. Issuers will gain enhanced capabilities to distinguish between third-party fraudulent transactions and first-party fraud, ultimately fostering more effective dispute resolution with cardholders.

How It Works:

The First-Party Trust program is designed to enhance transaction transparency by enabling merchants, including small businesses, to submit essential insights to counter first-party fraud. Mastercard offers two avenues for sharing these enhanced insights between merchants and card issuers. Merchants can transmit this data directly as part of the transaction, or they can do so post-transaction as part of the dispute resolution process. The program will also improve dispute resolution by providing:

  • AI and risk modeling to identify genuinely fraudulent (third-party fraud) transactions and highlight those with the highest trustworthiness levels.
  • Enhanced signals for issuers, offering deeper insights into the cardholder’s purchase history, device information, delivery details, identity elements, and geographic location.
  • New guidelines defining compelling evidence to recognize genuine purchases and prevent unnecessary dispute escalations, along with merchant chargeback protection for disputes complying with First-Party Trust data sharing requirements.

The First-Party Trust program is a global initiative, commencing its rollout in the United States in 2024.

Key Quotes:

  • Ajay Bhalla, President of Cyber and Intelligence at Mastercard, emphasized the importance of reducing friction in digital transactions, highlighting how their technology empowers banks and merchants to maintain trust with their customers.
  • Linda Kirkpatrick, President of Mastercard, North America, stressed the necessity of providing the entire ecosystem with the tools and technology to combat fraud while safeguarding consumer protections.
  • John Drechny, CEO of Merchant Advisory Group, applauded the program for transforming the dispute experience, strengthening trust among all stakeholders, including merchants and small businesses, issuers, and consumers.
  • Julie Fergerson, CEO of Merchant Risk Council, welcomed the partnership with Mastercard, acknowledging the positive impact it will have on merchants and expressing a commitment to continued collaboration to enhance the dispute experience and streamline transactions for all parties involved.

Author: Terry KS

Share This Post On