MasterCard Collaboration: How Mastercard's new dispute resolution initiative will benefit eCommerce merchants.

MasterCard has been catching up on VISA's success with the Rapid Dispute Resolution (RDR) services. In collaboration with Ethoca, the company has announces that they'll be introducing Collaboration (Pre-dispute) stage to their dispute process on the 17^th of July 2022. The introduction of this new service by MasterCard will make it easier for people to have their disputes resolved faster. 

Why is MasterCard Collaboration needed?

The emerging payment technologies and e-commerce have prompted a need for an updated dispute process. The Collaboration Dispute, created by MasterCard, aims not only to enhance the customer experience but also to secure customer’s information during transactions by using the latest security measures available and providing a new level of transparency among banks, merchants and cardholders.

 

With the growing number of payment methods, the chargebacks rate has increased substantially. The process for disputing them can be long and expensive, not just in terms of time but also with operational costs that mount up across both acquirers' networks and merchants. It requires ecommerce merchants having solid risk strategy and controls built into their business operations. It is important for merchants to also have a chargeback reduction strategy in action. 

 

The dispute management is an integral part of customer loyalty. According to a recent survey, over 60% of customers who had disputes were more likely than others to have positive opinions about the company as long as their issues were handled timely and professionally. At the same time, almost the same percentage of customers blame their negative experience with a given company on the slow dispute resolution. 

 

Disputes directly affect customers’ satisfaction with the offered goods or services. The lack of data associated with the transactions makes it difficult to resolve disputes quickly and efficiently. With rising volumes, there’s a surge for data exchange with the idea to close the chargeback ecosystem and resolve cases quickly.

 

With the acquisition of Ethoca and NuData, Mastercard is now part of the whole customer journey. The company’s forecast shows that they will be able to review more details associated with disputes which should result in significantly higher resolution rates.

 

With the help of NuData, Mastercard has started using a connected intelligence that merges location and biometric data with patterns detected in users' behaviour. This new technology will allow them to show more specific information about client transactions such as cardholder data, device used, time and date of the transaction, purchased product and others which will help to encounter and stop any potential fraud as well as to improve the communication between acquirers, merchants and issuers. Moreover, NuData helps to prevent any fraudulent activities by securing the logins and accounts after verifying a user's legitimacy even if there is no transaction taking place.

 

The acquisition of Ethoca has helped Mastercard to manage dispute collaborations and integrate Ethoca’s solution into its own MasterCom Dispute Resolution platform. Communication is key when it comes to avoiding chargebacks. If merchants and issuers can share information with one another, it will help consumers make informed decisions, prevent disputes from becoming chargebacks, while also protecting businesses from high levels of fraud that can be costly in terms of both financial impact as well personal reputation damages.

 

For example, when looking at the card statement in their banking app, a cardholder can click on a transaction and view its contextual information. Instead of just seeing a merchant name—which can oftentimes be misleading or vague—the cardholder can see more information such as the items actually purchased, the device used to make the purchase, the username of the account, and even the IP address, when applicable. This can refresh consumer’s memory, or perhaps alert them to the fact their child is buying items with the card without their knowledge.

 

How does MasterCard Collaboration work?

 

Upon received Presentment, the Issuer can dispute a charge against the Acquirer in accordance with the requirements specified by the card scheme’s Dispute Rules.

 

MasterCard Dispute Cycle has four phases: Collaboration, Chargeback, Representment and Arbitration Procedures.

 

Collaboration Stage:

Acquirers can resolve disputes by partnering with merchants before the first chargeback occurs, enhancing the dispute process and reducing the number of the chargebacks.

 

The advantages from the Collaboration process are:

• Enhance the experience for all involved parties.
• Decrease the chargeback and fraud rates by automatically detecting missing of false claims.
• Speed up the time to resolve the dispute resolution
• Reduce the number of disputes before entering into the chargeback phase.
• Improve the consumer experience and brand loyalty.
• Reduce costs from third-party service providers. 

Collaboration Process:

• An Issuer files a claim and a first chargeback through MasterCard’s The chargeback in the system for a period of 72 hours.
• The Acquirer is informed by MasterCard’s system for the received Collaboration request.
• The Acquirer should respond to Issuer’s request with one of the following options:
  • The Collaboration is accepted and refund is initiated;
  • The Collaboration is declined and the dispute is automatically turned to Chargeback;
• If no actions have been taken in the 72 hours period, MasterCard will automatically decline the Collaboration request making it a Chargeback.
• If Collaboration succeeds in resolving the dispute, the system rejects the
• If Collaboration does not resolve the dispute, the formal chargeback process continues.

 

Chargeback:

In case a Collaboration request is declined (or not responded within the timeframe) by an Acquirer, it is automatically escalated to Chargeback.

 

Chargebacks are financial disputes, where the Issuers automatically debit merchants for processed transactions. Alerts about received Chargebacks and processed Representments are sent via auto-generated Chargeback Daily Report.

 

 Chargebacks are classified into four groups:

 

Fraud-Related – the cardholder states that he did not authorize a transaction;

Service-Related – the cardholder disputes the service, provided by the Merchant:

• Goods or Services Were Not as Described or Defective;
• Goods or Services Not Provided;
• Credit Not Processed;
• Cardholder Dispute of a Recurring Transaction.

Authorization-Related – The Issuer is stating that a transaction was not properly authorized (authorization declined; account not on file; etc).

Processing Errors – The Issuer disputes transactions as duplicated, an incorrect sum is taken, etc.

 

Representment:

The Merchant disputes received chargeback and represents the transaction in question. MasterCard allows the Acquirer to proceed with representment only after certain documentational and processing conditions are satisfied.

 

Arbitration Cycle:

Pre-Arbitration – MasterCard allows an Issuer to initiate Pre-Arbitration after a transaction is represented. After the announcement for Pre-Arbitration, the merchant has a period of 15 days to respond to the Acquirer with instruction for further processing. The following are the options for proceeding with the case:

• Accept the Pre-Arbitration and the financial liability – this ends the The merchant is charged with the disputed amount + MasterCard Fee;
• Reject the Pre-Arbitration – the Issuer may proceed to Arbitration and escalate the dispute to be ruled by MasterCard Arbitration Committee.

In case the Issuer escalates to Arbitration, there are two options:

• Withdraw the case – the merchant is liable for disputed amount + all applicable fees for each separate case;
• Proceed with the Arbitration and let MasterCard Committee solve the dispute: 
• If the decision is in Bank’s favour, the merchant is not liable for any fees;
• If the decision is in Issuer’s favour, the merchant will be liable for the amount of the disputed transaction including the rеlevant fees.

 

At CatalystPay, we have the expertise and experience necessary to help your business leverage the new MasterCard services and benefit from the improved customer service. Contact us today to learn more about how we can help you.