Mastercard Launches 'First-Party Trust' Program to Tackle 'Friendly Fraud'

Mastercard has unveiled its First-Party Trust program, a new initiative aimed at curbing the escalating trend of first-party or ‘friendly’ fraud. This type of fraud occurs when legitimate transactions are erroneously or deliberately disputed by cardholders. The program uses AI-powered insights and has been developed in partnership with industry groups like the US Merchant Advisory Group and the Merchant Risk Council.

A Focus on Small Businesses

Recent data from Datos reveals that 75% of the fraud experienced by digital businesses is first-party fraud. With global ecommerce levels on the rise, there’s a growing need to ensure the safety and transparency of payments for merchants, small business owners, and entrepreneurs. The First-Party Trust program will be particularly beneficial for small businesses as it provides assistance with time and resource-consuming tasks such as investigating and addressing claims.

How The Program Works

The program aims to create greater transaction transparency by enabling merchants to submit relevant insights to counter first-party fraud. Mastercard will provide two paths for the sharing of these insights between a merchant and a card issuer. Merchants can either send the enhanced data directly as part of the transaction or do so post-transaction as part of the disputes process.

The program will enhance the resolution of such disputes by using AI and risk modeling to help identify genuinely fraudulent transactions and signal those with the highest levels of trust. It will provide enhanced signals for issuers, giving them greater insight into the cardholder’s purchase history, device, delivery information, identity elements, and geographic location. Furthermore, it will introduce new rules defining compelling evidence to help recognize genuine purchases and prevent unnecessary flawed disputes.

A Global Program

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

Industry Response

Ajay Bhalla, President of Cyber and Intelligence at Mastercard, emphasized the importance of reducing friction in the transaction process in an increasingly digital era. Linda Kirkpatrick, President of Mastercard North America, echoed this sentiment, stating that it’s essential to equip the entire ecosystem with the right tools and technology to fight fraud.

John Drechny, CEO of the Merchant Advisory Group, and Julie Fergerson, CEO of the Merchant Risk Council, both praised the program, highlighting its potential to transform the dispute experience and streamline transactions for everyone involved.