Chargeback Gurus’ Tim Tynan: Firms are realising the big problem chargebacks pose

Charge back service is a cancel of electronic payment and return money.
Editorial credit: Panchenko Vladimir /

Chargebacks have become a significant concern in the digital payments industry, posing financial and operational challenges for merchants. In response, Mastercard is set to release the full criteria and process details of its First Party Trust programme in Q3 of this year.

Tim Tynan, CEO of Chargeback Gurus, sat down with Payment Expert to discuss Mastercard’s First Party Trust programme. He shared insights on the programme’s potential to combat rising fraud risks and enhance the overall security of the digital payments landscape, benefiting both merchants and consumers.

PE: Is Mastercard’s First Party Trust programme indicative of payments firms, both small and large, becoming more aware of the impact of chargebacks?

Tim Tynan This programme shows that payment firms have begun to realise just how big of a problem chargebacks are. Chargebacks present significant financial challenges for merchants, as well as operational difficulties. The initiation of this programme demonstrates the ongoing need for solutions to mitigate this problem.

PE: Banks have been warning about the rising risk of fraud. In this context, is it an unsurprising move for Mastercard to target a new programme in this area?

TT: The risk of fraud has been rising with the growing sophistication of technology. First-party fraud, in which cardholders dispute genuine transactions, has begun to be a serious concern. 

It is no surprise that Mastercard would begin to develop a focused effort in reducing this type of fraud, and help the overall industry improve security and defences for both merchants and consumers within the digital payments landscape.

PE: Can you provide an overview of Mastercard’s First Party Trust programme? Does the programme bring anything new to the table that other stakeholders have not introduced already?

TT: Mastercard First Party Trust tackles first-party fraud using informed transaction data along with artificial intelligence and risk modelling. It assists in determining the validity of a dispute by comparing the disputed transaction with data from two previous transactions that had no incident of fraud. This might be information such as IP addresses, device IDs, shipping addresses and login details.

The programme will initially be released with a series of new, innovative features, including AI and risk modelling to more effectively identify fraudulent transactions, as well as new rules to define what counts as compelling evidence in validating genuine purchases. That way, they can guarantee a more efficient dispute resolution process that’s more flexible and less burdensome on merchants.

PE: How does it differ from Visa CE 3.0? Could we perhaps expect Visa to make some enhancements to its existing offering in response?

TT: While Visa’s CE 3.0 focuses on providing records of previous transactions to counter false claims of fraud, Mastercard’s First Party Trust programme integrates AI and risk modelling to enhance the accuracy of fraud detection. This programme has the potential for higher rates of success in dispute resolution.

With the innovation Mastercard brought into its programme, Visa will likely look to update and improve its offering based on this novel solution. There may then be a more competitive environment where each firm keeps improving its respective anti-fraud solutions for the good of the payments ecosystem.

PE: In your view, what impact will Mastercard’s new programme have on the payments sector? Which segments stand to benefit the most?

TT: Mastercard’s First Party Trust programme will make a massive impact on payments. It will support lowering the number of chargebacks and even help increase the level of efficiency of the dispute resolution procedure. 

The programme will offer advantages to small businesses more than anyone else. Such business entities seldom have the wherewithal to fight chargebacks, and the programme’s ability to shift liability and provide compelling upfront evidence can save them both time and money. Compliance and operational stability are also essential to maintain healthier chargeback ratios.

The programme allows issuers access to more reliable data, thus better positioning them to distinguish between actual fraud and friendly fraud. This added accuracy not only saves the issuer from financial losses, but also saves its relationship with the cardholder by making sure even legitimate claims are addressed quickly.

PE: Could you walk us through the process of how a programme like this works? From dispute initiation to resolution.

TT: Dispute flows through Mastercard’s First Party Trust programme starting with initiating a dispute. In disputes where the merchant is participating in the First Party Trust programme, information may be submitted where it can serve as a match against two good prior transactions. 

Then, using AI, the dispute is analysed using different forms of data, such as IP addresses, login details, and device IDs. In cases where the information submitted by a merchant is compelling enough to prove that the cardholder authorised the transaction, the Mastercard system rejects a chargeback. 

The persuasive evidence is forwarded automatically to the issuer for their resolution with the cardholder. This way, dispute resolution becomes very smooth, and the likelihood that disputes turn into full chargebacks is much lower.

PE: How does a programme like this give merchants more power to fight back against chargebacks?

TT: With the First Party Trust programme, merchants can present compelling evidence that is standardised and consistent throughout the dispute process. The programme allows for proactive dispute either before the transaction or post-transaction, hence reducing financial exposure and operational disruption that come with managing chargebacks. 

Additionally, liability is shifted to the issuers when compelling evidence is given, which serves to boost the spirits of the merchants in the dispute resolution setup.

PE: Can we expect competitiveness in anti-fraud solutions and programme development to increase following this launch?

TT: Yes, the introduction of Mastercard’s First Party Trust programme is likely to spur increased competitiveness in the development of anti-fraud solutions. As payment firms recognise the benefits of such programmes, there will be a push to innovate and enhance existing offerings. 

This competitive drive will ultimately lead to more robust and effective solutions for combating fraud and managing chargebacks, benefiting merchants, issuers, and consumers alike. The competitive landscape will encourage continuous improvements and the adoption of advanced technologies, such as AI and machine learning, to better address the evolving challenges of fraud and chargebacks in the digital payments ecosystem.