How can acquirers and payment service providers comply with the new Mastercard collaboration process?‍

We explain how allowing acquirers and merchants to respond to cardholders’ enquiries outside of chargeback cycles prevents potential disputes.

Cardholder disputes, sometimes commonly known as chargebacks, usually begin when cardholders or issuers discover possible fraudulent charges or errors on accounts. Issuers and acquirers then attempt to resolve this through the dispute resolution cycle.

Chargebacks were a $31 billion problem in 2017, according to Javelin Strategy & Research. This is projected to increase to $117 billion in 2023, of which merchants will bear nearly $79 billion in losses, says Chargebacks911.

With a cost-of-living crisis underway, inflation rising, recession likely and consumer incomes under pressure, the situation could potentially get worse. ‘Chargeback season’ tends to follow peak season as 10% of disputers admit to fraudulently playing the dispute system during the holiday season, says fraud prevention company, Sift.

Re-purposing the retrieval request process

A retrieval request was a way a cardholder could request more information about a charge on their account. The cardholder’s issuer would typically initiate a request for the purchase receipt through the dispute resolution system.  

The acquirer would respond to the retrieval request themselves with transaction records they had on file. Or they would pass the request to their merchant, who in turn provided the information to the acquirer to pass back to the issuer.

Although a retrieval request was not a formal dispute or chargeback, it was often a precursor to one. As issuers lacked the necessary information to adequately validate and resolve disputes quickly and efficiently. The process was long and cumbersome.

Towards the end of 2021, Mastercard changed its dispute resolution process, removing retrieval requests. Secondly, it included a pre-dispute or collaboration stage. And thirdly, required acquirers to participate in the collaboration stage. The aim was to streamline the dispute process, improve information exchange and thereby reduce the number and cost of disputes.

The introduction of a collaboration stage and the inclusion of acquirers in this stage was designed to promote a quick and efficient resolution of disputes and reduce associated costs.

Enhancing the collaboration process

The Mastercard dispute cycle now has four phases: collaboration, chargeback, representment and arbitration.  

Prior to initiating a chargeback, issuers must file a collaboration request with Mastercard, instead of a retrieval request, to resolve disputes and avoid first chargebacks.

After locating these requests in the relevant queue, acquirers can respond to them in Mastercom, the Mastercard portal allowing information sharing during the dispute cycle.  

This will come into effect for Mastercard acquirers and issuers worldwide from 26 February 2023.

What does this mean for acquirers and PSPs?

Acquirers and payment service providers (PSPs) have 72 hours to action and reply to collaboration requests before they automatically become chargebacks. Therefore, the need for communication and a well-functioning decision framework between acquirers/PSPs and merchants is paramount.

Web Shield has developed a plug-and-play chargeback management communication platform to help with this. Our Chargeback Portal provides the tools to effectively work through and communicate around the dispute resolution process, with automation making workflows quick and easy.  

The Web Shield Chargeback Portal is quick, easy, and free for customers to implement. Little to no development work is needed from acquirers or PSPs to enable merchants to:

• See all notifications/requests in one place and communicate with the acquirer
• Easily review and trigger refunds
• Customise and define auto-refund rules
• Manage merchant details, including all related billing descriptors

In addition, to the above functionality, acquirers and PSPs can:

• Easily import their merchants into the Portal
• White-label the Portal according to their brand identity
• Set parameters for automatic refunds the merchant must abide by

For more information

Get in touch for more information and find out how easy it is to implement your own branded dispute resolution management platform.

To learn more, see the Mastercard bulletin AN 4655 Inclusion of Acquirers in the Mastercom Collaboration Process (September 2022) and AN 4720 Inclusion of Acquirers in Select Countries and Territories in the Asia/Pacific Region in the Mastercom Collaboration Process (September 2022).