Mastercard Mastercom Collaboration Update

The rising number of credit card chargebacks in the eCommerce world impacts all ecosystem players, from customers and merchants to issuers, acquirers, and card networks. This introduces friction in digital payments and escalates costs for the merchants and banks involved.

As a remedy, popular card networks like Mastercard provide dispute resolution platforms for streamlining cardholder disputes and reducing card chargeback volumes. This article covers Mastercard's Mastercom platform highlights and its new, upgraded workflow, effective starting early 2023.

What is Mastercard Mastercom?

Mastercom is a portal owned by Mastercard designed to enable issuers, acquirers, and third parties with the tools they need to share information during a dispute cycle and resolve disputes smoothly.

The platform has been around for years and claims to reduce chargeback costs by 20 percent and shorten typical dispute resolution timelines from months to days. 

Players in the digital payments ecosystem can use Mastercom to resolve disputed transactions by creating cases, chargebacks, and second presentments, as part of the Mastercard dispute cycle.

During this cycle, Mastercom facilitates the efficient sharing of information to determine which party has financial responsibility for the chargeback and allows funds to move seamlessly between issuers and acquirers. In return, Mastercard charges fees for the notifications and penalties for non-compliance.

Recent highlights of Mastercom updates effective 2023

Mastercard has announced some updates to Mastercom to serve as a warning system for merchants to reduce the volume of chargebacks. In addition, the updates should provide merchants with a reasonable chance of rectifying disputes before they turn into formal chargebacks within a defined timeline.

Let’s look at what the updates are:

• Mastercard Mastercom will now include acquirers in the collaboration system.
• Integrating acquirers and mandating their participation will enhance the functionality and information-sharing capabilities. They will now be able to respond to issues raised and attempt to resolve them before they become chargebacks that result in unavoidable losses.
• Issuers will obtain collaboration responses from the acquirer rather than asking to fulfill retrieval requests.
• With this rollout, the cycle time of a dispute should reduce to a mere 72 hours, extending unprecedented efficiency to the process.

A closer look at the Mastercom workflow: then and now

Earlier, Mastercom didn't allow acquirers to collaborate in dispute resolution. However, merchants were included and could participate in Collaboration via Ethoca Merchant Network and Ethoca Alerts.

Issuers would alert merchants of cardholder disputes in real-time. In addition, these two parties could exchange transaction details under their legacy arrangements.

In case of disputes arising out of fraud, merchants could choose to refund cardholders and prevent the inevitable chargeback and its resulting fee. This notification also helped merchants stop the delivery of items to cardholders.

However, a drawback was that the information exchange process was lengthy, and merchants often received the information at a later stage from when the cardholders disputed. This delay cost them losses in sales revenue and the value of products or services already delivered.

With the new workflow, an issuer's dispute initiation will now rely on their relationship with Ethoca, the chargeback protection solution partnered with Mastercard.

In the case of a direct relationship with Ethoca, they can initiate a collaboration through it. However, without a direct connection, the collaboration request will be routed through Mastercom. This involvement will be mandatory.

If there's a link between the merchant and issuer, Ethoca will be used to notify the merchant of the request. If not, it shall be sent to the acquirer. Then, the acquirer may request further details from the merchant, which they must furnish within 72 hours.

Acquirers can thereafter respond on their merchants’ behalf (depending on their arrangement) in the following ways:

• Accept the dispute, thereby allowing Mastercard to refund the issuer directly.
• Acknowledge the situation and propose a direct refund from the merchant within 72 hours.
• Disregard other parties and settle with the merchant if the issuer deducts the charge from the acquirer.
• Reject the dispute when believed to be invalid by both merchant and acquirer. In case of an issuer's subsequent chargeback request, gather compelling evidence within 72 hours.

What are the expected outcomes of the updated Mastercard Mastercom Collaboration?

These updates should help streamline payment disputes with fair resolution in an expedited manner. In addition:

• Overall chargeback volumes should see a notable decline. As the updates look to enhance the collaboration between the different parties in a speedy manner, they should be able to resolve queries before they turn into formal chargebacks.
• As data sharing and collaboration get advanced, it should be helpful for all parties involved. For example, cardholders should get money back faster, and issuing banks should save processing costs and liability losses from chargebacks. In the same vein, acquirers should be relieved of processing costs and card network fees. Specifically, in the interest of merchants, it should persuade customers not to contest some valid transactions by providing them access to contextual information. This clarity should reduce the filing of chargebacks that cause sellers significant losses.
• It should also streamline the broader payment ecosystem, as Mastercard keeps Ethoca a vital part of this process, which is kept brand agnostic. As a result, similar problems should be solved with other cards as well. 

How is this different from Visa's Rapid Dispute Resolution (RDR)?

Even though Visa RDR is also designed to notify merchants and acquirers in advance about pending disputes, there are some key differences compared to Mastercard Mastercom and its updates.

• RDR includes the provision for automatic refunds, whereas Mastercom keeps this process manual, subject to merchants’ responses.
• It provides merchants a 72-hour period to inform if they shall initiate a refund or have already refunded the buyer. This flexibility contrasts sharply with the pre-set rules for Visa RDR that define refunds, restricting merchants' flexibility on a case-by-case basis.
• Per Visa's RDR, merchants need to reconcile all cases in the CRM. Doing so guarantees that refunded transactions don't turn into chargebacks. However, Mastercom doesn't require all transactions to be reconciled by merchants.

In summary, Mastercom’s updates look like a promising development for reducing eCommerce payment disputes and frauds and safeguarding the interests of all players.

If you're a merchant who'd prefer to focus on growth rather than being caught in the whirlwind of chargeback recovery, going with a specialized partner to help with chargeback management is essential for retaining profits and supporting your growth.