Chargeback changes with the Mastercard Dispute Resolution Initiative

Mastercard is enhancing the chargeback process by making it easier and faster to handle disputes.

It’s called the Mastercard Dispute Resolution Initiative and it will be a rules-based chargeback decisioning process.

The aim from Mastercard is to improve the dispute handling process by automatically detecting invalid disputes, shortening dispute resolution timeframes and updating some dispute reason codes and their conditions.

This will hopefully decrease chargeback volumes and allow for faster resolution of disputes.

The Dispute Resolution Initiative will roll out in phases, according to the below timelines:

  • First phase: October 12, 2018 (No development changes required)
  • Second phase: April 12, 2019 (The announcements in this phase are subject to change by Mastercard)
  • Third phase: October 18, 2019 (Impact will be further clarified by Mastercard)
  • Fourth phase: April 17, 2020 (No development changes required, however the announcements in this phase are subject to change by Mastercard)

Chargeback changes timeline

Chargeback changes you need to know

First phase: October 12, 2018

Issuers will be required to request more information from their cardholders so they can file chargebacks for the following reason codes:

  • 4863 - Cardholder does not recognize
  • 4853 - Cardholder dispute (for recurring billing and digital goods)
  • 4834 - Point of interaction error
  • 4831 - Incorrect Transaction Amount/Transaction amount differs

By requesting this information at the first chargeback stage, Mastercard aims to reduce invalid chargebacks raised without the necessary information. Our customers don’t need to take any action regarding this change.

Second phase: April 12, 2019

As of April 12, 2019, if you initiate a refund after the chargeback has been reversed and the issuer files a second chargeback, it will result in a double loss.

We don’t recommend you initiate refunds once a chargeback has been reversed.

As a best practice, communicate clearly with your shopper if you do perform a refund after the first chargeback has been reversed.

As always, if a refund is issued before the first chargeback, you have one opportunity to provide the refund information to the cardholder, which is in the response/defense to the first chargeback.

We have automated dispute defense for fully refunded transactions and will always send the refund details to cardholders.

To support faster resolution of disputes, Mastercard has reduced the timeframe to file a chargeback for reason code 4834 - Point of Interaction Error from 120 days to 90 (counted from the transaction date). You won’t need to do anything here if you’re one of our customers.

Lastly, the below chargeback reason codes will be removed from the rules and issuers will no longer be allowed to file a chargeback:

  • Chargeback reason code 4840 - Fraudulent Processing of Transactions
  • Chargeback reason code 4863 - Cardholder does not recognize

Third phase: October 18, 2019

Mastercard has announced they are planning additional changes effective in October 2019. We will inform you as soon as we know more.

Fourth phase: April 17, 2020

Mastercard will not send a second chargeback for the following reason codes.

  • 4837 - Fraud (excluding 4870 - Chip Liability Shift and 4871 - Chip/Pin liability shift chargebacks)
  • 4853 - Cardholder Disputes
  • 4834 - Point of Interaction Error

Instead, for these reason codes the issuing bank will be able to send a pre-arbitration chargeback.

Mastercard will align with the Visa collaboration chargeback process (the consumer dispute category) whereby issuers can continue the dispute with a pre-arbitration chargeback.

The pre-arbitration chargeback is initiated by the issuing bank, when the cardholder does not agree with the defense information provided by the merchant.

Based on the current information Mastercard has provided us there will not need to be any development work, as the new flows should match the ones currently used for Visa VCR.

Merchants should keep in mind that Mastercard is only removing the second chargeback cycle for the above mentioned dispute reason codes.

Dispute reason codes that do not fall in these categories (for example, 4808 - Authorization related disputes) can still receive a second chargeback.

These announcements are subject to change by Mastercard, we will notify you as soon as we have the information to hand.

Make sure you keep the dates in mind for the chargeback changes and feel free to talk to one of our payments experts if you have any questions at all.

Read next: A new Account Updater — for buying in real time


Updated October 2, 2018: New information has been released from Mastercard. Various changes have been made to the original announcement.

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