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.

Mastercard's aim is to improve the dispute handling process by automatically detecting invalid disputes, shortening dispute resolution timeframes and updating several 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 (No development changes required)
  • Third phase: October 18, 2019 (No development changes required)
  • Fourth phase: July 17, 2020 (No development changes required)

Chargeback changes you need to know

First phase: October 12, 2018

As of 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, the issuer can file a second chargeback. This will result in a double loss.

We therefore recommend not to 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 (partially) 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 don't need to take any action if you’re one of our customers.

Lastly, the below chargeback reason code 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

Third phase: October 18, 2019

Chargeback rights for reason code 4863 (cardholder does not recognize) will be removed from the rules and issuers will no longer be allowed to file a chargeback.

Fourth phase: July 17, 2020

Mastercard has introduced a pre-arbitration chargeback for the following reason codes:

  • 4837 - Fraud (excluding 4870 - Chip Liability Shift and 4871 - Chip/Pin liability shift chargebacks)
  • 4859 - Questionable Merchant Activity
  • 4853 - Cardholder Disputes
  • 4834 - Point of Interaction Error

The pre-arbitration chargeback is filed after a chargeback is reversed and the cardholder challenges the supporting documents uploaded by the merchant in response to the first chargeback.

After the pre-arbitration is filed, there are 30 days to accept or decline the case. This will be done in cooperation with the merchant.

Based on the information Mastercard has provided us, it seems there will be no will need for any development work, as the new flows should match the ones currently used for Visa VCR.

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 introducing the pre-arbitration chargeback cycle for the above mentioned dispute reason codes.

Dispute reason codes that do not fall in this category (4808, 4870 and 4871) will not receive a pre-arbitration chargeback. In addition, for these reason codes the second chargeback has been removed from the rules.

Instead of filing a second chargeback, the issuing bank can escalate the case to Mastercard directly (Arbitration case filing) after the chargeback is reversed.

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.


Updated November 14 , 2019: Dates have changed for chargeback reason codes.

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

Updated July 23, 2020 New information has been released from Mastercard. Various changes have been made to the original announcement.


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