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Trends in Mobile Credit Card Processing for Fall 2021 and 2022

Over the last 12 months, almost every retailer felt the need to shift from the in-store traditional payment methods to the new-age digital methods. Businesses have also understood that this shift has a vast scope – it is not just a momentary reaction to the prevailing coronavirus pandemic, but a long-term trend. IBM’s U.S Retail Index study revealed that the transition to digital payment was speedy due to the pandemic, which otherwise would have taken five years. E-commerce purchases are predicted to grow by 20% this year.

Even in these uncertain economic times, retailers can be confident that online and hybrid shopping will continue to grow. Today, the customers have become more aware and want more flexibility and security in mobile solutions from these brands. And therefore, brands cannot just sit quietly.

We know that even if the pandemic ends, the e-commerce growth and related customer needs are here to stay. For businesses to keep up with the competition, they must shift to modern payment methods. This article will discuss six trends in mobile credit card processing for fall 2021 and 2022 that will make their way into the future.

#1 E-Wallets

With the increasing number of smartphones, e-wallets have become the most convenient mode of payment for consumers. A mobile wallet syncs your bank accounts and credit cards and turns your smartphone into a contactless payment device. According to some statistics, the global estimate of smartphone users in 2021 was 3.8 billion, compared to 2.6 billion in 2016. A smartphone has become a necessity as it gives you apps for every need from banking to driving, social to nutrition tracking related to all aspects of your life.

55% of Americans use their smartphones when shopping, all due to the increasing use of e-wallets like Google Pay and Amazon Pay. With mobile wallets becoming popular and the growing use of peer-to-peer transfers, the security of these apps has also increased. E-wallets are going to change the way how we pay now. It is one of the most significant trends in mobile credit card processing that cannot go unnoticed.

#2 Social Shopping

A retailer’s most remarkable ability is being able to use personal relationships to his advantage and engage their customers in their business. More than 78% of customers trust the recommendation of their friends and family for shopping, so brands can count on social media sharing and engagement as a better proof of purchase than a direct message to the consumer.

Retailers can hire social media influencers for promotion and make use of social media tools to get to know their customers better. They can further promote positive reviews, give better customer service and sell directly on the platform where their customers spend substantial time.

#3 Contactless Payments

During the pandemic time and earlier, we would hesitate to touch cash as we did not know how many hands the bill was exposed to. With credit cards, handing them over to the cashier for a swipe and typing your card pin is avoided to minimize the touch. Things have changed much over the past months, and Mastercard’s survey suggests the same. The survey says that more than 51% of people use cashless payment in some form. Contactless payments are now more secure than the traditional swipe method with scanning technology to complete the transactions. All this is possible because of the encrypted microchips and mobile apps.

#4 Mobile POS Devices

As more and more consumers use contactless payments, retailers align their shopping experience with POS technology. With the help of mobile POS, retailers can accept payments anywhere as these are wireless devices and not connected to checkout locations. This gives even the smallest brick and mortar storse the flexibility to offer customers multiple checkout locations. With various payment solutions, customers can safely pay in line with social distancing norms. More than 73% of customers want more checkout options with advanced technology. Having said this, mobile point-of-sale devices are fast becoming a necessity for retailers large and small.

#5 Biometric Authentication

If someone had talked about authenticating a process using biometrics five years ago, it would seem like a scene from a futuristic movie. Now this process is everywhere and most of use this technology daily to unlock our phones. Biometric authentication consists of fingerprints, face, and voice recognition that we use today to unlock e-wallets. Biometric authentication gives more security as it is unique to each customer, and due to this trust, the technology attracted huge investments. According to a study by Mobile Payment Authentication & Data Security, by the year 2024, the use of biometric authentication is expected to grow more than 1000%, with a transaction value of more than $2.5 trillion. By the end of 2019, transactions valued at $228 billion were already authenticated by biometric technology.

#6 Flexible Payments

With consumers demanding more convenience and security while using mobile wallets for payments, the pandemic has also forced them to maintain and stick to a budget. Retailers now offer options like installments or Buy Now Pay Later to their customers. With enhanced security, convenience, and accountable spending, consumers have accepted these offers enthusiastically. Consumers get maximum flexibility with the zero-interest installment schemes which the retailers offer at the point of sale. It helps the customers to make large purchases easily without worrying about the having the full payment up front. The popularity of e-commerce and online shopping is growing drastically. The mobile payment strategy of the retailer will play a significant role in the purchase pattern of their customers. This strategy is almost 80% responsible for the rise or fall in sales. If the customer is getting complete flexibility in payments, multiple payment choices, and a streamlined checkout process, nothing can stop him from completing the decisive step of the final purchase.

Bottomline

As the digital world is changing fast, all kinds of e-commerce stores and other retailers need to adapt to the latest payment trends as soon as possible. With contactless payments and e-wallets offering complete convenience to consumers, they are becoming popular at an unimaginable speed. If your customers get absolute security along with seamless checkout, they will keep coming back to shop at your store. Therefore it is important for all fintech companies to keep a watch on. One thing is certain – that even if the pandemic ends, the e-commerce growth and the related customer needs are here to stay. For businesses to keep in the competition, they must shift to modern payment methods.

Current Changes To Interchange Rates For 2021

Visa and MasterCard were both planning on changing their interchange rates in 2021. But pandemic-related issues and concerns have prompted them to delay their increases. They will change their interchange rates in April 2022.

These rate changes reflect various ways how Visa and MasterCard operate. Your business will experience a significant impact, as the higher rates will cut from your profit margins and cash flow. You can keep these changes from being a problem if you plan ahead.

Changes Through Visa

Visa was planning on putting in a few changes to its interchange rates and fees in April 2020, but they were delayed by a year due to the pandemic. They have been delayed another year due to worries about how businesses can recover from the pandemic.

Visa’s first change will entail how it will handle card-not-present or CNP transactions. The fee for a traditional Visa card on transactions of $100 or more will rise from $1.90 to $1.99. For premium cards, the fee will go from $2.50 to $2.60.

Visa also has plans to increase the interchange rates for supermarkets and grocers. But it has not been open about how much of an increase will occur here. Visa has since announced it will delay the increase to 2022.

The highest rates for Visa cards are around 2.95%. The company will likely go past the 3% mark in 2022, although how high the network will go remains unclear.

Visa did make one other move, as the Electronic Interchange Reimbursement Fee or EIRF has been eliminated. The EIRF entails proper reimbursement for some losses in downgraded transactions.

What MasterCard Is Planning

MasterCard has announced it will be increasing the interchange rates for various industries. These include supermarkets, convenience stores, and some physical retailers. These increases will help MasterCard manage its network and handle its reward programs.

MasterCard has not been forthcoming on what it will specifically do with its increases. MasterCard will likely add a few tenths of a percentage point to each rate it offers for these businesses. The company will not go forward with these increases until 2022.

MasterCard offers various protective features for cardholders and offers support for anti-fraud measures. MasterCard often charges slightly higher rates than Visa offers, so you can expect MasterCard’s rates to continue to remain high. But the rates MasterCard charges are nowhere near as significant as what American Express charges to businesses that accept their cards.

What Everything Means

The plans for Visa and MasterCard to increase their rates in 2022 means that businesses may struggle to keep their cash flows under control. The problem with interchange rates is that they have been rising, which is problematic in industries where credit transactions have become more common.

All businesses that accept credit cards will require an analysis of their efforts in how they accept these payments. They must look at how much they are collecting from customers versus what they are losing in interchange charges. Businesses can recognize how their customers are spending money to see what changes they need to consider for their operations.

What Can Your Business Do To Offset These Increases?

The potential increases that Visa and MasterCard will impose will be substantial concerns for businesses to watch. You can offset these increases by using a few measures to help you keep these changes from being as significant:

Use a sensible pricing model for your industry.

Merchant account providers can help you find different pricing models that fit your business. These include providers that will offer an interchange-plus or tiered pricing platform. A tiered program may work if you accept specific card payment types versus others. An interchange-plus platform is best if you accept a variety of cards.

Look at a possible cash discount system.

You can use a cash discount program where you can promote that people will spend less on their orders when they pay with cash. You can adjust the prices at your store to cover the increase in the interchange rate, and then offer a percentage discount for people who pay for something with cash. The effort is useful as it doesn’t entail an additional surcharge that might not be legal in some places. But the cash discount should be promoted well, and any prices you list should be reflective of what people will spend if they pay in cash.

Enter a Level 2 or 3 tier for how you collect credit card payments.

You will qualify for a lower interchange rate if you provide more information on your business. Card networks will assign a specific tier level to your business based on how much information you provide. A Level 1 business will pay the highest rates and only submit its name, the purchase amount, the date, and the billing zip code in each transaction.

A Level 2 business will include these features plus a tax indicator, a customer code, a merchant tax ID, an invoice and order numbers. A Level 3 business will add a product or SKU description, details on each unit price and the quantities available, discount amounts, and any shipping totals and duty charges.

You will pay less in interchange totals if you gather more data on each card payment. The increased info will help a network identify your business transaction and will produce a lower rate. You could save a few tenths of a percentage point on interchange fees if you use the right measures.

Use anti-fraud measures to prevent chargebacks.

Sometimes a high interchange rate may be due to your business being at risk of chargebacks and fraud. You can use a few anti-fraud measures to keep these in check, thus reducing your average rate:

Conduct transactions by phone or mail when possible.
Use an address verification service to confirm one’s address when processing an order.
Settle the purchase authorization within two days of shipping a product.
Provide as many details on a product or service to the customer as possible. The customer will be less likely to require a chargeback when one knows what is happening at a time.

Lloyds Bank Credit Card Holders Can Use MasterCard’s Open Banking Connect

Lloyds Bank Credit Card Holders Can Use MasterCard’s Open Banking Connect

The MasterCard Open Banking Connect service provides support for managing payments the right way. With this system, users can start a PISP or Payment Initiation Service Provider payment and pay off their credit card balances. The user can create a credit card bill through a mobile app and then withdraw funds directly to their credit card account, ensuring they can manage their payments as necessary.

The Open Banking Connect service has been available in many places, but it is now available in the United Kingdom for the first time. Lloyds Banking Group is giving its members access to the Open Banking Connect system.

The MasterCard will be available to people who use all the bank’s brands. These include the Bank of Scotland, Halifax, and Lloyds Bank brands. These brands are available in many places around the United Kingdom and have some support overseas with different partner banks.

People can use the Open Banking Connect system to help them handle their credit card payments well. The setup will do well for Lloyds Bank, as it helps them run their payments right without struggling to try and keep them running well.

A Focus on Simplicity

The Open Banking Connect service provides a simple approach to paying bills and facilitating transactions. It offers third-party service providers the option to link to different financial institutions. The customer will provide data on one’s financial efforts to Lloyds and MasterCard, and their app will provide access to the details they need.

Open banking activities can work on the system regardless of the API being used or the method for how the API runs. The setup time for handling things will be minimal. Service providers can instead focus on different projects they would prefer to complete for their growth.

The new PISP lets customers choose how they will pay their credit card balances. The effort saves time, plus customers don’t have to enter their debit card data all the time. The customer also doesn’t have to set up a credit card to where the person paying for it is doing so through an account on another banking app. The same Lloyds app may work when paying off one’s MasterCard dues.

The design comes as people are constantly looking for new ways to handle their funds. People appreciate it when financial service providers help them handle their content well.

Open Banking Is Exciting

MasterCard’s Open Banking Connect is a solution that concentrates on keeping financial transactions open and easy to follow. The concept of open banking will be sensible for managing many unique needs that people hold.

Open banking is a process that will benefit customers in many forms. Open banking gives a bank the power to share consumer data with third parties. The customer agrees to have one’s data shared before the process works. Open banking provides better functionality regardless of the API. Offering the Open Banking Connect feature from MasterCard will expand upon what Lloyds will do when supporting its consumers’ financial activities.

An Expansion of Lloyds’ Services

The work Lloyds Bank is managing is an expansion of sorts of different services Lloyds is aiming to handle. Lloyds has been supporting open banking in the last few years. Open banking lets people manage their funds in many accounts. People can even handle accounts from different banks through the same Lloyds platform.

Lloyds Bank continues to be one of the United Kingdom’s top financial service providers. Lloyds continues to offer loans, insurance services, and other financial points for everyone to follow. The new partnership with MasterCard shows how Lloyds wants to make its services more convenient and useful to everyone who wishes to use the system. It becomes easier for people to handle their funds when they know what to expect and see in their efforts.

Essential Features to Note

There are some additional features of the MasterCard Open Banking Solutions system that Lloyds Bank can utilize. Many of these focus on the developmental processes involved, but they can be worthwhile when used right:

The fast onboarding system keeps the setup time for producing content down. A bank can get this ready in moments, keeping the development costs down. The program can also be customized for whatever unique needs specific customers may hold.
The secure sandbox MasterCard provides helps companies test their banking efforts. The open banking testing makes it easier for a group like Lloyds to see that its environment works well.
The authorization system that MasterCard uses ensures a secure system that maintains proper connectivity and stays intact for as long as possible.

These features make it easier for MasterCard to provide its services to people. It also works well for people looking for something sensible for any need. The program is especially worthwhile in an environment where people are looking for convenient things they can use right now. People are tired of waiting for services, so they’ll want something useful they can trust immediately.

Expanding Services In Europe

The move from Lloyds Bank will help expand MasterCard’s services throughout Europe. MasterCard recently established a partnership with the payment technology company CleverCards to support digital cards throughout Europe.

But while this move may be appealing, there also exist concerns over how much it may cost to use a MasterCard credit card for some things in Europe. MasterCard recently increased its interchange fees by at least five times for customers in the UK who wish to buy from companies based out of the European Union. The move came amid the recent Brexit move that did not have any deals between the UK and the rest of the EU.

But whatever happens in the future, it will be necessary for people to see how well this system from Lloyds Bank works. The MasterCard Open Banking Connect platform will be worthwhile for many needs. It can be exciting for people to see how well the MasterCard system works as they aim to become closer with their money.

MasterCard Takes Contactless Payments to the Cloud

The past few months, especially since the pandemic outbreak, saw rapid development in contactless payments. The rising need to accept or adopt cashless or contactless payment modes was mainly in response to preventing the spread of coronavirus.

Nowadays, more advanced and smarter technologies are being deployed across several mobile devices, mostly due to factors like convenience, flexibility, and speed. And this is the reason why contactless payments are gradually being moved to the cloud.

With that, the card brand, MasterCard announced on January 11, 2021, that it has partnered with payments gateway NMI, financial tech company Global Payments, and IT services provider CEG (Computer Engineering Group) to launch its first pilot for the new cloud-based point of sale (POS) technology, called Cloud Tap on Phone.

Their aim is to broaden the acceptance of contactless payments for merchants since today’s consumers prefer paying for their purchases using mobile payments on their smartphones. In addition to enhancing and expanding its point-of-sale solutions, MasterCard is also working on improving its cloud POS systems.

The card network’s goal is to make its Cloud Tap on Phone openly available across various cloud-based environments. It will empower different solution providers and ecosystem partners to build their own cloud POS offerings by integrating newer features, tools, and functionalities. The process, therefore, is also expanding the acceptance of this new cloud-based payment and POS technology.

Nili Klenoff, Senior Vice President, Global Acceptance Solutions at MasterCard, revealed that the pilot for their new cloud POS system is based on three major dynamics in the marketplace:

The digital shift, which she believes won’t change soon, even if the pandemic recedes.
The acceleration in the need for adopting a contactless infrastructure within the retail industry.
The advantage of switching to cloud solutions, which Klenoff believes is democratizing access to digital payments solutions and apps.

MasterCard has further said that in Q3 2020, contactless payments accounted for 41% of global in-person transactions. This was a significant increase from the previous year’s 30%. It indicates that amid the pandemic situation, this new offering received much popularity and acceptance.

mastercard contactless payments - Cloud Tap On Phone

As a result of this launch, other payment players have innovated their digital POS solutions to make them more widely accessible.

For example, towards the end of 2020, Visa came up with its Tap-to-Phone solution across several global markets. Just like MasterCard’s Tap on Phone solution, Visa provides businesses with a mobile POS solution that one can deploy without requiring any additional hardware.

Klenoff reportedly said that the company’s new cloud solution is designed to help users develop and expand the entire payment ecosystem. This is mainly targeted at enabling businesses to enhance their customer engagement and improve their shopping experiences.

This new system from the card company can be especially beneficial for SMBs (small- and medium-sized businesses), who are affected by the pandemic outbreak. Hence, the cloud-based POS solution might also accelerate the global expansion and evolution of digital transactions.

MasterCard Contactless Payments – Key Points

Cloud Tap on Phone is one of the card network’s next-gen innovative acceptance products. Furthermore, the software is hosted on the powerful Azure Cloud platform from Microsoft.

Microbusinesses and SMBs can gain access to a more cost-efficient contactless POS system without investing in any external hardware. MasterCard’s Cloud Tap on Phone can help businesses with fewer resources for purchasing additional POS hardware.

During the COVID-19 crisis, 34% of SMBs have adopted contactless payment solutions to optimize their checkout processes. This was a result of a study conducted by Paysafe that analyzed several SMB checkout processes used in various countries like the US, UK, Italy, Canada, Austria, Bulgaria, and Germany.

The Tap on Phone solution from MasterCard is also designed to expand the acceptance of contactless payments across global markets.

By introducing this cloud-based POS system, SMBs can also keep pace with larger enterprises that provide a number of different payment modes. It further enables MasterCard to increase their volume of payments.

Since the company’s new offering is spreading across numerous countries, businesses operating in markets where digital transaction infrastructures are developing, such as parts of Asia and Africa, are expected to gain access to this cloud POS system. It will further push contactless payment acceptance forward, thus accelerating MasterCard’s payment volume potential.

For instance, micromerchants running in India who have seen significant growth in cashless payments are more likely to take up the card network’s offering. Therefore, it will expand the overall acceptance of contactless payments in the near future.

Using the Tap on Phone solution, businesses, irrespective of their size, can deliver the best-in-class contactless payment expenses to their consumers via their own smartphones.

MasterCard’s new cloud system democratizes POS technology by converting an Android device into an acceptance device. It enables businesses to implement more contactless payment systems at checkout, while cutting down costs on external hardware terminals and other tools or features.

The system will help merchants to provide better curbside pay on delivery or pickup facilities for faster checkouts at the store, thus eliminating long queues. It’s a convenient, touch-free, cash alternative for consumers.

MasterCard’s cloud POS has become a new channel for businesses to provide more meaningful and value-added services to their consumers.

At present, MasterCard’s Tap on Phone software has been rolled out across 16 markets, including Asia Pacific, Europe, Latin America, North America, Africa, and the Middle East. Additionally, pilots are occurring with respective partners in Hong Kong, Costa Rica, Poland, Romania, Kazakhstan, Russia, Canada, the UK, Belarus, Turkey, and several other markets.

The card network’s new product development wing, MasterCard Labs, spearheaded the development of the cloud POS technology and its new cloud-based Tap on Phone product. The pilot working with CEG is following product testing sessions on the New York campus of MasterCard’s Purchase.

The product, Cloud POS, is a result of the company’s multi-cloud strength, meeting several businesses, financial institutions, partners, and consumers in the Cloud using innovative solutions and applications.

MasterCard has been planning this transition to contactless digital transactions for years. The rising demand for faster, safer, more convenient, and flexible methods to make payments has been a driving force behind this transition.

Today, consumers are willing to use this touch-free transaction experience permanently, even after the pandemic ends.

The Best Credit Card Offers for 2020 and 2021

If you have a New Year’s resolution to get your finances in order, that may include finding the right credit card. If you have a high-interest card that doesn’t provide you with any rewards or benefits, you could be missing out.

The Top Credit Card Offers for 2020 and 2021.

Discover-It Cash Back

If you want a simple credit card that pays you for your purchases, Discover-It is it. You earn 5% back on your purchases up to $1,500 each quarter. The reward categories change, but you always have options, and they are typically categories everyone spends in or specific stores everyone shops at (such as Amazon).

Discover also doubles the cashback you earn after your first year. In other words, you earn ‘free money’ if you keep your card in good standing for the year.

Citi Double Cash Card

Earn 1% back on all purchases and an additional 1% when you pay your bill. Even if you pay your balance over a few months, you still earn 1% of what you pay. So it totals out to 2% cashback as long as you don’t let interest charges take over your rewards.

The Citi Double Cash card doesn’t have a reward bonus like most cards, but it comes with a 0% balance transfer APR for 18 months. That’s a nice long period to pay off your balance before interest accrues.

Chase Freedom Unlimited

If you like tiered rewards, check out the Chase Freedom Unlimited card. There’s no annual fee, and you earn cashback year-round in a tiered manner.

It’s best for people who travel as you get the largest reward on travel purchases (5%). It also pays 3% back on restaurant purchases, 3% back at drugstores like CVS, and 1.5% back on all other purchases. So, no matter where you spend money, you’ll earn cashback.

Bank of America Cash Rewards Credit Card for Students

Students sometimes have a hard time finding a credit card that provides them any benefits besides a small credit line. The Bank of America card is a great place to start and it offers students rewards.

Students earn 3% cashback on a category that you choose, whether it’s groceries, dining out, or gas. Students can also earn 2% cashback on groceries, including Sam’s Club and Costco, and 1% back on everything else.

The 3% bonus category and 2% rewards can be used up to $2,500 per quarter, and then it falls to 1%, which is the perfect amount for students.

Look at the Credit Card Rewards you Need

Before you take just any credit card, determine your needs. What rewards will you use and what categories do you spend money in the most? Why not take advantage of what credit cards have to offer by finding the card that pays you back in ways you’ll use it and for purchases you already make?

If you aren’t sure which one is right for you, pull out your bank and credit card statements for the last year and total up your spending in each category to make the right choice.

MasterCard and AptPay Partner for Faster B2B Payments

MasterCard and AptPay Partner for Faster B2B Payments

MasterCard and AptPay announced on Wednesday, August 19, the integration of MasterCard Send into the AptPay platform. MasterCard Send is a global push payments platform, enabling funds to be sent securely in near real-time into any payment card or account. AptPay is a Canadian FinTech company. The partnership allows companies using the AptPay platform to send digital payments securely through bank accounts, prepaid cards, or digital wallets in near real-time.

The partnership enables faster cash access for businesses when cash flow management is more than critical – it is paramount to survival. The COVID-19 pandemic intensified the need for small and medium sized businesses to access cash. Much faster than legacy payment types, MasterCard Send can process payouts end to end. AptPay’s compliance services meet the compliance needs for their industry, ensuring transactions are safe and secure.

The COVID-19 pandemic also enhanced the need for businesses to digitize and automate their payment processes. With the ability to receive funds directly, securely, and in near real-time, businesses are liberated to enable free cash flow.

Safer, Faster, and Less Costly than Checks

Offering more safety than checks provide, the partnership speeds disbursements across multiple industries. With more transparent payment information along with the ability to approve, reject, or reverse payments, businesses can reduce check-related expenses and fraud. Checks not only involve added costs and lengthy timelines, but they also can take days to clear.

“Over the last few years, digital transformation and faster payments have been top priorities for many industries. COVID-19 has created the perfect storm, highlighting the problems caused by not having these priorities in place. AptPay’s Digital Payment Hub enables companies to execute on these priorities and weather the storm,” said AptPay CEO Suganthan Vishnu Krisnarajah

MasterCard

A global technology company in the payments industry, MasterCard uses secure data and networks with connections across more than 210 countries and territories. Their mission is to connect and power a digital economy, benefiting everyone, everywhere by making transactions safe, simple, smart, and accessible.

AptPay

Founded in 2019, AptPay is a Canadian Fintech in the payments space. Serving businesses across a network of connected financial institutions and multiple payment rails, AptPay envisions a future where payouts are safely made to customers in near real-time, without friction.

Host Merchant Services

Host Merchant Services offers state-of-the-art POS systems personalized for your business. From B2B to B2C and everything in between, HMS provides businesses the tools they need to be successful. For payment processing, HMS can help your business accept all credit and debit cards with the lowest transaction rates on the market. We are able to retain customers with our low rates and excellent customer service – not our contracts. With 24 hour customer service, seven days a week and 365 days a year, we require no term commitment, and we charge no up-front fees or hidden fees. Nor do we charge application or setup fees. An industry leader, Host Merchant Services is always here for you.

MasterCard’s Dispute Resolution Initiative

Mastercard is rolling out its new Dispute Resolution Initiative for payment processors and merchants that will bring many changes to how Mastercard chargebacks and transactions are handled.

The initiative, which has a goal of improving chargeback outcomes and efficiency, will likely mean a more consistent process for merchants. The Dispute Resolution Initiative is being rolled out in four phases and began in October 2018 with a final phase rollout scheduled for April 2020. The latest changes went into effect in October 2019.

What Merchants Should Understand

The Mastercard Dispute Resolution Initiative (MDRI) brings modern solutions to payment processing and chargeback resolutions. MDRI puts more responsibility on issuing banks which must collect information from cardholders like a receipt before initiating a dispute which rules that aim to prevent double refunds completely and reduce invalid disputes that are expensive for merchants.

Merchants won’t use Mastercard’s new dispute system, MasterCom, directly. Instead, the payment processor uses it on the merchant’s behalf. Acquirers and issuers will use MasterCom to initiate and respond to every Mastercard chargeback. As a merchant, your processor can submit supporting documentation through the system if you want to fight a chargeback.

The new dispute system is similar to Visa Claims Resolution (VCR) which Visa rolled out in 2018. VCR, a method of simplifying the chargeback process, automated 80% of dispute volume and reduced the average chargeback resolution time from 54 to 23 days.

New Payment Processing and Chargeback Rules

The Dispute Resolution Initiative adds new processes, technology, and rules to automatically validate dispute requests, open new communication channels between merchants and cardholders, and create a central dispute management platform for acquirers and card issuers.

During the first phase of the rollout, Mastercard instituted a new rule that requires issuers to request more information from cardholders to file a Mastercard chargeback for these reasons:

Cardholder Does Not Recognize (4863)
Cardholder Dispute, Recurring Billing and Digital Goods (4853)
Point of Interaction Error (4834)
Incorrect Transaction Amount (4831)

For these reason codes, issuers must get supporting documentation. For disputes over digital goods or recurring transactions, there must be a cardholder email, letter, or expedited transaction dispute form.

By obtaining more information at the beginning of the chargeback process, the goal is to reduce the number of invalid chargebacks.

Mastercard also added a new pre-compliance requirement. Before an issue can be escalated to a compliance case, a pre-compliance case needs to be filed.

During the second phase, Mastercard instituted a new rule that refunds cannot be initiated after a chargeback is reversed or filed. An acquirer cannot use a pre-compliance case to reverse a second refund if credit is issued for a disputed transaction. Acquirers can still recover the money with a new presentment if the time limit allows, through a pre-arbitration case filing if credit is issued after a second presentment, or through collections.

Issuers are now instructed to check for a reversal or refund before a chargeback and accept a second presentment if the transaction is submitted as “Credit Processed.” Always verify if the customer’s bank is involved before filing a refund to avoid a double refund.

Issuers can no longer use the following reason code for a Mastercard chargeback:
Fraudulent Processing of Transactions (4840)

The timeframe to file a chargeback for a Point of Interaction Error (4834) has also been reduced to 90 days from 120 days.

Changes Still Planned

Phase four of MDRI in 2020 will streamline the chargeback process by removing the arbitration or second chargeback cycle. Instead, card issuers can continue disputes with pre-arbitration before escalating to arbitration in case of fraud. This will be similar to the Visa Claims Resolution process.

During the final phase, Mastercard will eliminate the following reason code for a chargeback:

Cardholder Does Not Recognize (4863)

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