First-party fraud is, increasingly, warranting a first line of defense from the payments networks, using data and AI to uncover what’s really going on with transactions and whether consumers are initiating fraudulent disputes.
Picture, then, the cardholder who challenges a legitimate charge on their account. Mastercard noted in an online posting Monday (March 18th) that the challenges can be tied to several scenarios: the consumer may honestly have forgotten the purchase had been made; they may have been confused about details on their statements. Alternatively, and this is where fraud comes in, the customer may be seeking to be credited for a transaction that was on the up and up, and may look to keep the goods or services that had been ordered and provided.
Mastercard said that its First Party Trust Program, which had been announced in October, will be rolling out later this year. As had been noted then, the program employs “enhanced transaction insights,” artificial intelligence (AI), and risk modeling to combat friendly, or first-party, fraud.
Mastercard’s Monday posting noted that it can be difficult to identify when first-party fraud is underway, because consumers are using their own cards, on their own devices. The new program, the payment network said, “provides merchants with a secure channel for submitting pertinent information as part of a Mastercard transaction. Combined with Mastercard’s network-level analytics, this data will uncover insights into a cardholder’s purchase history and behavior that could indicate first-party misuse.”
Merchants, beginning with the initial rollout in the states this year, have option to submit that data at the time the purchase is made or upon the initiation of a dispute. The advanced technologies, said Mastercard, “enhance the detection of true third-party fraud — and bolster the case against dishonest chargebacks later on.”
Separately, and as detailed last year, Visa’s Compelling Evidence 3.0 (CE 3.0) — a change to its dispute program that debuted last April — uses data to trace an established “footprint” between the cardholder and the merchant, and key identifying fields that match across the historical transactions and the transaction being disputed.
The key fields, as we reported last year, include user ID, device ID, IP address, or shipping address on at least two non-fraud transactions occurring between 120 to 365 days prior. These data points are used to prove the historic connection to the cardholder and the newer transaction that is being called into question.
Other providers have been joining the fray: The same month Mastercard launched its program, Socure announced its own first-party fraud solution, Sigma First-Party Fraud, along with the First-Party Fraud Consortium (FPFC). The consortium had more than 50 million active accounts at launch and said it aims to add another 200 million accounts.
The Socure FPFC aims to detect and prevent first-party fraud by analyzing alternative data signals that are not typically tracked in traditional credit reports, Socure said this past October.
PYMNTS Intelligence data, in reporting on dispute prevention solutions, found that 77% of merchants said the costs from fraud and disputed transactions have been one of the largest sources of disputes-related pain.
In addition, 48% of merchants surveyed said they get notifications and alerts about disputes from a card network.
And as many as 20% of merchants make use of third parties’ data-sharing services to prevent disputes.
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