Friendly fraud, also known as first-party fraud, occurs when a cardholder disputes a legitimate transaction—either mistakenly or maliciously—leading to unnecessary chargebacks and losses for merchants. This form of fraud has surged alongside the growth of e-commerce, posing a growing challenge for retailers and financial institutions alike. Mastercard’s solution aims to proactively tackle this issue by enhancing data sharing between merchants and card issuers.

How It Works:
First-Party Trust enables merchants to provide enriched transaction data during both the authorization and dispute phases. This includes granular insights such as device and location data, shipping address, merchant history, and shopping behavior. This real-time information helps card issuers more accurately evaluate disputes and identify instances of legitimate transactions, reducing erroneous chargebacks.

“With First-Party Trust, we’re bringing transparency and collaboration to the transaction ecosystem,” said Chris Reid, EVP of Identity Solutions at Mastercard. “By empowering issuers with clearer data, we help protect merchants from unwarranted losses and create a fairer digital commerce experience.”

Expansion Across APAC and Emerging Markets:
Mastercard’s decision to expand the program to the Asia-Pacific region and other international markets comes amid increasing incidents of friendly fraud globally. The Asia-Pacific digital commerce market is expected to grow at double-digit rates over the next few years, with mobile and cross-border transactions playing a key role. Mastercard sees this as the right time to reinforce transaction integrity in these high-growth regions.

Industry Impact:
The First-Party Trust program is aligned with Mastercard’s broader push toward fraud prevention through AI and intelligent data sharing. By enabling better merchant-issuer communication, Mastercard is aiming to reduce the billions of dollars lost annually due to chargebacks.

The program is expected to benefit sectors especially vulnerable to friendly fraud, including online retail, travel, and digital subscriptions. Early results from the U.S. pilot suggest a significant drop in chargeback rates where First-Party Trust data signals are used effectively.