How Will the New Mastercard Chargeback Rules Impact Your Business?

  • Max Jones
  • April 9, 2019
  • 6 minutes

The Mastercard Dispute Resolution Initiative is an update to the network’s legacy chargeback management workflows and regulations.

These new Mastercard chargeback rules could have a significant impact on your business, but what exactly will the effect be?

Here’s an overview of what you can expect.


Reason code 4837 (no cardholder authorization) is being discontinued.

Issuers and acquirers can no longer settle authorization issues with reason code 4837. This reason code was retired in the October 2018 phase of updates.


You could lose more revenue if your merchant account hasn’t been set up properly.

This reason code allowed acquirers to provide alternate information when the originally-submitted payment information was incorrect.

If there was a mismatch between authorization and clearing, the acquirer could respond to the chargeback with the correct merchant name, location and/or date. This information would successfully overturn the chargeback and the merchant’s revenue would be safe.

Now, acquirers no longer have this capability.

ACTION ITEM: To avoid unnecessary revenue loss, check with your processor and make sure your merchant account has been configured correctly. The same business information you use during authorization must also be used for clearing.


Issuers will need to ask cardholders for supporting documentation.

If cardholders want to dispute certain types of transactions, they must provide the bank with documents that help justify their case.

Supporting documentation is required for the following chargebacks:


You might experience less friendly fraud.

Friendly fraud, whether intentional or accidental, can often be avoided if issuers have access to more information. Without insight as to what happened or what will happen, issuers may be forced to side with the cardholder and initiate a chargeback.

Asking for supporting documentation may help clear up any confusion about what was purchased and deter customers trying to file illegitimate chargebacks.

ACTION ITEM: Use this as an opportunity to perfect all your customer-facing communications:

  • Product descriptions
  • Confirmation emails
  • Return policy
  • Terms & conditions
  • Customer support interactions (email, phone, social media, etc.)

Make sure all information is clear, concise, and accurate. Not only do you need cardholders to understand what’s expected, you need banks to understand as well.


The timeline for reason code 4834 (point-of-interaction error) has been decreased.

Issuers must file all disputes with a point-of-interaction error reason code within 90 days of the transactions (instead of 120).


If you made a mistake, you’ll know about it 30 days sooner.

One of the biggest shortcomings of the chargeback process is that it takes so long for information to travel back and forth between parties.

By the time a chargeback reaches you and you learn about the problem, you’ve probably processed several additional transactions with the same error–all of which could likewise result in chargebacks.

But if you learn of the issue sooner, you can solve the problem sooner.

ACTION ITEM: Get a system in place to accurately monitor disputes in real time. That way, you can take full advantage of this new Mastercard rule update.


Reason code 4863 (cardholder does not recognize) is being discontinued.

Issuers will no longer be able to file chargebacks with reason code 4863. However, new collaboration initiatives might be introduced instead. 


There is potential for a reduction in chargebacks, but as of now, very little is expected to change.

For many merchants, reason code 4863 is one of the most commonly used classifications for disputes. Since it is such a popular reason code, a logical assumption would be that eliminating it would have a significant impact on the ecosystem.

But in reality, there won’t be a major impact for merchants.

Issuers will likely feel the effects of the update because it was easy for them to file 4863 disputes without much thought, effort, or proof from the cardholder. However, issuers aren’t going to simply ignore cardholders when there is confusion about a purchase. They’ll likely just shift those “cardholder doesn’t recognize” disputes to a different reason code.

Here’s where the potential for significant change might happen: Mastercard has said that this update will be accompanied by “the implementation of a collaboration layer and process within the new Mastercard Claims Manager.”

It’s uncertain what the effectiveness of this collaboration layer will be, as it is dependant on issuer adoption. But similar to Visa Merchant Purchase Inquiry, it seems promising. Given some recent acquisition activity by Mastercard (learn more here), a significant portion of consumer disputes could be resolved before they become chargebacks.

ACTION ITEMS: First, update your billing descriptor. Make it as easy as possible for cardholders to recognize and understand what they purchased.

Second, sign up for the Midigator newsletter. Since Mastercard hasn’t explained the ”collaboration layer and process” yet, it’s difficult to recognize the full implications of this policy change. If you are part of our mailing list, we’ll share details with you as soon as they become available.


The arbitration chargeback cycle is being discontinued and pre-arbitration case filing is being added.

The new Mastercard chargeback rules will remove the arbitration chargeback cycle. Instead, issuers will respond to a second presentment with a pre-arbitration case filing.


You may win more chargeback responses.

From the merchant’s standpoint, this policy shift doesn’t bring about significant changes. The issuers and acquirers will be impacted the most.

However the effect these adjustments have on issuers could potentially impact you.

The updated dispute resolution workflow adds a lot of new responsibilities for issuers. It is unclear how issuers will handle these additional tasks. It is possible you could “win” cases that would otherwise be considered losses.

ACTION ITEMS: Don’t relax your standards. Just because it will be harder for some issuers to respond doesn’t mean they won’t. Nor does it mean that all banks will struggle with these new regulations.

If you see an increase in your win rate and you haven’t done anything to update your own processes, expect the influx to be temporary.

If you want a genuine and long-lasting improvement to your outcomes, consider intelligent dispute responses.


The dual message system and the single message system will be combined.

Mastercard currently use two different workflows to process and dispute transactions: the dual message system and the single message system.

The new Mastercard chargeback rules will combine these two workflows.


Processing transactions and responding to disputes will be a more streamlined process.

If you currently use both systems, your life will become much simpler!

You’ll use a single set of messages for all payment processing, and compelling evidence requirements will be more succinct.

ACTION ITEM: Carefully monitor the later stages of the new Mastercard rules roll-out. This update is tentatively scheduled for April 2020 or later, so there isn’t much information available yet.

However, the update will introduce new reason codes and could possibly bring about changes in compelling evidence requirements, so make sure you receive and understand the information once it becomes available.

Stay Up-to-Date on Mastercard’s New Chargeback Rules

The Mastercard Dispute Resolution Initiative will likely undergo various modifications as the industry transitions to these new policies and workflows. Midigator will continue to monitor the situation and share new information as it becomes available. We encourage you to bookmark this page and check back regularly.

Also, follow Midigator on social media to be notified of changes. You can find us on LinkedIn and Facebook. Or, sign up for our newsletter here and receive tips to make the transition easier and less risky.

Midigator aims to remove complexities for the entire payment ecosystem. If you have questions about these new Mastercard chargeback rules or want help making necessary changes, don’t hesitate to contact our team of payment experts.

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