Mastercard Merger Makes Major Bid To End “Friendly Fraud” and Chargebacks

Mar 14, 2019

Mastercard is making a bid to help end “friendly fraud” and aims to help eliminate unwarranted chargebacks thanks to the recent announcement of its acquisition of Ethoca, the world’s leading provider of collaboration-based technology that enables card issuers, e-commerce merchants and online businesses to increase transaction acceptance, stop more fraud, recover lost revenue and eliminate chargebacks from both fraud and customer service disputes.

That’s a lot of big words…but basically, it boils down to this…  Ethoca is on your side as a business owner.  They help make sure that you have the option and ability to refund a customer dispute BEFORE it becomes a chargeback.   Anyone who has had the unfortunate situation of having their merchant account shut down from one too many chargebacks knows just how important it is to do everything possible to reduce your chargebacks.

And if you haven’t had to deal with the gut-wrenching panic of watching your cash flow get cut off… consider this a cautionary tale.

But Ethoca has been hard at work for the past 15 years to help connect business owners and the banks that issue credit cards.  They do so with a quick and easy alert system that allows you to instantly refund a dispute before having to deal with the hassle of a chargeback.

Today, the Ethoca network brings together more than 5,000 merchants and 4,000 financial institutions around the world. When a consumer starts the process of issuing a chargeback, near real-time information is sent to the business owner so they can confirm the transaction, stop delivery or reverse the transaction to avoid the chargeback process.  As a result, both business owners and the banks that issue credit cards benefit from lower operational costs by reducing fraud at the source.

According to a recent report from Juniper Research, retailers are expected to lose $130 billion in online fraud over the next five years. In addition, research firm Aite Group estimates that false declines – when card issuers decline transactions from good customers’ cards due to a perceived fraud risk – cost the industry $331 billion in 2018 in the U.S. alone

And they are about to get even more connected…Mastercard just announced its bid to acquire Ethoca, adding more than 2.5 billion cards in 210 countries and territories around the world to the system.

This saves you time, reduces conflict, increases customer satisfaction and return, and most importantly could save you thousands each month.


Who is Ethoca?

  • Since 2005, Ethoca has build a network connecting the banks that issue credit cards with business owners to tell the business owners when a consumer starts to file a dispute… before it turns into a dispute.
  • Ethoca is a communication platform enabling business owners to access confirmed fraud and transaction dispute data from card issuers through a real-time secure portal or API.
  • Ethoca has exclusive relationships with a global network of banks that issue credit and debit cards to receive pending chargeback notifications and distribute them post-authorization.

What are Ethoca Alerts?

  • Ethoca Alerts are notifications for transactions (confirmed fraud and customer disputes) that consumers have started the the chargeback process for – and will result in a chargeback unless a business takes action. To avoid the chargeback, the business owner needs to issue a refund as soon as possible or stop settlement (objective is within 24 hours), and provide a notification to the issuer through the Ethoca portal or via API that such actions have been taken.

What are the benefits of Ethoca Alerts?

  • Providing that a refund is issued in a timely manner and the outcome is submitted, a Chargeback Alert enables a business owner to avoid the chargeback altogether – and all the direct and indirect cost associated with getting a chargeback. If a merchant is shipping physical goods or providing a service, Ethoca Alerts also help merchants recover fraud-related losses.

What data elements are included in an Ethoca Alert?

  • Each Ethoca Alert provides the following information; Credit Card Number (canceled), Authorization Date/Time, Amount of the transaction, and the Business’ Descriptor.

What action does the business owner take when they receive an Ethoca Alert?

  • Simply refund the transaction immediately and record the outcome within the Ethoca portal (or API).
    Alerts should be recorded as “Stopped” and insert “Refunded on <date/time>” within the comment field.

How does Ethoca match  Alerts to affected merchants?

  • Ethoca uses the merchant descriptors to match Ethoca Alerts to a merchant company. If you open new merchant descriptors, advise Ethoca as soon as possible.

What if you get a Chargeback on a transaction that has been refunded?

  • Ethoca works closely with card issuers to prevent this from occurring. In the event, however, you receive a chargeback, simply contact Ethoca by emailing our customer service department at [email protected]. Ethoca will work with the card issuers to address the issue and where the credit was submitted in a timely manner, no charges will be applied for the Alert.

What if you don’t refund a transaction that you get an Ethoca Alert for?

  • Actioning the alerts are at the sole discretion of the business. However, failure to take action will result in a chargeback being processed by the card issuing bank.

There is no denying that fraud (and fraudulent chargebacks) are on the rise, This acquisition will go a long way to help protect you from fraud, save you time, and a ton of cash in the long run.

For more information on what this merger means to you- click here to view the original press release

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