First-party fraud is becoming a focal point for payments networks as they utilize data and AI to uncover the truth about transactions and whether consumers are initiating fraudulent disputes. Imagine a scenario where a cardholder disputes a legitimate charge on their account. Mastercard recently emphasized that such challenges can arise due to various reasons: the consumer may genuinely have forgotten about the purchase, or they may be confused by the details on their statements. However, fraud may also be involved if the customer is seeking reimbursement for a valid transaction while keeping the goods or services received. To address this issue, Mastercard announced the upcoming rollout of its First Party Trust Program, which utilizes advanced transaction insights, AI, and risk modeling to combat friendly, or first-party, fraud. The program, scheduled for release later this year, aims to tackle the difficulty of identifying first-party fraud when consumers are using their own cards and devices. It establishes a secure channel for merchants to submit specific transaction information to Mastercard, facilitating the analysis of a cardholder's purchase history and behavior to uncover potential instances of misused first-party privileges. Merchants participating in the program will have the option to submit relevant data at the time of purchase or when a dispute is initiated. These enhanced technologies will enable better detection of true third-party fraud and strengthen the case against dishonest chargebacks. Visa, too, has implemented its Compelling Evidence 3. 0 (CE 3. 0) dispute program, introduced in April last year.

CE 3. 0 relies on data analysis to establish a historical connection between the cardholder and the merchant, examining key identifying fields such as user ID, device ID, IP address, or shipping address from non-fraudulent transactions that occurred within a 120 to 365-day timeframe before the disputed transaction. These data points serve as evidence of the established connection between the cardholder and the transaction in question. Other providers have also joined the effort to combat first-party fraud. Socure launched its Sigma First-Party Fraud solution and established the First-Party Fraud Consortium (FPFC), boasting over 50 million active accounts at its launch, with plans to incorporate another 200 million accounts. Socure's FPFC uses alternative data signals that are not typically included in traditional credit reports to detect and prevent first-party fraud. According to PYMNTS Intelligence, 77% of merchants consider fraud and disputed transactions as the primary cause of disputes-related financial loss. Additionally, 48% of surveyed merchants receive notifications and alerts about disputes from card networks, and 20% rely on third-party data-sharing services to prevent disputes.