Chargeback Management

What is Mastercard Dispute Resolution Initiative?


Mastercard’s new Dispute Resolution Initiative mandate for merchants and payment processors is in the process of being rolled out, and it means significant changes to the way transactions, credentials, and Mastercard chargebacks are handled.

The latest Mastercard mandate began a phased rollout of a number of new and modified rules in 2019, which will continue through 2020. One important change to note is the Dispute Resolution Initiative, which overhauls many aspects of Mastercard's chargeback process, and is aimed at increasing efficiency and improving outcomes.Merchants who have taken the time to learn the intricacies of the chargeback process may be dismayed to learn of these impending changes, but ultimately, a faster, fairer, and more consistent process should be a net-positive. 

no merchant should risk non-compliance, and the resulting penalties

In order to ease the transition for merchants and other stakeholders, we’ve put together this summary of the Dispute Resolution Initiative, its procedural implications, and how they can best prepare for it.

Intent of the Mastercard Dispute Resolution Initiative

Fight & Recover Chargebacks - Get The GuideThe Dispute Resolution Initiative is designed to improve the chargeback dispute handling process and reduce the time it takes to resolve disputes. Under the policies, chargeback decisions must adhere to a rules-based process that automatically identifies invalid disputes, shortens the allotted timeframe to resolve a dispute, and updates dispute reason codes and conditions.

The goal is to reduce the volume of Mastercard chargebacks and enable the involved parties to resolve them faster.

Elements of the Mastercard Dispute Resolution Initiative 

The Dispute Resolution Initiative rolls out in four phases:

Phase 1 - effective October 12, 2018: issuers must request more information from their cardholders in order to file Mastercard chargebacks for the following reason codes:

  • 4863 (Cardholder Does Not Recognize)
  • 4853 (Cardholder Dispute, Recurring Billing and Digital Goods)
  • 4834 (Point of Interaction Error)
  • 4831 (Incorrect Transaction Amount/Transaction Amount Differs)

The objective of this phase is to reduce invalid chargebacks by obtaining this information at the start of the Mastercard chargeback process.

Phase 2 - effective April 19, 2019: refunds must no longer be initiated after a Mastercard chargeback has been filed or reversed. If a refund is initiated after a Mastercard chargeback has been reversed and the issuer files a second Mastercard chargeback, a double refund will result.

  • To speed up dispute resolution, Mastercard will reduce the timeframe to file a chargeback for reason code 4834 (Point of Interaction Error) from 120 days to 90 days, starting from the transaction date.
  • These reason codes will be removed and issuers will no longer be able to use them for chargebacks:
    • 4840 (Fraudulent Processing of Transactions)
    • 4863 (Cardholder Does Not Recognize)

Phase 3 - effective October 18, 2019: Mastercard has announced this date for the third phase of their chargeback mandate, but details have not yet been provided.

Phase 4 - effective April 17, 2020: pre-arbitration Mastercard chargebacks will replace second chargebacks for the following reason codes:

  • Download the eGuide, 4 Reasons to Hire a Chargeback Management Company4837 (Fraud), excluding 4870 (Chip Liability Shift) and 4871 (Chip/PIN Liability Shift) chargebacks
  • 4853 (Cardholder Disputes)
  • 4834 (Point of Interaction Errors)
  • Mastercard will align with the customer dispute category of the Visa collaboration chargeback process, which allows issuers to continue the dispute with a pre-arbitration chargeback.
  • Pre-arbitration Mastercard chargebacks are initiated by issuers when their cardholders do not accept the evidence provided by the merchant in defense of the original transaction.
  • Mastercard’s new process is expected to match the one currently being used in Visa Claims Resolution. It’s important to note that Mastercard is only eliminating the second chargeback cycle for the reason codes listed above; other reason codes can still be addressed via a second chargeback. 


Change can be stressful - especially when it has the potential to impact your bottom line in a meaningful way - and adapting to them often takes time and money. But no merchant should risk non-compliance, and the resulting penalties. The important thing to remember is that, while there can be a learning curve for new card network mandates and other rule changes, the card networks offer plenty of  advance warning to allow merchants to adjust to the coming changes.

If you’re feeling unsure about your ability to comply with the new Mastercard Dispute Resolution Initiative mandate, or are worried about the consequences of failing to comply, companies like Chargeback Gurus can help guide you through these changes with confidence. With years of experience in the payments industry, we can show you how to prepare, what to anticipate, and how to work the changes to your advantage.

Thanks for following the Chargeback Gurus blog. Feel free to submit topic suggestions, questions or requests for advice to:

Mastercard Mandates eBook