Mastercard Intros Strategy to Ferret Out Scam Merchants

Mastercard wants to help banks and payment companies separate legitimate merchants and scammers.

That’s the goal of Merchant Trust Services, a new strategy that uses Mastercard’s intelligence, cyber and identity capabilities, and analytics to distinguish real merchants from risky ones, both on and offline, according to a Tuesday (May 19) Mastercard trend story.

“Every bad experience online makes shoppers second-guess legitimate businesses, and that makes it harder for real merchants to win and keep customers,” Mastercard Chief Franchise Officer Simon Collins said in the story. “When confidence cracks, businesses pay for it in more declines, more disputes and more abandoned carts.”

Merchant Trust Services is being rolled out ahead of Mastercard’s cybersecurity conference, RiskX, in Singapore, the story said. It helps acquirers and payment service providers uncover scammers during the merchant onboarding process, preventing them from launching their businesses, whether in the physical or virtual worlds.

While these merchants will often trick customers with low-grade counterfeits of real items, or take their money without shipping anything at all, the dangers don’t stop there, according to the story. Some of these storefronts are phishing operations, with scammers stealing card information to make fraudulent purchases or reselling the card details on the dark web.

“The fallout from scam merchants also impacts issuers, the cardholders’ banks, which carry the burden of consumer complaints, the dispute resolution process and the cost of replacing compromised cards,” the story said.

With that in mind, Mastercard is also introducing its Merchant Scam & Risk Indicator (MSRI), which offers issuers “merchant risk signals during authorization” to enable fraud mitigation, per the story.

In a pilot with an issuer, MSRI uncovered approximately 80% of the issuer-identified risky merchants, with many flagged as early as 90 days before the issuer’s initial escalation, the story said. MSRI will launch first in Europe and the United States, with worldwide expansion planned within the year.

Mastercard’s efforts come amid a surge in consumer fraud cases. According to data from the Federal Trade Commission, consumers filed 3 million reports of fraud last year, totaling $15.9 billion in losses. That was up from 2.6 million fraud reports and $12 billion in losses in 2024.

Meanwhile, Claire O’Donnell, Amazon’s vice president of selling partner trust and store integrity, discussed with PYMNTS in April the company’s efforts to keep fraudulent merchants away from its marketplace, as outlined in its first “Trustworthy Shopping Experience” report.

“A key cornerstone … is how do we get more proactive,” so Amazon can spot issues with sellers or products ahead of time and prevent them from reaching shoppers, she said.