Will the Mastercard and Coinbase Partnership Make Chargebacks Easier or More Complex?

By Michael B. Cohen
Vice President of Global Operations

One reason people choose cryptocurrencies is to get around the red tape of banking regulations and fees. To benefit from the cryptocurrency boom, however, many consumers feel they are entering a virtual Wild Wild West without a sheriff. 

Credit cards like Mastercard, for instance, represent safety to their customers because of transparency and the existence of a chargeback process for unauthorized transactions and merchant disputes. 

So where is the middle ground between cryptocurrency and credit cards? New deals between conventional financial services, such as banks and credit cards, and cryptocurrency exchanges, such as Coinbase, are marrying these two worlds. But will these deals solve problems or create new ones?

The NFT Deal Between Mastercard and Coinbase? What It’s All About

Mastercard is seeking to build bridges with innovative financial companies and platforms such as Coinbase. Just as hot as cryptocurrencies are NFTs, or non-fungible tokens, which make it easy for creators to own, sell and share their work. 

NFTs are likely to be the new phase of content, and smart corporations want to get into the trend early. Therefore, Mastercard has teamed up with Coinbase so its customers can purchase these NFTs with credit cards and debit cards. 

Up till now, Coinbase and other platforms have required customers to purchase a crypto wallet first and then buy NFTs. However, Mastercard wants to give its customers a way to purchase these NFTs directly without having to get a crypto wallet or acquire  cryptocurrency first. 

Mastercard’s Raj Dhamodharan emphasized the increased security and flexibility with this deal and said, according to CNBC, “Getting more people involved safely and securely is perhaps the best way to help the NFT market thrive. As it does, Mastercard sees even greater potential for NFTs’ underlying tech to go beyond art and collectibles into many more areas.” 

On its website, Coinbase summarized the deal with Mastercard as another step in increasing freedom in its financial services. “Coinbase wants to simplify the user experience to allow more people to join the NFTs community,” Coinbase states. “Just as we helped millions of people access bitcoin for the first time in an easy and trusted way, we want to do the same for NFTs.”

What Are the Benefits of This Deal?

The deal should provide several benefits to Mastercard, Coinbase, and their customers. It also bodes well for cooperation between cryptocurrency platforms and traditional financial institutions to expand options while keeping transactions secure. 

Mastercard will provide its customers’ exposure to the NFT market. It no longer needs to face losing customers because a crypto exchange will allow the purchase of NFTs. That way, it can retain its cardholders and offer blockchain-based assets without sacrificing customer security. 

Coinbase will be able to open up the market on NFT to those who may still be reticent about cryptocurrencies or may simply prefer to make credit card transactions. Plenty of people have been discouraged from buying NFTs because they do not necessarily want to get a cryptocurrency wallet first. Now, they can stick to their preferred payment method and still buy non-fungible tokens. 

Also, when Mastercard’s customers become familiar with the blockchain and Coinbase’s products, they may be more likely to make the switch to cryptocurrency. This may pose some risk for Mastercard and other credit card companies, but traditional finance stands to lose much more by sitting out the blockchain revolution than joining in. 

Could Credit Card and Crypto Collaboration Complicate Fund Recovery or Make It Easier? 

The connection between cryptocurrencies and credit cards can be a complicated one, particularly regarding chargebacks and tracking down funds on the blockchain. 

If there is a dispute with the merchant, an unauthorized purchase, or if the customer is not satisfied with the purchase, a third party will be required to handle their complaint. 

In the case of credit cards, this is done through a chargeback claim, which is submitted by the customer to the bank that issued the credit card after attempting without success to resolve the issue with the merchant or broker. Each side presents their arguments and evidence backing it up and the issuing bank will determine whether or not the charges will be reversed. 

However, when someone uses a credit or debit card to purchase cryptocurrency and the money is exchanged into crypto, tracking down and recovering funds can be more complicated.

Even when NFTs are purchased by credit card as a result of the recent deal inked by Mastercard and Coinbase, the process may not necessarily be straightforward even if the money stays in fiat currency. In that case, it is easier to deal with in some ways than if it were converted to bitcoin or another type of digital currency, but the issuing bank will be judging a dispute between an individual customer and Coinbase, a lucrative platform. 

These two distinct problems – fund recovery when a credit card was used to purchase cryptocurrency and chargebacks involving fiat currency but which involve a conflict of interest between the issuing bank and the merchant – may be difficult to predict or to solve, particularly for individuals.

Sometimes a broker or a merchant will convert customer funds from credit cards into cryptocurrencies without the customer being aware of it. They may do this simply because they find it easier to deal with bitcoin. 

Once the money is in crypto form, then a chargeback is not so simple. Reversing charges when the money has been converted may not be possible, but the merchant will have to be persuaded or forced to give a refund. 

In the second scenario, the customer might want a refund for an NFT they purchased on Coinbase with a Mastercard credit card. Since the money was not converted into crypto, this would seem to be a straightforward chargeback dispute. However, the issuing bank is partnered with the customer’s adversary. One would expect the issuing bank to be fair, but this means providing a persuasive claim and evidence to back it up. 

That is why you need MyChargeBack experts to put your chargeback claim in the best light and to increase your chances of fund recovery success. 

Contact MyChargeBack Professionals for Fund Recovery Assistance Today!

If you are involved in a broker dispute, need to make a chargeback claim, or have lost money to a cryptocurrency scheme, talk to us right away. Consult with MyChargeBack experts and get started with your fund recovery claim. We have extensive knowledge and working relationships with law enforcement agencies and regulators, as well as the dynamics of crypto recovery, and can improve your prospects of getting your cryptocurrency back.