Securecode, which is being offered to banks and online retailers, uses public key technology to authenticate the identity of the card holder.
The system, based on technology supplied by Baltimore, compares an encrypted Pin code typed in by the card holder against a central database held by MasterCard.
Baltimore said the system would mean that significantly fewer online retailers would be forced to pay for goods ordered by fraudsters.
Up to 84% of all e-commerce chargebacks occur because the cardholder denies making the transaction, MasterCard said.
"Securecode shifts liability away form the merchant. They are not going to be caught by chargebacks," said Baltimore's senior vice president of global marketing, Elaine Treacy.