Price Matching Fraud and Chargebacks
Table of Contents
- What Is Price Matching?
- How Does Price Matching Lead to Disputes?
- What Does Price Matching Fraud Look Like?
- What about Price Protection from Card Issuers?
- How Can Merchants Prevent Price Matching Chargebacks?
- The Bottom Line on Price Matching
- What's the Point of Price Matching?
- Why Did Walmart Stop Price Matching?
Competition is always fierce in the world of retail, and consumers have more choices than ever when it comes to finding a merchant who delivers the products they want at the best possible prices. There’s always a risk that some other store will steal away your customers by undercutting your prices, and that’s why many merchants offer price matching guarantees.
Price matching helps you retain your loyal customers, but it can also introduce complications that can lead to fraud and transaction disputes. Should merchants offer price matching, and if so, how can they offer these guarantees to their customers while protecting themselves from scammers and chargebacks?
What Is Price Matching?
Price matching has been around for a long time, and the concept is simple and appealing: If a customer finds one of your products advertised for sale at a lower price than you’re offering, you will sell it to them for that lower price. Many merchants extend this offer for some time after the purchase has been made, and will refund the difference if the customer finds a lower price after the fact.
Most customers value price over anything else when it comes to deciding where to make a purchase. While there are other factors, such as distance or shipping time, when customers are looking to make a specific planned purchase, price is king.
Price matching, however, eliminates price as a factor entirely. With that out of the way, customer decisions are more likely to be based on who’s local to them, or the merchant who offers the best customer service, or shares their values. It’s a mutually beneficial arrangement for both merchants and consumers, but any time there’s a deviation from the standard transaction process, there’s a chance that things might go off the rails.
Fraudsters are always on the lookout for the latest ways to scam merchants out of their products or revenue, and tips and tricks for committing fraud are often shared online, meaning any new ideas that prove effective can become widespread very quickly. In addition, legitimate customers may file chargebacks when they're confused or disappointed, and anything that alters the way a transaction works can sometimes lead to confusion and unrealistic expectations.
In order to mitigate the downsides of price matching, it's important to understand exactly how these guarantees can lead to negative outcomes for a merchant. You should also try to learn what you can do to prevent fraud, communicate clearly to customers, and manage expectations.
How Does Price Matching Lead to Disputes?
Even merchants who don’t offer price matching to their customers may find that it’s a factor in some of their chargebacks. There is no legitimate basis to ask for a chargeback because the price of the item went down after the transaction was completed, but that doesn’t stop some customers from trying.
These customers may resort to “friendly fraud” when they’re on the phone with their bank representative, and fabricate elements of their dispute claim in order to give it a legitimate chargeback basis.
Even customers who aren’t out to commit fraud might inadvertently provide misleading or confusing details, which may result in the issuing bank submitting a transaction inquiry to the merchant’s acquiring bank before deciding whether to escalate the dispute to a chargeback.
When acquirers pass along these transaction inquiries, merchants should always attempt to provide the requested information as promptly as they can. Usually, the merchant can avoid a chargeback by doing so.
What Does Price Matching Fraud Look Like?
Most price matching scams work by exploiting the merchant’s own price matching policy and using it to obtain expensive products for absurdly low price. One infamous example was when Walmart offered price matching against online retailers like Amazon. Fraudsters set up fake Amazon Marketplace shops offering expensive consumer electronics and other valuable goods at dirt cheap prices, then took those listings to Walmart stores to demand that they match the price. Some stores realized what was going on and refused, but many others dutifully carried out the policy.
The one upshot of these scams is that they rarely result in chargebacks—no card fraud is involved. The lesson here for merchants is to write these policies carefully and try to anticipate the loopholes that bad actors might try to exploit.
What about Price Protection from Card Issuers?
Price matching isn’t always the domain of the merchant. Some issuers offer price protection to their customers, which means they’ll refund the difference if a customer makes a purchase and finds the same goods for a lower price within a certain time-frame.
This kind of price protection is strictly between the cardholder and their issuer, and the merchant doesn’t get involved. However, card-based price protection plans can sow some confusion in consumers’ minds about which party is responsible for price matching. This can lead to the aforementioned inquiries that can turn into friendly fraud chargebacks.
How Can Merchants Prevent Price Matching Chargebacks?
An analysis of your chargeback data and customer feedback may be able to tell you if customers consider your prices to be high compared to those of your competitors, and whether or not that may be feeding into buyer’s remorse and transaction disputes. Unfortunately, it’s often the case that you won’t be able to tell whether price matching expectations were the impetus for a friendly fraud chargeback.
Any time you receive a chargeback based on false or inaccurate information, your best response is to fight the chargeback by representing the transaction along with compelling, documentary evidence that proves your version of events to be true.
To avoid falling prey to scams, merchants who do offer price matching guarantees should be very careful and deliberate about how the specific wording of the terms and conditions of the offer.
It’s a good idea to build in protections that will minimize revenue loss in an extreme scenario—for example, you could set a cap on the amount you are willing to refund, or exclude third-party sellers from your guarantee.
Not every merchant needs to offer price matching, but when customers approach you on an individual basis because they feel like they overpaid for something they could have bought for cheaper elsewhere, it’s always a good idea to find some way to leave them feeling satisfied about their purchase, whether that requires a refund, a credit on a future purchase, or some other concession. Not only does this avoid a possible chargeback, it builds trust and loyalty with the customer too.
Although issuing refunds and credit more generously can cost you some revenue, it's always worth doing for customer issues that are likely to turn into chargebacks. Once all the various costs associated with a chargeback are accounted for, it can often cost more than twice as much as the transaction amount, making refunds by far the cheaper option. In order to make sure you're not letting customer issues turn into chargebacks, you should always look for instances of a customer contacting your customer service and then later filing a chargeback. If this happens often, it's often indicative of a problem with your policies.
The Bottom Line on Price Matching
Consumers love it when their favorite merchant offers price matching, but you have to be careful that your price matching guarantee isn’t full of loopholes for fraudsters to walk through. Make sure to clearly communicate the rules, time-frames, and caps on your offer.
While the expectations around price matching may fuel some of the entitled sentiments that friendly fraudsters use to justify their actions, the best prevention methods remain indifferent to fraudsters’ motivations—the best thing to do with friendly fraud is to fight it vigorously.
What's the Point of Price Matching?
Why Did Walmart Stop Price Matching?