Price Matching Fraud and Chargebacks
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. How can merchants offer price matching guarantees to their customers while protecting themselves from scammers and chargebacks?
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.
When customers don’t have to worry about finding the lowest possible price for the products they want, they can choose to patronize the merchant who’s local to them, or the one 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.
Customers get confused and suspicious when they see activity that looks unusual on their card statements, and fraudsters are always looking for new ways to scam merchants out of their revenue.
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 Wal-Mart 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 Wal-Mart 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 timeframe.
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.
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, timeframes, 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.