The address verification service or commonly called AVS is a service that’s provided by credit card processors. Issuing banks also offer these to detect suspicious credit card transactions and get rid of card fraud. The AVS checks the billing address that the user has provided with the address mentioned on the card account. This is done as a part of the merchant’s request for credit card authorization. The credit card processor sends a response code back to the merchant after indicating the degree of address matching. Thus verifying ownership of a credit or debit card transaction that doesn’t have a person in front of you. This process helps the payment merchant understand if the card transaction should be allowed to go through.
AVS is one of the most commonly used tools in the industry, and it prevents credit card fraud. Unfortunately, it’s not the perfect solution to end the card, not present fraud. This is because the billing address provided by a customer may not match the address that’s available on banking records.
The reason behind this mismatch can be that the cardholder has recently moved, or maybe the address was incorrect since the beginning. In the cases where addresses don’t match, the merchant has to take the risk of rejecting a legit transaction or allowing a fraudster to come through.
AVS is undoubtedly one of the most important parts of the credit card verification process. Merchants from the United States, Canada, and the UK rely on AVS. Without AVS, it may become tough for financial institutions and businesses to onboard customers. Fraudsters can use fake documents and data to trick the onboarding process.
Understanding Address Verification Service (AVS)
The Address Verification Service (AVS) is a card fraud prevention service that when used effectively can prevent or limit chargeback frauds. AVS works to verify the billing address provided by the customer is the same as a cardholder. AVS is used by all the major card companies to prevent card-not-present fraud.
During the checkout process, the customer has to enter their address, which is then compared to the address available on bank records. Once the address is verified, the issuing bank returns an AVS code to the merchant. Merchants can use this AVS code as a guide to figure out how to proceed with this payment.
AVS response codes are single-letter codes that are sent to the merchant during the authorization process relying on their processing platform. These codes help in determining the next action, this leads to transaction approval, exception, or decline. Without AVS verification, financial institutions may end up allowing fraudsters into their systems. Merchants may end up approving fraudulent transactions.
Common Examples of Address Verification Services (AVS)
Let’s take the example of a customer shopping from Amazon. Whenever the customer enters their billing address, a process in the background happens:
- Amazon’s payment gateway shares the address data with the customer’s credit card brand.
- The credit card brand then forwards this information to the issuing bank. The issuer compares the address that’s stored on the customer’s banking file.
- The issuer then sends the authorization status and associated AVS response code to Amazon’s payment gateway.
If the address on the file does not match the billing address filed by the customer, the AVS code will show a mismatch between the two addresses and the transaction may be declined. If the two addresses match, the AVS response code will indicate this and the transaction can be authorized. The proper AVS process generally takes only a couple of seconds, and it happens completely in the background. This reduces time in customer verification, and it helps in speeding up the payment process.
Things to Know About AVS
It’s important to understand that AVS is not a full-proof fraud prevention solution. It is the next best solution when it comes to fraud prevention. Moreover, sometimes the system will generate false declines or partial declines even for the legit customers. A partial decline may require the merchant to use additional validation methods before you complete the transaction.
A payment gateway or other payment solution should use AVS in conjunction with other fraud detection mechanisms. These additional methods of security include CVV verification codes, IP address verification, 3D Secure, biometric analysis, and device authentication.