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How Does Address Verification Work?

How Does Address Verification Work

Address verification is a process that checks the accuracy of location data. It is used across many industries like eCommerce, gaming, financial services, healthcare, education, insurance, banking, and logistics. The process takes place through software or an address verification service that compares the accuracy of information across multiple systems.

What is Address Verification?

Address verification ensures that the collected address data is accurate, up to date, and standardized. Solutions and services that offer address verification correct spellings provide the proper formatting and append missing ZIP+4 information. They also work in real-time. 

Address verification takes advantage of existing databases that have demographic and geographical data. The process requires comparing a user-inputted address to a standard database to verify accuracy and completeness.

Sometimes, an eCommerce company may use an address verification API to auto-complete form fields. An insurance company might use an API to research policy quotes for a specific area.

Address Verification Services are also used for this purpose. They are tools that credit card processors provide to prevent fraud. The AVS checks the billing address against the billing address on record. The authentication occurs when the credit card processor sends a response code to the merchant indicating authenticity. 

What Steps are Involved in Authentication?

Address verification can be done in many ways. Some popular methods are called: 

  • Fuzzy Matching — Fuzzy Matching takes the general address, detects any spelling mistakes or missing information, and then fills those gaps to create a more accurate result. 
  • Geocoding and Reverse Geocoding — Geocoding is used for data visualization, identifying locations, and providing insights about locations. It’s used in address verification very commonly. 
  • Address Standardization — Through standardization, merchants and issuing banks can compare their address data without problems arising from misspelling, missing information, and wrong formats. 

When it comes to Address Verification Services, the steps involved in authentication are as follows: 

  • The cardholder performs a transaction. 
  • This causes the AVS to check the billing address provided by the card user. 
  • The address is sent to the issuing bank.
  • The address is cross-referenced.
  • If the addresses are the same, the bank sends an AVS code letting the merchant know that the addresses are valid. 
  • The transaction moves forward successfully. 
  • If the addresses do not match, the bank sends a different AVS code.
  • The transaction is denied in this case. 

Why is Address Verification Needed?

Address verification is a huge challenge faced by organizations. It is essential in the following use cases:

  • Enhancing customer records with accurate information
  • Establishing a line of communication with shipping carriers to anticipate shipping delays
  • Ensuring compliance with ID verification processes
  • Mapping distance between two locations
  • Verifying an address for accuracy in real-time
  • Making it easy for customers to check out by auto-completing forms

It’s crucial for organizations that have transactions with global customers.

How Do AVS Codes Work

 AVS response codes are single-letter codes returned to a merchant during the authorization process. They help determine the following action: approval, exception, or declination. The issuing bank sends the code after it has compared the address. Suppose that the address is verified, then the issuer would send a code to let the transaction continue. If it is not verified, the transaction will be rejected. 

Examples of Address Verification Service 

A typical example can be Amazon’s payment gateway which transmits address data to the customer’s credit card brand. The credit card then sends the information to the issuing bank. The issuer compares both addresses then sends the authorization status and response code to Amazon’s payment gateway. This process is invisible to the customer and takes just a few seconds. 

Key Takeaways

AVS is very effective in comparing address data. Still, one must understand that it should be used along with other security procedures such as a multilayered fraud protection system for it to be truly effective. It works best when it is a part of such a system. On its own, the AVS will not be a guaranteed fraud prevention solution. A payment gateway that uses AVS should also use additional measures such as CVV validation codes, IP address verification, 3D security, biometric analysis, and device authentication.

Austin Proctor

Austin Proctor

Technical Writing Manager @ BatchData

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