Address Verification Service (AVS) is one of the most used methods to prevent fraud in card payments. This method checks the given address of a credit card against the bank’s address on file. If the address doesn’t match, the fraudulent transaction is stopped before it can go through. Credit card processors and banks provide this service to merchants to ensure that all the credit card transactions are genuinely being done by the person who owns the card.
Understanding Address Verification
If used effectively, the Address Verification System prevents fraud and chargeback. It’s also used to avoid card-not-stop fraud. AVS works when during the checkout process, the customer enters the address. This address is then compared with the issuing bank. The bank returns a code to the merchant. The code decides whether the transaction is approved or declined.
The tool was designed by Mastercard and has since been adopted by other companies. Once the buyer has submitted their address, the processor sends the information. The processor compares the address’s numeric values, such as its street address, box number, zip code, and so on.
Six conditions generate a response code: full match, partial match, no match, match-address, match-zip code, data unavailable, or international address. This process takes a few seconds and is entirely seamless.
If the response codes match, the authorization process moves along. If the response codes don’t match, then the transaction is flagged.
AVS works best when utilized as a part of a multilayered security system. It adds an extra layer of security for both the customer and the merchant.
For example, Amazon’s payment gateway transmits your address data to the credit card brand. The brand sends the information to the issuing bank. The bank compares the address with the address stored on file. It then sends an authorization status and response code to Amazon’s payment gateway.
How It Helps Prevent Fraud
AVS helps prevent fraud by countering card-not-present fraud and chargebacks. Additionally, it serves as a protective measure for people whose credit cards got stolen. It also helps prevent fraud by weeding out fake credit cards made by scammers.
When a customer disputes an item on their account statement successfully, they’re charged back the amount they paid for that item. Chargeback fraud, also known as friendly fraud, occurs when a customer makes an online shopping purchase and then requests a chargeback after receiving the purchased goods. The customer gets their money and keeps the product.
AVS prevents this by preventing the chargeback from being filed in the first place. In most cases of friendly fraud, the address given by the customer doesn’t match the one in the bank’s database.
Similarly, in card-not-present fraud, the credit card isn’t physically presented to the merchant during the transaction. These transactions usually take place over the phone or the internet. If a criminal obtains a cardholder’s data through phishing, they can use that information to buy from the card. However, AVS prevents this from happening as the criminal posing as the customer must give their address during the transaction. Then it is compared, and the transaction is declined.
Lastly, people who use fake credit cards to shop through Amazon often provide generic and computer-generated addresses. AVS can point out that these addresses are fake and stop the transaction.
AVS adds an extra layer of protection for merchants and customers alike when used in a multilayered capacity. It can stop chargeback fraud and card-not-present fraud very effectively through response codes generated by the issuing bank that is sent to the merchants. By verifying the address, AVS ensures that the right person is using the card (as opposed to a criminal) and ensures that all transactions are seamless and secure.
The primary benefit of AVS is that it takes no more than a few seconds to verify a transaction. Moreover, it lends credibility to both customers and the merchants when performing a transaction. AVS provides a foolproof security protocol paired with other protective measures such as CVV validation codes, IP address verification, and biometric analysis.