Payment networks such as Visa and Mastercard have set up automated services to prevent unauthorized credit card transactions. An address verification service, or AVS, allows you to automatically block purchases that are more likely to be fraudulent while authorizing purchases that are lower risk. The AVS check involves a partnership between the payment network, your payment processor, and your customer’s bank. All of these financial services cooperate to verify the identities of customers who shop at your store.
An AVS Check Compares Your Customer’s Billing Addresses
This is how an AVS check works. First, the payment processor sends the verification request to the AVS. Then, the AVS sends the billing address provided by the buyer to the bank that issued the buyer’s credit card. The bank then compares this address to the billing address for the credit card account holder. It then sends back a code to the merchant describing the results of the comparison process. For example, the bank might report a full match, a partial match, or no match. It might also report that its systems are down and it couldn’t make the comparison.
Even if both billing addresses are the same, the verification process can be complex. For example, there may be several ways to write down a street address. Terms like avenue and boulevard are often shortened to “ave” and “blvd”, respectively. First floor and 1st floor mean the same thing but don’t match either. And although many apps will accept five-digit zip codes, some services use the longer nine-digit zip codes instead. Both types of zip codes are valid and are commonly used, but they may cause an AVS to report a partial match instead of a full match.
Rules for Screening Transactions
You can set up rules with a payment processing app to automatically screen transactions based on the results you get back from the AVS check. For example, you could approve transactions when the AVS reports a full match or a partial match and reject transactions when the AVS reports no match. The verification process happens in real time, so your customers won’t have to wait while the AVS processes the identity check.
The AVS check compares the customer’s billing addresses. It doesn’t check the shipping address, which might be different from the billing address. This situation often occurs when a customer is buying a gift for a recipient who lives at a different address. But a thief with a stolen credit card may also use a shipping address that’s different from the billing address on the card. So you may want to consider using additional transaction screening rules in addition to the AVS check.
AVS Checks and Merchant Liability
One reason why payment card networks created address verification services is that they’re trying to prevent chargeback fraud. An AVS makes it easier for you to reject transactions that are more likely to result in chargebacks. You can decide whether you want to use an AVS and how strict you want the AVS rules to be. If you’re operating a high-risk business, you may want to set up stricter AVS rules.
Ultimately, it’s your decision to approve a purchase. And if the credit card holder claims that the transaction was fraudulent, the holder may ask the bank for a chargeback. If the bank approves the chargeback, you will lose money. To defend yourself against a chargeback claim, you need to be able to argue that you attempted to verify the transaction, and using an AVS is a common way to do this.
But using an AVS is not always enough to prevent a chargeback. For example, even if the billing addresses match, the customer might still claim that the transaction was fraudulent. This can happen in cases of friendly fraud, which occurs when the customer asks for a chargeback on a purchase that the customer doesn’t remember. So you might want to use a payment processor that uses additional identity verification services, such as biometrics, to help you build a stronger case against chargebacks.
An AVS Check Helps But May Not Be Enough
An address verification service is a useful tool for preventing fraud, but it may not be enough by itself. You could lose business unnecessarily if you apply strict verification rules. On the other hand, you might still lose a chargeback dispute even if you use an AVS, although an AVS makes this less likely to happen. It’s still worthwhile to use an AVS because it does improve your security and you can still decide which transactions to approve. But you might also want to use a payment processor that has additional identity verification software.