Chargebacks & Disputes FAQ

What is Address Verification Service (AVS)?

The Address Verification Service (AVS) is a fraud prevention system that, when used effectively, can help to limit fraud and chargebacks. AVS works to verify that the address entered by the customer is associated with the cardholder’s credit card account. AVS is a MasterCard service designed to stop CNP fraud; however, it is widely used by many major credit card companies.

During the checkout process, your customer enters their address which is then compared to the address on file with the issuing bank. Once the addresses are compared, the issuing bank returns an AVS code to the merchant. You can use this AVS code as a guide to determine how to proceed with the transaction.

Typically, AVS authentication is used as part of a multilayered fraud protection system to ensure that valid transactions are approved, and those deemed suspicious are declined.

AVS applies to cardholder addresses from the U.S., Canada, and the United Kingdom.

What are the steps involved in AVS authentication?

When your customer enters their address during checkout and clicks Submit, the following happens:

  1. Your payment gateway transmits this address data to the customer’s credit card brand (Visa, MasterCard, Discover, or American Express).
  2. The credit card brand then sends this information to the issuer. The issuer compares the address with the address stored on file.
  3. The issuer then sends an authorization status and associated AVS response code to your payment gateway.

This process takes only a few seconds and is invisible to your customers.

What is compared during the address verification?

It’s important to understand that while your customer provides their complete address for verification, only the numeric portion of the address is verified by the issuer. Typically, only the house number and ZIP/postal code are compared. This means there can be some confusion when a customer enters an address for an apartment or suite.

When the issuer can’t get an exact address match, it returns an AVS code that indicates how the address verification failed. For example, an AVS code of A indicates that the address matches but the ZIP code doesn’t match.

How do AVS codes work?

Just like chargeback reason codes, each credit card brand has its own system of interpreting the AVS code returned by the issuer. Additionally, there are instances when the AVS code does not apply to one credit card brand but does apply to another.

We suggest you review the documentation provided to you by your credit card company and issuer. As well, you can refer to this AVS code chart for quick reference, but it’s best to only rely on official credit card brand documentation.

Working with payment solution experts such as the Verifi team can ensure that your payment gateway is configured to respond to and manage AVS code responses. Using a customized rules engine, you’re able to specify which AVS codes are accepted and which AVS codes should trigger an additional confirmation step or force a declined transaction.

It’s important to remember that there is a fine line between being too aggressive with your AVS code rules engine and in not being aggressive enough. Working with payment and fraud experts, you can get guidance on how to best configure these rules to ensure that fraudulent transactions are stopped and legitimate purchases are approved.

Is there anything else I should be aware of about AVS?

Yes, it’s important to understand that AVS is not a guaranteed fraud prevention solution. Do not rely on only AVS to prevent fraud and chargebacks. Your payment gateway or other payment solution should be using AVS in conjunction with other fraud detection mechanisms, such as CVV, biometric analysis, IP address verification, 3D Secure, and device authentication.

If you sell globally, make sure your payment gateway is configured to manage and accept international AVS capabilities. Do not overlook this key aspect of your fraud prevention strategy. Remember that often CNP fraud occurs when a customer from an international address places a large one-time order for multiple items.

Don’t leave your fraud prevention strategy to chance. Relying on just AVS or just 3D Secure or just biometrics may not be enough. It’s important to implement a multilayered fraud prevention approach to protect your business and legitimate customers from the boom in omnichannel fraud. Contact us to learn more about the latest in fraud detection technology and how you can best protect your business.

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