Address Verification Service

What Is Address Verification Systems &
Address Verification Services (AVS)?

Merchants who accept credit cards in a store, over the phone, through the Mail or Internet risk a certain degree of credit card fraud. Unfortunately, there is nothing new about stolen credit cards, stolen card numbers, fraudulent transactions, fake cards and numbers, etc. Mechanisms have evolved to protect mail order/telephone order and internet merchants that need to deal with "card not present" transactions.

The Address Verification System (AVS) provided as part of the standard "card-swipe" process and, more recently, embedded holograms, and on-card photos have all been deployed overtime to help manage physical world credit card fraud. The Internet, however, introduces a whole new level of risk.

On the anonymous Internet, it's too easy for someone to hide behind an assumed or stolen identity. There are no photo ID's or signatures as of yet, and no one guilty looks nervous or twitches to give away a would-be crook.

Numerous characteristics of each transaction, including such variables as name, billing address, zip code, and shipping address are verified against the V/MC billing information of the cardholder when using AVS.

As any merchant can attest, the brazenness of thieves intensifies when the face-to-face element is removed. You can be dealing with anyone. In addition, AVS does not apply to international orders, due to language differences, which for many Web businesses constitutes a large percentage of the transaction volume.

AVS will verify if the address given by the cardholder actually matches their billing address when they applied for the credit card. When these don't match this sends a flag to the merchant to implement more safeguards to ensure they aren't being ripped off.

Who loses? No matter who perpetrates credit card fraud, the big loser is the merchant, followed closely by the bank and then us. While consumers are provided with a certain degree of protection if their credit card numbers are stolen and misused, Internet merchants are fully liable for all transactions because Internet transactions are classified as "card-not-present." As a result, each fraudulent credit card transaction usually results in a chargeback. A chargeback is a forced refund to the customer via the merchants bank account. Merchants new to the Internet often start by accepting fraud and the resulting chargebacks as part of the price of doing business. They regret this after being terminated by their bank for numerous chargebacks.

Credit card associations penalize merchant banks for chargebacks. Naturally, the bank passes the fines on to the responsible merchant, and these penalties can be severe. Therefore, performing AVS on all transactions greatly reduces a merchant's exposure to risk.

How Does Address Verification System &
Address Verification Service Work?

When you manually enter a sale into your credit card terminal or your PC software program it will prompt for the customer's address and zip code. You will key enter the street number (example - 123 if the address is 123 Main Street and then the five or nine digit zip code). The terminal will dial out for an approval and the zip code and numeric billing address will be compared with the physical address to which a cardholders MasterCard or Visa is registered. Once this information is verified, the merchant will receive a response to the AVS request as to the validity of the address. The AVS code will be displayed on your terminal display screen and an AVS code or message indicator will also appear on the customer's receipt if you have an electronic printer attached to your credit card machine.

The address verification system response codes and their definitions are as follows:

Warning to Merchants

The transaction may be approved even if the address verification information does not match! The merchant will need to check all AVS responses to find out if the address is good. THE TRANSACTION WILL NOT BE DECLINED BECAUSE THE AVS INFORMATION DOES NOT MATCH. The merchant will NOT be penalized if any of the AVS information is incorrect. The merchant does face a greater chance of chargebacks if he decides to accept the sale on a questionable match.

AVS is designed to give the merchant additional information to raise the comfort level of the merchant prior to shipping product when taking credit card orders over the phone or through the mail. It's used as extra protection when accepting a purchase in-person when the magnetic stripe of the card is unreadable. Merchants who do not perform Address Verification are charged a higher discount rate on those particular transactions and will see it broken out separately on their merchant statement. All processors charge more for manually keyed transactions without Address Verification Services.

It is very important to remember that whenever you swipe a card through the credit card terminal and the magnetic stripe is unreadable that you MUST manually imprint the customer's card with a manual imprinter and have the customer sign the manual sales draft, otherwise you automatically lose your chargeback rights if there is a customer dispute or retrieval request. The only exception is for lodging transactions and in this case a signature on the guest registration card is usually sufficient as an address verification system and no address verification service may be necessary.