Credit card fraud prevention is a hot topic for merchants–and for everyone else working in the payment processing industry. Fraudulent transactions can mean lost profits for everyone involved. Fortunately, merchants can protect themselves in a variety of ways. One way merchants within the United States can protect their business is by using the Address Verification System, or AVS, which most acquiring banks support.
The idea behind AVS is simple. When a consumer enters their credit card billing address and shipping address through your payment page, the Address Verification System compares the two addresses and provides information regarding how much the two match. In its essential form, AVS returns a single-character code when a consumer submits a transaction. The following are some examples of AVS codes:
| Code | Message |
|---|---|
| A | Address matches, zip code does not |
| E | Data not available/error |
| N | Address and zip code do not match |
| X | Exact match, address and 9-digit zip code |
In this basic form, the Address Verification System cannot approve or decline transactions. However, merchants can use it with a pre-authorize/capture system to pre-screen orders before committing to the sale. For merchants who process one-pass sales transactions, they can choose to refund an order that looks suspicious–a reverse transaction much more preferable than a chargeback. Some payment gateways and third-party services offer more AVS functionality than others do, including being able to flag or automatically void transactions returned with certain codes.
Shipping Address vs. Billing Address
Since AVS tries to match the billing address with the shipping address, it’s important to distinguish between the billing address and shipping address on your website. Although the two addresses may be the same for most customers, simply asking for one address may result in false non-matches. Like any system, AVS may not be able to return any useful information on occasion. However, the detailed information the codes provide will give you a better idea as to whether you might want to review the other transaction information, and possibly avoid a fraudulent transaction and chargeback.
If the Address Verification System is available to you, I suggest that you take advantage of what it can do for your business. AVS codes can help you determine the risk of continuing with a customer’s order and will essentially save you money by preventing chargebacks.
