Address Verification Service (AVS) Definition

What is Address Verification Service (AVS)?

The Address Verification Service (AVS) is a tool provided by credit card processors and issuing banks to merchants to detect suspicious credit card transactions and prevent credit card fraud. AVS verifies the billing address submitted by the card user with the cardholder’s billing address on file with the issuing bank. This is done as part of the merchant’s request for authorization of the credit card transaction. The credit card processor returns a response code to the merchant indicating the degree of address match, thereby authenticating ownership of a credit or debit card in a remote transaction. This process helps the merchant determine whether a card transaction should be accepted or rejected.

AVS is one of the most common tools used by merchants to prevent credit card fraud. However, it is not a foolproof system, as the billing address provided by a customer in good faith may not always match the address on file with the card issuer. Reasons for such a mismatch would be a recent move of the cardholder or a check-in address that was incorrect on departure. In such cases, the merchant runs the risk of rejecting a perfectly legitimate transaction. The AVS is an important part of the credit card authentication process and applies to cardholder addresses in the United States, Canada, and United Kingdom.

Key points to remember

  • Address Verification Service (AVS) is a tool that allows merchants to detect suspicious credit card transactions and prevent credit card fraud.
  • AVS verifies that the billing address entered by the customer is the same as that associated with the cardholder’s credit card account.
  • AVS response codes are returned to the merchant during the authorization process and help the merchant determine the next action, which can be transaction approval, exception, or denial.
  • Payment gateways should use AVS in conjunction with other fraud detection methods, such as CVV validation codes, IP address verification, biometric scanning, and device authentication.

Understanding Address Verification Service (AVS)

The Address Verification Service (AVS) is a fraud prevention system which, when used effectively, can help limit fraud and chargebacks. AVS verifies that the billing address entered by the customer is the same as that associated with the cardholder’s credit card account. AVS is widely used by major credit card companies to stop card not present (CNP) fraud.

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

AVS response codes are single-letter codes that are returned to the merchant during the authorization process through their processing platform. These codes help determine the next action, which can be transaction approval, exception, or denial. Typically, AVS authentication is used as part of a fraud protection system to ensure that valid transactions are approved and those deemed suspicious are declined.

Example of Address Verification Service (AVS)

Imagine a customer is shopping online at Amazon.com. When the customer enters their billing address during checkout, this is what happens:

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

If the address provided by the client does not match the address registered by the issuer for this client, the AVS code will indicate the mismatch between the two addresses and the transaction may be refused. If the two addresses match, the AVS response code will indicate this and the transaction will be authorized. The whole AVS process usually only takes a few seconds and is invisible to customers.

Special Considerations

It is important to understand that AVS is not a guaranteed fraud prevention solution. Additionally, the system may on rare occasions generate false or partial denials. A partial decline may require the merchant to use additional validation methods before completing the transaction.

A payment gateway or other payment solution should use AVS in conjunction with other fraud detection mechanisms. Examples of these additional measures include CVV Validation CodesIP address verification, 3D Secure, biometric analysisand device authentication.

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