Use address verification to safely accept payments online
Forty-two percent of merchants who support online channels are reporting an increase in fraud. All merchants operating in the ecommerce space have a responsibility to help reduce the threat of fraud for the sake of their customers and their own business. One important tool for minimizing fraudulent transactions is the Address Verification Service (AVS). Let’s take a closer look.
How AVS works
AVS verifies the cardholder’s billing address with the card issuer. AVS uses two pieces of extra information in the authorization request you send to your payment processor: the numeric portion of the cardholder’s address and the ZIP code. Your payment processor compares this information against information at the cardholder’s issuing bank, along with other factors (card number, expiration date, etc.)
Why AVS is important
A positive AVS response is one way to remedy many “Unauthorized Use” and “Non-Receipt of Merchandise” chargebacks. Without a positive AVS response, card-not-present merchants have no dispute rights. Additionally, VISA® transactions using AVS are given a better interchange rate than those that do not, even if the AVS fails.
How to use AVS
AVS applies to payments using VISA, MasterCard®, American Express®, and Discover® cards. A merchant using AVS should follow these steps:*
- Ask the customer for the billing address as it appears on his/her monthly statement.
- Submit the required alpha/numeric portions of the address with the authorization request.
- Research all AVS partial matches. A “partial match” indicates that the billing address being compared has the same ZIP code or the same numeric values in the street address, but not both. A “no match” response indicates that neither part of the billing address matches your data.
- Evaluate AVS “no match” responses carefully, as they are typically a strong indicator of fraud. Because not all AVS “no match” responses necessarily indicate fraud, it is a signal that the merchant must take further steps to authenticate the order.
- A “no match” response does not automatically result in the authorization being declined.
What to do with the results
Here are some common AVS messages, and suggestions about how to handle them.
“ZIP does not match, address matches” or “ZIP code (5 or 9 digit) matches, address does not match”
Establish a dollar threshold that puts these orders in an AVS Hold report for special processing. Look for these suspicious attributes:
- Larger than normal orders
- Several units of the same item
- Overnight shipping
- Orders shipped to an address other than the billing address
“Neither ZIP nor address match”
This is a strong indicator of fraud, but an AVS failure may be legitimate. For example, a customer has recently moved but has not yet notified their bank. You should follow-up by:*
- Calling the customer to verify their telephone number, billing address, and home address.
- Contacting the cardholder’s issuer to determine whether the name, address, and telephone number match those in the issuer’s file.
- Using directory assistance or internet search tools to contact the individual at the billing address and confirm that he or she initiated the transaction
“AVS Service not supported by issuer”
This is a typical response to an international order, which AVS does not support. One solution is to fax a credit card slip to the consumer, requesting a faxed signature to verify the order. This may not be the most cost-effective means for all international orders, so a dollar threshold should be established to determine which orders must be validated.
AVS plays a very important role in minimizing fraudulent transactions for card-not-present transactions, but is not foolproof. It should be combined with your internal and external fraud detection tools such as CVV2, CVC2, CID, “Verified by Visa®”, and “SecureCard.” For more information about AVS and other best practices for accepting payments online, contact us.