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Fraud Prevention Guide: Address Verification Service (AVS)

If your business regularly collects credit card information, it’s important to have rules in place to help reduce fraud and protect your loyal customers. This guide discusses an easy tool to enable: AVS.


What is AVS?

Address Verification Service (AVS) is one of the easiest ways to reduce fraud and chargebacks. It’s easy to enable with your payment processor and layer onto your digital credit card authorization process to make card-not-present (CNP) transactions more secure.

AVS will compare the billing address used in a credit card transaction against the cardholder’s billing address that’s on file with their issuing bank. You’ll then receive a response code indicating how closely the addresses match. The provided address with either return as a match, partial match, or not match.

After your customer submits their payment information and address, the following authentication steps happen behind the scenes:

  1. Your payment gateway transmits this address data to the customer’s credit card network(Visa, MasterCard, American Express, or Discover.
  2. The credit card network sends this information to the issuer.
  3. The issuer compares the address with the cardholder address on file.
  4. The issuer 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.

You'll receive a letter response which corresponds to how closely the address used matches the address on file. These codes can help you determine whether to accept or decline a transaction.

  • A&W (Partial Match): Either the street addresses or zip codes don’t match.
  • N (No Match): Neither the street addresses or the zip codes match.
  • X&Y (Full Match): Both the street addresses and zip codes match what the bank has on file.
  • R (Retry): System is unavailable. Please run it again.

How do I use AVS?

Not every “partial match” or “no match” is due to fraud, so use the codes along with your own discretion when accepting a payment. While automatically rejecting risky transactions will likely result in less fraud, the likelihood of lost revenue and business is far greater.

Common explanations for error codes other than fraud:

  1. A buyer who has multiple credit cards and doesn’t remember which address is associated with which card.
  2. A family member uses someone else's credit card but accidentally enters their personal address.
  3. Someone recently moved and their old address is still listed as their billing address but they enter their new address.
  4. While your customer provides a complete address, only the numeric portion, typically the house number and postal code, of the address is verified. Sometimes the system confuses an apartment or suite number.

  1. Instead of immediately declining a payment, set up a rule to alert your customer of the address mismatch and let them try again (but limit the number of retries they’re allowed).
  2. Be prepared to reach out to the customer directly after multiple failed attempts.
  3. Have an automated email response set up to verify their identity and finances.
  4. While you shouldn’t automatically reject a no match response, it’s important to keep in mind that the risk of fraud goes up without an AVS match, and typically, so does the card’s processing fee.

There are still ways for fraudsters to get around AVS. Keep in mind:

  1. If the fraudster has access to the address associated with the credit card, AVS won’t protect you.
  2. Many credit cards issued outside of the U.S., Canada, and the U.K. don’t support AVS.
  3. You may still be liable for chargebacks if you can’t prove you have prevent fraud measures in place in addition to AVS.
  4. Since AVS only looks at numeric values, entries like “5th Street” could confuse the system.
  5. Pre-paid cards will almost always fail an AVS check.
  6. AVS can work against you as much as it works for you. Allowing automatic declines based on the banks response can lead to significant revenue loss.

In the end, AVS can only help reduce the risk of fraud, but it’s by no means a comprehensive solution, nor should it be the only method of fraud prevention you rely on to protect you and your customers. It can often be difficult to determine which technique will be best in deterring fraud, so the more layers of defense you have, the better.

For additional insights, check out our Fraud & Chargebacks Prevention Guide.

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