The Address Verification System (AVS) is a fraud prevention measure used by merchants and financial institutions to verify the accuracy of billing addresses provided during card-not-present transactions, such as online or telephone purchases. AVS helps detect suspicious transactions by comparing the address information provided by the customer with the billing address on file with the card issuer.
Here’s how the Address Verification System (AVS) works:
- Transaction initiation: When a customer makes a card-not-present transaction, they are required to provide their billing address along with other card details.
- Address verification request: The merchant sends the transaction details, including the billing address, to the acquiring bank or payment processor. The acquiring bank then submits an address verification request to the card issuer (the customer’s bank).
- Address matching: The card issuer compares the billing address provided by the customer with the address on file associated with the cardholder’s account. The address can include the numeric portion of the street address, the ZIP or postal code, or a combination of both.
- AVS response codes: The card issuer generates an AVS response code based on the comparison between the provided address and the address on file. The response code indicates the level of match and can vary depending on the issuer’s system. Common response codes include:
- Match: The provided address matches the billing address on file.
- Mismatch: The provided address does not match the billing address on file.
- Partial match: Some portion of the provided address matches the billing address on file.
- Unavailable: The issuer’s AVS system is unavailable or the issuer does not support AVS.
- Merchant action: Based on the AVS response code, the merchant can make an informed decision about the transaction. They may choose to proceed, request additional verification from the customer, or decline the transaction if there is a significant mismatch or suspicious activity.
It’s important to note that AVS is not foolproof and does not guarantee the legitimacy of a transaction. It is just one layer of fraud prevention and risk assessment used by merchants and financial institutions. AVS is particularly effective in preventing fraud involving stolen card numbers, as the fraudster may not have access to the cardholder’s accurate billing address.
Merchants can configure their payment systems to utilize AVS and set specific rules or thresholds based on the response codes to determine how they handle transactions. This allows them to customize their risk management strategies and reduce the likelihood of fraudulent transactions while maintaining a balance with customer convenience and satisfaction.
