The “Address Verification System,” also known by its acronym “AVS,” is a credit card processing security system designed to prevent thieves from pretending to be legitimate card holders. Without AVS, thieves can rack up huge bills on cards and/or make fraudulent chargeback requests. With AVS, most thieves are never able to do more than attempt to make a purchase.
How Does It Work?
When a customer uses a credit card or a debit card like a credit card to pay for a purchase in a card-not-present scenario, such as when someone makes a purchase over the phone or online, the security system requires that the merchant input the customer’s billing address. Once the information is inputted into his credit card processing system, it’s then transmitted to the customer’s bank where it’s compared to the address on file.
AVS Security Outcomes
If the address on file matches, the bank authorizes the transaction. If the address on file doesn’t match, the bank declines the authorization.
AVS Loophole Issues
The Address Verification System is not perfect. Many hackers around the world are capable of gathering enough identifying information about someone that they can accurately provide the correct billing information when asked to confirm it. Additionally, some credit card processing companies permit merchants to bypass this security system.
The best way a business owner can protect his merchant account from fraud is by using other security measures in addition to AVS, such as the CVV code verification: A merchant must confirm that a customer is actually in possession of the card during a card-not-present transaction by asking for this code.
Another AVS Problem
From time to time, the address on file doesn’t match the given address even though the customer is the legitimate cardholder. This happens several reasons: A bank representative miss-keyed something, the customer miss-typed something during an e-commerce transaction or the customer failed to update the bank after moving to a new address.
Since a single purchase can often result in future repeat sales, as well as positive social feedback about a merchant’s business, it’s critical for a merchant to try to work with the customer to fix the problem. If the bank has the wrong information, for example, a merchant might perform a three-way call with the customer and the bank and agree to wait until the bank updates the error to try the transaction again using his merchant account.