Simpler Smarter Savings

Any business which accepts credit and debit cards should use an address verification system during payment processing. Read on to learn why.

Many businesses accept what are called card-not-present transactions. These are transactions in which neither the cards nor the cardholders are present. An example of this would be a charge made over the phone. Card-not-present transactions have a higher rate of fraud than face to face transactions. The merchants accept financial liability for these transactions when they prove to be fraudulent. This means that the dollar amount of these transactions can be charged back to merchant accounts. These are called chargebacks. The additional costs of chargebacks to merchants include the costs of processing the transactions as well as the cost of the merchandise lost.

Billing addresses associated with credit and debit cards are very important in reducing the number of fraudulent card-not-present transactions because criminals using these cards don’t usually know the billing addresses associated with the cards. A card may be lost or stolen, or the card number may have been copied from a sales receipt. In either case, a business using an address verification system can stop a fraudulent transaction because the criminal doesn’t have the address affiliated with the card account.

An address verification system can do more for a business than reduce its number of chargebacks. It can also improve the business’s image with its customers. For example, say a loyal customer loses a charge card, and someone other than the cardholder attempts to use it. Use of the address verification system keeps the merchant from processing that transaction. The loyal customer is grateful, and maybe even more loyal than before.

In addition, address verification systems are fast. They allow merchants to process authorization requests in real time. They are also easy to use. All the merchant needs to do is enter the customer’s address and zip code. In a few seconds, the merchant has all the necessary information to make an informed decision regarding whether to accept the card or not.

The first address verification system was created in 1990 in response to requests from the direct marketing and airline industries. These industries needed a solution to fraudulent card-not-present transactions, such as catalog orders or purchasing tickets by mail. Since then, address verification systems have become an indispensable part of payment processing for most businesses. An address verification system should be seen as a must for any business that handles card-not-present transactions.