An online shopper enters their billing address during checkout, which is then compared to the address registered on file for the cardholder at their credit card company. Mismatches are a common indicator of fraud and help merchants weed out potentially fraudulent transactions from their order queue. But how does this system work, and what do the various AVS codes mean?
AVS, or Address Verification Service, is a fraud-prevention tool used by credit card processing companies to reduce the number of chargebacks they have to process. It’s commonly used in ecommerce and other card-not-present (CNP) transactions where there are fewer alternative ways to verify the identity of the person paying for the purchase.
When a shopper enters their billing information during an AVS check, the processor pings the issuing bank with the details. The bank then responds with a code indicating how well the billing information matches up, and the merchant can use this to determine their next course of action.
AVS responses will typically indicate a full match (Y), partial match (X), international match (IAVS) or no match at all (N). In addition to being an effective fraud prevention tool, AVS is also required for qualified interchange rates.
However, it’s important to remember that not all AVS mismatches are fraud. Depending on the reason for the mismatch, and combined with other verification methods like signature upon delivery, you may be able to successfully defend against a friendly fraud chargeback.
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