What is Address Verification Service (AVS)
The address verification service (AVS) is a crucial tool for online merchants to validate customer identity and reduce fraudulent transactions and chargeback incidents. This system verifies the cardholder's billing address given at the point of sale against the bank's records.
For AVS to be an effective part of chargeback prevention, merchants must understand both what AVS can do and its limitations.
Understanding AVS Checks
An AVS check is employed to authenticate a customer's identity during an online transaction, ensuring that the person making the purchase is the legitimate cardholder and not engaged in unauthorized usage.
When a purchase is made, AVS prompts the customer to enter the address linked to their card account—the address where the bank sends billing statements.
The system then examines the numerical parts of the address, such as the house number and zip code, and for American Express® users, the cardholder's name as well. When the information aligns with the bank's data, it indicates the transaction is legitimate. If there's a discrepancy, it suggests potential fraud.
The AVS Authentication Workflow
AVS functions as a rapid verification exchange between the merchant and the issuing bank to confirm the authenticity of the address information provided by the customer.
Detailed steps of the process are:
- During checkout, either online or via phone, the customer provides their billing details, which are forwarded to the merchant's payment gateway.
- The payment gateway submits the address for validation along with the authorization request to the card brand (Visa®, Mastercard®, American Express, etc.).
- This request is then passed on to the issuing bank, which checks the provided address against its records.
- Following verification, the issuing bank sends an AVS response code back to the payment gateway.
- Based on this response code, the merchant's gateway will either approve or decline the transaction.