Address Verification Service (AVS)

What Is the Address Verification Service (AVS)?

The Address Verification Service (AVS) is a tool provided by credit card processors and issuing banks to merchants in order to detect suspicious credit card transactions and prevent credit card fraud. The AVS checks the billing address submitted by the card user with the cardholder's billing address on record at the issuing bank. This is done as part of the merchant's request for authorization of the credit card transaction. The credit card processor sends a response code back to the merchant indicating the degree of address matching, thereby authenticating ownership of a credit or debit card in a non-face-to-face transaction. This process helps the merchant in determining whether a card transaction should be accepted or rejected.

AVS is one of the most common tools used by merchants to prevent credit card fraud. However, it is not a foolproof system, since the billing address provided by a bona fide customer may not always match the address on record at the card issuer. Reasons for such a mismatch would be a recent move by the cardholder or an address of record that was incorrect to begin with. In such cases, the merchant runs the risk of rejecting a perfectly legitimate transaction. AVS is an important part of the credit card authentication process and applies to cardholder addresses from the United States, Canada, and the United Kingdom.

Understanding the Address Verification Service (AVS)

The Address Verification Service (AVS) is a fraud prevention system that, when used effectively, can help to limit fraud and charge-backs. AVS works to verify that the billing address entered by the customer is the same as the one associated with the cardholder’s credit card account. AVS is widely used by the major credit card companies to stop card-not-present (CNP) fraud.

During the checkout process, a customer enters their address, which is then compared to the address on file with the issuing bank. Once the addresses are compared, the issuing bank returns an AVS code to the merchant. Merchants can use this AVS code as a guide to determine how to proceed with the transaction.

AVS response codes are single-letter codes that are returned to the merchant during the authorization process through their processing platform. These codes help determine the next action, which could be transaction approval, exception, or decline. Typically, AVS authentication is used as part of a multilayered fraud protection system to ensure that valid transactions are approved, and those deemed suspicious are declined.

Example of Address Verification Service (AVS)

Imagine a customer is shopping online at Amazon.com. When the customer enters their billing address during checkout, the following happens:

1. Amazon's payment gateway transmits this address data to the customer’s credit card brand (e.g., Visa, MasterCard, Discover, or American Express).
2. The credit card brand then sends this information to the issuing bank. The issuer compares the address with the address stored on file.
3. The issuer then sends an authorization status and associated AVS response code to Amazon's payment gateway.

If the address provided by the customer does not match the address the issuer has on file for that customer, the AVS code will indicate the mismatch between the two addresses and the transaction may be declined. Should the two addresses match, the AVS response code will indicate this and the transaction will be authorized. The entire AVS process generally only takes a few seconds and is invisible to customers.

Special Considerations

It’s important to understand that AVS is not a guaranteed fraud prevention solution. Additionally, the system can on rare occasions generate false declines or partial declines. A partial decline may require the merchant to then use additional validation methods before completing the transaction.

A payment gateway or other payment solution should be using AVS in conjunction with other fraud detection mechanisms. Examples of these additional measures include CVV validation codes, IP address verification, 3D Secure, biometric analysis, and device authentication.