IPP Europe

What is Address Verification Service

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Address Verification Service (AVS) is a crucial tool used by businesses, particularly those in the e-commerce sector, to authenticate the billing address of a credit or debit card holder. It is a security measure designed to prevent fraudulent transactions and protect both the business and the customer. The service cross-checks the billing address provided by the customer with the address on file at the credit card company. If there’s a match, it confirms that the person making the purchase is likely to be the legitimate cardholder.

Understanding the Concept of Address Verification Service

The concept of Address Verification Service (AVS) was introduced in 1996 by major credit card companies as an additional layer of security for online and telephone transactions where physical cards are not present. AVS helps businesses verify that customers are who they claim to be by matching their provided billing addresses with those on file at their respective banks or credit card companies. This process reduces instances of fraud and chargebacks, thereby protecting both businesses and consumers.

In essence, AVS serves as a gatekeeper, ensuring that only legitimate transactions go through. It’s important to note that while AVS is primarily used for ‘card-not-present’ transactions such as online purchases, it can also be utilized in physical stores during ‘card-present’ transactions for added security.

The Importance and Benefits of AVS

The importance of AVS cannot be overstated in today’s digital age where online fraud is rampant. According to a report by Javelin Strategy & Research, identity fraud hit a record high with 16.7 million U.S. victims in 2017, an increase of eight percent from the previous year. In this context, AVS serves as an essential tool for businesses to safeguard against fraudulent activities.

One significant benefit of using AVS is reducing chargebacks – when customers dispute charges on their accounts due to fraudulent activity or other issues. By verifying addresses before processing payments, businesses can significantly decrease the likelihood of chargebacks, saving both time and money.

Moreover, AVS enhances customer trust and confidence. When customers know that a business takes their security seriously, they are more likely to make purchases and become repeat customers. This increased trust can lead to higher customer retention rates and improved business reputation.

How Does Address Verification Service Work?

The working mechanism of AVS is relatively straightforward. When a customer makes a purchase, they provide their billing address along with their credit card information. The merchant then sends this data to the cardholder’s bank or credit card company via an electronic system. The bank or credit card company checks the provided address against the one on file for that particular card. If there’s a match, the transaction is approved; if not, it’s declined.

It’s important to note that AVS only verifies the numeric portion of the address – that is, the house number and zip code. It does not verify street names or apartment numbers. This is because errors in these parts of an address are more likely due to typos or abbreviations rather than fraudulent activity.

Implementing AVS in Your Business

Implementing AVS in your business is a relatively simple process that involves integrating it into your existing payment processing system. Most payment gateways and merchant service providers offer AVS as part of their services.

Before implementing AVS, it’s crucial to inform your customers about this additional security measure. Transparency about security measures can enhance customer trust and reduce shopping cart abandonment rates due to unexpected security checks.

Once implemented, businesses should regularly review AVS results to identify any patterns of fraud or issues with legitimate transactions being declined. Regular reviews will help fine-tune the system for optimal performance.

In conclusion, Address Verification Service (AVS) is an essential tool for businesses looking to protect themselves and their customers from fraudulent activities. By understanding its concept, recognizing its importance and benefits, knowing how it works, and implementing it effectively, businesses can significantly enhance their security measures and foster a safer shopping environment for their customers.