Address Verification Systems Help Reduce Chargebacks

Address Verification Systems Help Reduce Chargebacks

As a successful merchant, avoiding fraudulent transactions is most likely a high priority for you. Chargeback management can seem daunting to both new and experienced business owners. Luckily, with the right payment processing systems in place, you can not only win some of those chargeback battles, but actually prevent them from happening in the first place.

We are going to take you through the basics of a couple of tools that are at your disposal. This way, you can make an informed decision about what systems are right for your business.

To put it simply, AVS is basically a conversation between you and the cardholder’s bank.

The Address Verification System is a service that verifies whether a billing address matches the address of a credit card holder. AVS is a widely used fraud-prevention measure for Card Not Present transactions, such as online payments. It gives the merchant a way to confirm that the customer is most likely the actual cardholder, making it harder for criminals to make unauthorized purchases. AVS can be a very helpful chargeback prevention tool if you understand the technology’s abilities and limitations.

To put it simply, AVS is basically an interface between you and the cardholder’s bank. Here is a breakdown of the process:

  • During checkout, the customer enters the address associated with the payment card account and is directed to your payment gateway.
  • In a matter of seconds — yay technology! — the payment gateway sends the address information to the card brand: Visa, Mastercard, American Express, etc.
  • The card brand forwards the request on to the issuing bank, which then verifies the information against the billing address on file.
  • The issuing bank returns a response code to the payment gateway, letting you know if it is a match..
  • The transaction will then be approved or declined.

While AVS can be an essential component of your fraud prevention system, it is not without weaknesses. The tactics of fraudsters evolve almost as quickly as ecommerce technology itself, making AVS less effective than it used to be. As it was not designed to prevent friendly fraud or basic customer disputes, AVS cannot account for unscrupulous consumer behavior.

Most customers are happy to provide their billing address for added security, but there will always be a few that will be put off by having to take the additional steps. You can make the process easier by only requiring a ZIP code instead of a full address, just like we all do at the gas pumps. Also, if your require a shipping address, a check box can be added to make the billing address the same. 

Even with its shortcomings, AVS provides great benefits, one of the main ones being saving you money — and who doesn’t want that?

AVS can help block unauthorized transactions and can reduce malicious fraud and the resulting chargebacks, meaning it can help you recover more revenue as AVS response codes are usually compelling evidence when fighting invalid chargebacks. This is critical because in order to win a chargeback reversal, you must provide sufficient evidence to persuade the cardholder’s bank to reevaluate the case, and response codes from identity verification tools are just that kind of evidence.

Another way AVS can save you money: you will likely pay less payment processing fees. Transactions authenticated by AVS are typically classified as “qualified” transactions with your processor. If you do not use AVS, transactions are downgraded to “mid-qualified” or “non-qualified.” Those transactions have higher processing fees than qualified transactions.

While AVS is an important tool for both intercepting and fighting chargebacks, there is no one single tool or strategy that will provide 100% protection. Other systems such as Card Verification Value and Rapid Dispute Resolution can add extra layers to your defenses. Chargeback management is about having several systems and processes in place to be able to battle fraud on all fronts.

Speaking of Card Verification Value, let’s touch briefly on how that can be another great weapon to have in your payment processing arsenal. CVV, also called CVC for Card Verification Code, is a short numerical code of three or four digits that typically appears on credit cards, as well as debit cards that can be used as credit cards. It was added to increase the security of electronic credit card transactions and works by helping to confirm that the customer has physical access to the credit card being used. This system is used to reduce fraudulent purchases made using credit card numbers that were stolen. If a merchant requires a CVV code for credit card purchases, a customer cannot make a purchase without providing the code on their credit card, even if that customer has the whole card number and expiration date.

By now you can see how these two tools can make a big difference in your payment processing game and help save your business time and resources that would otherwise be spent fighting fraudulent transactions. As you might have guessed, the more security you can offer at checkout, the less of a chance there will be for fraud. Protecting against chargebacks and ultimately revenue loss requires a multifaceted approach, after all.

Jonathan Corona has two decades of experience in the electronic payments processing industry. As chief operating officer of MobiusPay, Corona is primarily responsible for day-to-day operations as well as reviewing and advising merchants on a multitude of compliance standards mandated by the card associations, including, but not limited to, maintaining a working knowledge of BRAM guidelines and chargeback compliance rules defined in both Visa and Mastercard operating regulations.


Copyright © 2023 Adnet Media. All Rights Reserved. XBIZ is a trademark of Adnet Media.
Reproduction in whole or in part in any form or medium without express written permission is prohibited.

More Articles


WIA: Sana Gaziani

Sana Gaziani has always been industrious. She worked in retail for over 20 years, first as a teenager selling chocolates door-to-door and then in multiple part-time jobs at grocery stores. She worked at cosmetics company Lush to put herself through college, where she studied to become a law clerk.

Women In Adult ·

Ensuring Subscription Billing Is a Win-Win for Businesses, Customers

Subscription billing is one of the fundamental cornerstones of our industry. Marketing practices and processing technologies have evolved, but the basic concept has remained unchanged.

Jonathan Corona ·

The Importance of a Modern Tech Stack

You’ve built your website or platform. It is a fantastic piece of software, it works — and even better, your customers love it. You’re done developing, so now you can fire all your developers and not renew your contractor agreements. Right?

Brad Mitchell ·

Unpacking Mastercard's Enhanced Communication Path

Sharing information is important between card associations and service providers like payment facilitators and independent payment operators. In those relationships, information typically flows from the card brands to the acquirers, and then to service providers.

Cathy Beardsley ·

Piracy Battlefront: Content Protection Watchdogs on Evolving Threats, Solutions

Thanks to the creator economy, the rise of indie paysites and a cross-pollinating ecosystem of affiliates, studios and multibrand behemoths flooding the internet with billions of photos, videos and text messages, there has never been such a treasure trove of adult content online. But where there is treasure, there are pirates.

Alejandro Freixes ·

A Steady Pace & Realistic Goals Are Vital for Empire Building

I’ve seen countless websites and businesses fail to launch because the project exceeded the budget for development, and nothing was left for marketing or building a team. The dreaded cash crash.

Juicy Jay ·

Unveiling the Future With Mastercard's New AI Rules

As technology advances at an unprecedented pace, the role of artificial intelligence (AI) in driving innovation across industries has become crucial. The financial services sector, in particular, has recognized the potential of AI to improve efficiency, accuracy and customer experience.

Jonathan Corona ·

Eyes on the Site: Strategies for 24/7 Website Monitoring

Back in the 1990s, there were all sorts of companies that would scan your website and let you know if and when it ever went down. Ah, the memories. Site monitoring has since advanced far beyond those humble beginnings. Today, most websites are more complex, and checking whether one is online or not is not as simple as it used to be.

Brad Mitchell ·

Understanding Visa's New Pricing and High-Risk Tiers

In April, Visa announced that it was rebranding its Global Brand Protection Program as the Visa Integrity Risk Program (VIRP). The program is designed to strengthen the integrity and security of the Visa payment system.

Cathy Beardsley ·

WIA Profile: Caroline Karolinko

When Caroline Karolinko joined Segpay in 2018, she did not know a lot about the adult industry. After graduating from the University of Florida with a master’s degree in speech-language pathology, she worked with autistic youth and others with behavioral disorders.

Women In Adult ·
Show More