What Is an AVS Check and How Does It Prevent Fraud?

The Address Verification Service (AVS) is a tool used within payment processing to enhance security for transactions where the physical credit or debit card is not present. This system primarily helps to prevent fraudulent activities by verifying the cardholder’s billing address. It serves as a foundational measure in securing online purchases and other remote transactions.

What is an AVS Check?

An AVS check is a security protocol that compares the billing address provided by a customer during a transaction with the address on file with their card-issuing bank. This comparison is particularly important for “card-not-present” (CNP) transactions, such as those conducted online or over the phone, where traditional physical card authentication methods are unavailable. By confirming the billing address, AVS provides a level of assurance that the person making the purchase is the legitimate cardholder.

The primary function of AVS is to reduce the risk of fraud and subsequent chargebacks for merchants. Chargebacks occur when a customer disputes a transaction, often due to unauthorized use of their card, leading to financial losses and administrative burdens for businesses. For consumers, AVS adds a layer of security, contributing to a safer online shopping experience.

The AVS Verification Process

The AVS verification process begins when a customer enters their payment and billing address details during a transaction. This information, including the numeric portion of the street address and ZIP code, is typically captured by the merchant’s payment gateway. The payment gateway then securely transmits these details to the acquiring bank, the merchant’s bank.

The acquiring bank subsequently forwards the address data to the relevant card network, such as Visa or Mastercard. The card network then routes this information to the issuing bank, the bank that issued the customer’s card. The issuing bank compares the provided billing address with the address it has on record for that specific card account. Based on this comparison, the issuing bank generates an AVS response code, which is then sent back through the card network and acquiring bank, reaching the merchant’s payment gateway. The entire process typically occurs in a matter of seconds, making it largely imperceptible to the customer.

Interpreting AVS Response Codes

Merchants interpret AVS response codes to understand the match between the provided address and the cardholder’s address on file. Codes like ‘Y’ or ‘M’ indicate a full match of the street address and ZIP code, signifying a low-risk transaction. A ‘Z’ code means the ZIP code matches but the street address does not, while ‘A’ indicates the street address matches but the ZIP code does not. These partial matches might suggest a typo or a recent address change.

A ‘N’ code signals no match for either the street address or the ZIP code, which is a strong indicator of potential fraud. Other codes, like ‘U’ (unavailable) or ‘S’ (not supported), mean the issuing bank could not perform the check or does not support AVS. Merchants use these codes, alongside other fraud detection tools, to decide whether to approve, decline, or manually review a transaction. A merchant’s risk management policies determine the specific action taken for each code.

AVS and Fraud Prevention

AVS is a significant layer in fraud prevention for card-not-present transactions. It confirms the individual knows the card’s billing address, making it harder for unauthorized users to complete purchases. However, AVS does not directly verify the cardholder’s identity or confirm physical possession of the card.

AVS contrasts with Card Verification Value (CVV/CVC) codes, which are security codes printed on the card designed to verify physical possession. AVS and CVV checks work in tandem, providing different yet complementary security. AVS is most effective when integrated with other fraud detection measures, such as IP address verification, device authentication, and advanced risk assessment systems. This multi-layered approach mitigates various types of fraud and reduces false declines for legitimate transactions.