The Address Verification System (or simply AVS) is a method for merchants to verify the identity of a customer who uses a credit card.
AVS is an excellent way to reduce the risk of fraud and increase the payment gateway’s security. In other words, it checks that a customer is the cardholder he claims to be and finally – it decreases the number of chargebacks.
How it works
When processing a payment, the merchant requests the customer’s billing address details along with the rest of his credit card information. After that, the merchant sends the billing data (including the address information) to the issuing bank. Bank checks the street number, zip code, city and state. As a result, the issuer returns a match level of compared fields. For example, a client can enter a proper street number, but make a typo when filling the zip code field. AVS will take that into account and return a proper response. The merchant can decide which level of AVS result is enough to process a transaction.
Are there any limits?
Unfortunately, there are. The Address Verification System isn’t supported by all card issuers. Also, AVS works only in a few countries like USA, Canada or the United Kingdom.
The said system doesn’t protect merchants in situations when a thief has stolen cardholder’s address information. In such case the entered billing address will be correct, AVS will return a positive result, but transaction remains a fraud.