An address verification service (AVS) is a system that verifies the personal address and billing information provided by a customer at the time of an online credit card transaction, against the information the credit card company has on file.

How AVS Can Protect You
Whether it be in a physical store, over the telephone, or in a virtual store, any company that accepts credit cards for payment of goods or services risks encountering a certain amount of credit card fraud. Every method of accepting credit cards has a risk classification assigned to it by the banks and credit card companies. The fees these companies charge for their services is based on the risk factor they assign to the type of credit card transaction taking place. Online real-time credit card transactions are considered among the highest risk. The AVS is part of the card transaction process.

When a merchant sets up an online transaction processing service and merchant account, certain "permissions" are set for credit card acceptance. The merchant tells the processing service and bank what information it wants verified. Each item that the merchant requests be verified is a "permission."

When a customer enters a credit card number and any other information required on the merchant's order form, that information is then passed through the AVS during the transaction processing procedure. Based on the permissions the merchant has in place, along with information the credit card companies and banks have provided, the credit card will be either accepted or denied.

AVS will verify whether the address provided by the cardholder matches the billing address that was provided on the credit card application. If the information provided by the customer does not match the information contained in the AVS, a notice is sent to the merchant, who then has the option to contact the customer to collect more information or to deny the transaction.

The AVS process is completely transparent to the customer. If a card is denied, the denial notice to the customer should be handled in a polite manner. The merchant should simply tell the customer that the credit card cannot be processed at this time and should offer a telephone number so that any legitimate cardholders may call and offer additional information, such as a new address.

AVS provides response codes to the merchant. The response codes and their definitions are as follows:

X = exact match, address and nine-digit zip code
Y = exact match, address and five-digit zip code
A = address matches, zip code does not
W = nine-digit zip code matches, address does not
Z = five-digit zip code matches, address does not
N = address and zip code do not match
U = address information is unavailable
R = retry, system is unavailable
S = service is not available
E = data not available/error invalid

It is up to the merchant's discretion whether to approve a transaction when the information does not match. All AVS responses to the transaction should be checked by the merchant. Merchants are not penalized if any of the AVS information is incorrect. In accepting and authorizing transactions that AVS has indicated are questionable, the merchant is at much greater risk for incurring chargebacks or accepting a lost, stolen, or fraudulent credit card.

AVS is designed to help merchants protect themselves against fraudulent, lost, or stolen credit cards and chargebacks. It is used as extra protection in transactionsfor which the card is not present. Currently, AVS is not available for international card transactions because of language barriers and other issues.

Cheryl Lindloff is the founder and CEO of Aurora Technology Group LLC, an e-commerce solutions company.

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