Address Verification Service: Why Is It Important to Businesses and Their Customers?
In 2019, UK businesses faced £239.9 million worth of online frauds. And this figure does not seem to be getting better even today! Thus, companies must devise several fraud prevention measures to protect themselves from such threats.
One of the most prevailing tactics businesses in the US, UK, and Canada employ is the address verification service (AVS). It helps you check the validity of your orders by cross-checking the billing address with the cardholder’s issuing bank.
However, an Address Verification Service (AVS) check only offers basic-level assurance that an order isn’t fraudulent. They still need to employ more payment protection strategies to identify spam orders and process the genuine ones.
Many merchants still struggle with this new technology, and we hope to offer some insights to make the concept clearer for you. Also, this blog discusses how the AVS system and codes work.
Let us dive in!
What is Address Verification Service?
This service is a fraud prevention tool that issuing banks and credit card processors provide to eCommerce retailers or merchants. It allows businesses to detect suspicious transactions and reject them.
The address verification service checks the billing address a cardholder provides to the merchant with their address in the issuing bank’s system. The prime goal is to determine that the person making the transaction is the genuine cardholder. If the addresses match, it becomes evident that they are the same person, and the placed order is legitimate.
Customers also benefit from AVS checking because it blocks other people from using their cards and making large purchases. Most people look for such security features before buying from an online retailer.
AVS is primarily a MasterCard service to stop card-not-present (CNP) fraud. But, all major credit card issuers also use it the same way. Once the merchant receives an order, the system sends an authorization request to the issuing bank that sends an AVS response code in return.
These AVS check codes help determine the degree to which both the addresses match to authenticate the ownership of the card. Thus, the merchant can decide whether to accept or reject the order.
Understanding the AVS Checking System
The AVS system is not a foolproof fraud prevention tool because of some obvious flaws. It compares the customer’s current address to the one registered with their credit card issuer. Often, these addresses differ because of the following reasons:
- The person recently shifted to a new place and is yet to update their address with the issuer
- The customer has two addresses, perhaps a permanent family home and a temporary residence
- The customer entered an incorrect address mistakenly
Thus, most companies also pair their fraud prevention tools with a postal address verification service like PostGrid. It helps them update old addresses of customers using the Postcode Address File (PAF), which has over 30 million updated mailing addresses.
Also, PostGrid allows businesses to conduct fuzzy matching and modify addresses that have some errors, like misspellings and typos. Therefore, they can reduce false negatives that the address verification service may generate because of such minor mistakes.
The entire process of PostGrid’s postal address verification service includes the following three steps:
- Parsing: You need to disintegrate an address to check the validity of every component, like the street name, city, etc. It helps identify partially incorrect addresses and allows the tools to modify the same.
- Standardisation: This step helps you reformat the addresses into the correct postal format. Though it alone does not help much in AVS checking, this stage allows you to validate addresses—which is crucial to completing the process.
- Validation: The final stage is address validation when PostGrid finds a match for the address in Royal Mail’s PAF file.
All these steps take place simultaneously, and you can verify millions of addresses together using our address verification API.
Examples of AVS Checking for Online Transactions
There are several examples of the address verification service, but let’s consider the most popular one. Suppose a customer wants to order something on Amazon. The site asks customers to complete a series of steps, like signing up for an account, adding things to the cart, and filling in the billing information.
Once they enter all the details and proceed with the transaction, the following things take place:
- Amazon’s payment gateway sends the billing address to the customer’s credit card issuer—Discover, MasterCard, RuPay, Visa, etc.
- Then, these brands transmit the data to the card-issuing bank that compares it with their records
- The issuing bank sends the authorization status and AVS check codes to Amazon’s payment gateway
The AVS code indicates a mismatch, and the transaction automatically declines if the address does not exist in the bank’s database.
This process does not show up on the customers’ screens, so they only get a transaction success or fail message. Also, the AVS checking process is super-quick, allowing customers to check out faster.
However, you should know that the AVS only checks the numeric portion of a billing address. Typically, it only cross-verifies the house number and postcode with the bank’s records. It makes it crucial for businesses to use a postal address verification service like PostGrid to confirm whether the address is accurate.
For instance, if your customer enters the address-
73 Gayton Road
Eastcote
Northamptonshire NN12 8NG
The AVS check only focuses on the number 73 and the postcode; the remaining address does not affect the results.
Please note: The AVS does not determine the deliverability of a postal address.
Why Isn’t Address Verification Service (AVS) a Foolproof Fraud Prevention Tool?
It isn’t illegal to send mail to customers on the MPS register. But, the Consumer Protection from Unfair Trading Regulations 2008 states that companies should avoid doing so repeatedly.
However, following the mail preference service regulation is mandatory under the DMA’s code of practice. Also, the organisation has the right to investigate the matter and pass it on to the Advertising Standards Authority if someone files a complaint against you.
Having an MPS licence protects you against such claims that tarnish your image and lead to negative publicity. Therefore, you must screen your mailing lists against the postal preference service UK before launching every advertising campaign.
What Are the Other Options for Customers to Subscribe Out of Unsolicited Mail?
You should know that AVS does not guarantee fraud prevention but is one of the many tools that help merchants check order accuracy. Sometimes, the system can generate partial and false declines because of confusion or misinterpretation. Such partial rejection requires the merchant to use an additional postal address verification service to complete or reject the transaction.
Moreover, all payment gateways should employ the AVS in conjunction with other fraud prevention tools, like:
- IP address verification
- Biometric analysis
- CVV validation codes
- Device authentication
- 3D Secure, etc.
Global businesses must ensure that their payment gateway accepts and manages the international address verification service. Most fraudsters conduct unauthentic transactions from international destinations for multiple items in one go.
Thus, using multi-layers fraud detection mechanisms to protect your genuine customers is crucial. Also, always use a postal address verification service like PostGrid to reduce false declines and customer dissatisfaction.
How Do the AVS Codes Work?
Different credit card brands use separate sets of AVS check codes. Thus, you may notice some code sets apply to one company but not another. It is advisable to read the documentation provided by your credit card brand and issuer. You can find several AVS code charts for reference, but it is best to rely on official documentation only.
Ensure to configure your payment gateway to respond to and manage the AVS check codes. Try using a custom rules engine to specify the acceptable AVS codes and the ones that should trigger an instant confirmation step or decline.
Remember that there should always be room to accommodate and investigate partial declines because being too aggressive would mean losing several genuine customers.
The AVS response codes consist of a single letter that may have different meanings across countries. Here are the most commonly-used codes:
N – no match
W – partial match of ZIP code, street address match failed
R – system unavailable or retry
U – Address data unavailable, or the card issuer does not use the AVS check
Merchant Liability and Card Associations
The credit card associations like MasterCard and Visa dictate the terms and conditions of AVS checking. Hence, the banks that want to issue branded credit cards and participate in the AVS system must adhere to these rules always.
Also, these credit card brands state the circumstances under which businesses can contest chargebacks. Sometimes, merchants need to accept a chargeback and leave back their representation rights.
You only get representation rights when you attempt to verify the transaction’s validity if a chargeback occurs because of an unauthorised charge or potential fraud. Thus, an AVS check system helps you in fraud-related chargeback conflicts.
Sadly, many merchants aren’t aware of what a fully-validated AVS check means. They might assume they are not liable if they use the AVS and get a full match. However, they still need to participate in fraud chargeback disputes and provide relevant evidence.
Many merchants opt-out of such disputes and write off the losses because they don’t have the resources and time to fight them. Also, they might not know the card association rules about chargebacks and how to dispute them, so they drop the matter.
An address verification service may not guarantee your win. But, it supports your case and increases your chances of winning the dispute. We get several questions about why merchants are held liable even after verifying that the cardholder and buyer are the same. The short answer to these doubts is—cardholder rights.
Cardholder Rights
All banks issuing credit cards to their customers have some obligations towards these cardholders. They should take measures to safeguard their interests and help them avoid fraud.
Hence, they must investigate all unauthorised transactions irrespective of other factors. The address verification service allows banks to get to the root cause and identify fraudsters. A bank still needs to acknowledge the claim and take the necessary steps even if the merchant receives a full match from their AVS check.
Luckily, PostGrid’s address checker allows banks to update their database from time to time to help them deal with such situations.
How Can PostGrid’s Postal Address Verification Service Help Businesses Spot Fraudulent Transactions?
PostGrid’s address verification API and software help you confirm the accuracy and validity of your customer addresses. It also cross-checks the deliverability of your mailing lists to identify spam orders and reduce mail returns.
Below, we have mentioned some benefits and features of our address verification solutions that benefit companies:
- Geocoding: Using rooftop geocoding, you can capture the customer’s accurate address for AVS checking. Thus, it helps you eliminate possibilities of typos, misspellings, swapped words, and other mistakes that hamper the process.
- International address verification: This feature allows global businesses to verify the validity of their overseas orders. It helps them transliterate and reformat addresses to match the guidelines of the destination country.
- Bulk verification: It does not make a difference if you need to use our address verification service for validating one or a million addresses. Our API is scalable and can accommodate your ever-growing needs.
- Not-yet-built (NYB) and multiple residence (MR) address files: PostGrid uses the Royal Mail NYB and MR files to validate your customer addresses. Often, the reason for false declines is because the address of the customer is under construction, and they provide a different address for the transaction. Our solutions help you know the reasons for a potential AVS check mismatch.
- Data security and confidentiality: PostGrid is compliant with the Data Protection Act and GDPR, enabling you to verify your mailing lists securely. Our API and dashboard for address verification service are in-built to protect your data and keep it confidential. Also, PostGrid is ISO 27001, 2701, 9001, and 14001 certified—helping you process your delivery addresses confidently.
Furthermore, PostGrid offers:
- Affordable pricing
- 24 x 7 technical assistance
- Dedicated customer onboarding
- API integration
Wrapping Up
With increasing online attacks in the UK, almost all businesses have resorted to using numerous fraud prevention mechanisms.
Undoubtedly, the address verification service plays a broad role in detecting fraudulent transactions. But, avoid making it your standalone strategy for fraud detection.
You can use PostGrid’s address verification service to standardise and validate your addresses. It enables you to make prompt decisions and always access a cleansed and updated database.
Are you ready to see PostGrid’s address verification service in action? Sign up now and save your genuine customers from fraud and other threats.
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