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April 24, 2022

AVS and CVV Verification

When your business accepts credit cards for a card-not-present transaction, it requires that you manually key in the credit card number. Because the customer is not in front of you, the additional data helps protect you against fraud. Using (CVV) Card Verification Value and (AVS) Address Verification System, help to confirm the authenticity and will lower the transactions costs charged by the credit card processing vendor.

CVV code

Most are familiar with CVV, it is the 3-digit number on the back, or 4-digit number on the front of Amex credit cards. With this number, the merchant can verify that the customer has the card in hand.

A card security code is a security feature for “card not present” payment card transactions instituted to reduce the incidence of credit card fraud. The CSC is in addition to the bank card number which is embossed or printed on the card. The CSC is used as a security feature, in situations where a PIN cannot be used. Wikipedia

What is AVS Credit Card Match?

The Address Verification System or Address Verification Service (AVS) is a system used to verify the address of a person claiming to own a credit card. The system will check the billing address of the credit card provided by the user with the address on file at the credit card company. The other security features for the credit card include the CVV2 number.

AVS is used when the merchant verifies credit card data, such as billing address and ZIP code, against the Visa/MasterCard billing information of the cardholder. AVS verifies that the billing address of the credit or debit card matches the address that was given by the customer. Because AVS only verifies the numeric portion of the address, certain anomalies like apartment numbers can cause false declines; however, it is reported to be a rare occurrence.

Cardholders that do receive false negatives, or partial declines for AVS from e-commerce verification systems, may require manual overrides, voice authorization, or reprogramming of the AVS entries by the card issuing bank.

Address Verification Service

To use AVS, a merchant will request the customers address and ZIP code. Most point-of-sale systems and virtual terminals can verify that the address the customer provides matches the billing address for the credit card.



How AVS Credit Card Match Affects Your Processing Rates

Running AVS will lower your Interchange rates. Although it costs $0.01 per transaction to run credit card AVS, your transactions qualify for lower rates when you use it. Note: Using CVV will not result in a lower Interchange rate.

When you run a transaction without running AVS on a keyed-in Visa credit card, it can result in a downgrade which is an increased transaction rate. See example below:

Regular rate:

CPS Retail Key Entry – 1.80% + $0.10

Downgraded rate:

Signature Preferred-Standard – 2.95% + $0.10

To try to limit fraud as much as possible, card brand Interchange rates increase for riskier transactions.

When you take a card-not-present transaction and fail to implement any fraud prevention best practices, you’re leaving yourself open to fraud.

With credit card AVS and CVV, you can catch a good portion of fraudulent transactions. This will result in better interchange rates and fewer fraudulent transactions.

Verifying AVS match on a transaction during order review offers a basic level of assurance for merchants that the order is not fraudulent.

For most merchants, the request for AVS verification on a transaction is automatically submitted via the payment gateway/processor alongside the payment authorization request. The request goes to the issuing bank with the billing address information used in the order, and the service returns a code that corresponds to how well the address entered matches up with the address in the issuing bank’s file. As a result, a merchant can find themselves with a transaction where there is full, partial or no AVS match.

The most common AVS codes are below:

Y – Full Match: Street address and 5-digit ZIP code match
X – Full Match: Street address and 9-digit ZIP code match
W – Partial Match: 9-digit ZIP code matches, street address does not
Z – Partial Match: 5-digit ZIP code matches, street address does not
A – Partial Match: Street address matches, ZIP code does not
G – International Card: Non-U.S. card issuing bank
N – No Match: No match on street address or ZIP code
R – Retry: Retry – System unavailable or timed out
U – Unavailable: Either address information is unavailable for that account or the card issuer doesn’t support AVS

When the merchant receives the returned AVS code, they can either cancellation the order, further investigation or approve the transaction.

How does Full AVS Match, Card Associations, affect your Merchant Liability?

The card associations (e.g. Visa, MasterCard and American Express) dictate the transaction rules that banks must adhere to if they want to continue participating in the network and issuing branded cards.

Card associations also set the circumstances in which a merchant can contest a chargeback, when do they have a right to represent themselves in a chargeback dispute. For certain kinds of chargebacks, a merchant may not have representment rights, and may be forced to accept the chargeback.

In the case of a chargeback due to perceived fraud or an unauthorized charge, a merchant only has representment rights if they’ve attempted to verify the validity of the transaction, for example, by performing an AVS check.

When the merchant can show a full AVS match, it gives the merchant a much stronger defense in a fraud-related chargeback dispute, and while it doesn’t guarantee that the merchant will win the dispute, it does help their cause.

Many merchants assume that if there is a fraud-related chargeback on a transaction where there was a full AVS match that they will not be held liable for the chargeback. This is not always the case, merchant may still have to participate in the chargeback dispute and provide evidence in order to win the chargeback.

Many merchants will restrict their order acceptance to orders that pass a full AVS match. However, this will not avoid all fraud or remove the potential for fraud-related chargebacks even with full AVS match.

Cardholder Rights

Banks that issue credit cards to consumers have professional obligations to cardholders who are their customers. When their customer (cardholder) submits an unauthorized transaction on their card, the bank is obligated to investigate the complaint. In the event of a full AVS match, the issuing bank will still investigate the cardholder’s claim that an unauthorized transaction occurred and act accordingly.

If the bank determines that the cardholders claim is valid, a chargeback will be filed with the merchant’s bank.

When the merchant is notified of the chargeback, they can then dispute the chargeback on transactions with full AVS match.

When there is a chargeback due to fraud on an order where there was full AVS match, the merchant will need to go thru the dispute process in order to win the chargeback. Even though the merchant has attempted to validate the transaction and has rights to dispute, many drop the dispute and write off the loss due to drain on time and resources.

AVS Credit Card Match with a full matchwill give you the ability to dispute chargeback. However, it does not guarantee you will win the dispute.  Also, not getting a full match does not automatically mean it is a fraudulent transaction.

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