What Are Address Verification Systems? And How To Prevent False Declines

The Address Verification System was originally developed by Mastercard to combat an increase in card-not-present fraud. Since then, other major credit card companies have also adopted the address validation process. AVS gained popularity as one of the most commonly employed fraud prevention tools and is now widely used by eCommerce merchants. And as fraudsters have grown increasingly sophisticated in their attacks, AVS on its own does not effectively prevent fraud  , though it can block revenue from legitimate customers.

An Address Verification System (AVS) is a service offered by major credit card processors to help merchants verify a customer’s credit or debit card ownership. The AVS service is conducted when a merchant requests authorization for a non-face-to-face credit card transaction. The credit card company or bank automatically compares the billing address provided by the customer to the billing address in its records and reports the result to the merchant. The ultimate responsibility of deciding whether to proceed with the transaction lies with the merchant. AVS can be used in combination with other security features of a credit card, such as the CVV2 number, for verification.

AVS helps reduce the risk of fraudulent transactions by comparing the address information provided by the customer with the address on file with the credit card issuer or the bank. Here’s how AVS typically works:

1. Customer input: During an online transaction, a customer enters their billing address as part of the payment process. This includes the street address, city, state or province, and postal/ZIP code.
2. Verification request: The merchant’s payment processing system sends the provided address information to the cardholder’s issuing bank or payment processor, along with the transaction details.
3. Address comparison: The card issuer or payment processor checks the provided address against the address on file for the cardholder’s account.
4. Response: The issuer or processor sends a response code or message back to the merchant, indicating whether the provided address matches the one on file or not.

The response codes can vary, but they typically fall into one of several categories:

• Match: The provided address matches the address on file. This is a positive result.
• Partial match: Some part of the provided address matches the address on file, but not all. This result may still be acceptable, depending on the merchant’s policies.
• No match: The provided address does not match the address on file. This could be due to a typographical error, fraud, or a legitimate change of address.

Merchants can use these response codes to decide whether to proceed with a transaction or take additional precautions, such as contacting the customer for further verification. AVS is just one layer of fraud prevention, and it’s often used in conjunction with other security measures like CVV (Card Verification Value) checks and fraud detection algorithms.

Keep in mind that AVS primarily verifies the billing address associated with a credit card, and it may not verify the shipping address. Therefore, it’s important for merchants to use additional fraud prevention measures to ensure both billing and shipping addresses are accurate and legitimate, especially for high-value transactions.

AVS response codes are single-letter codes that follow a request from a merchant for address verification. The meaning of the codes varies between credit card processors. These codes indicate the degree of address matching during the authorization process and help determine the next action — either an approval or a decline on the transaction.

Code	Visa	Mastercard	Discover	American Express
A	Street address matches, ZIP does not	Street address matches, ZIP does not	Street address matches, ZIP does not	Street address matches, ZIP does not
B	Street address matches, but ZIP not verified.	Not applicable	Not applicable	Not applicable
C	Street address and ZIP not verified	Not applicable	Not applicable	Not applicable
D	Street address and ZIP match (International Only)	Not applicable	Not applicable	Not applicable
E	AVS data is invalid or AVS is not allowed for this card type.	Not applicable	Not applicable	Not applicable
F	Street address and postal code match (UK Only)	Not applicable	Not applicable	Street address matches, card member name does not match
G	Non-U.S. issuing bank does not support AVS.	Not applicable	Not applicable	Not applicable
I	Address information not verified for international transaction	Not applicable	Not applicable	Not applicable
K	Not applicable	Not applicable	Not applicable	Card member name matches
L	Not applicable	Not applicable	Not applicable	Card member name and ZIP match
M	Street address and postal code match (International Only)	Not applicable	Not applicable	Card member name, street address, and ZIP code match
N	Street address and ZIP code do not match	Street address and ZIP code do not match	Street address and ZIP code do not match	Street address and ZIP code do not match
O	Not applicable	Not applicable	Not applicable	Card member name and street address match
P	Zip code matches, street address unverifiable due to incompatible formats (International Only)	Not applicable	Not applicable	Not applicable
R	System unavailable, retry	System unavailable, retry	System unavailable, retry	System unavailable, retry
S	AVS not supported	AVS not supported	AVS not supported	AVS not supported
T	Not applicable	Not applicable	9-Digit ZIP matches, street address does not	Not applicable
U	Address information unavailable. Returned if the U.S. bank does not support non-U.S. AVS or if the AVS in a U.S. bank is not functioning properly.	Address information unavailable	Address information unavailable	Address information unavailable
W	9-Digit ZIP matches, street address does not	9-Digit ZIP matches, street address does not	9-Digit ZIP matches, street address does not	Card member name, ZIP, and street address do NOT match
X	9-Digit ZIP and street address match	9-Digit ZIP and street address match	9-Digit ZIP and street address match	Not applicable
Y	5-Digit ZIP and street address match	5-Digit ZIP and street address match	5-Digit ZIP and street address match	5-Digit ZIP and street address match
Z	5-Digit ZIP matches, street address does not	5-Digit ZIP matches, street address does not	5-Digit ZIP matches, street address does not	5-Digit ZIP matches, street address does not

It’s important to note that AVS is not universally available across all credit card providers or countries. Currently, it is available in the United States, Canada and the United Kingdom. Typically, it’s not available for foreign credit cards — those issued in a country other than where they are being used. While AVS can help verify card ownership through billing address matching, it isn’t a foolproof system and leaves plenty of room for error and the potential of false declines, which block good sales and revenue. The billing address provided by a legitimate customer may not always match the address on record at the card issuer. 

Card companies may have different checks in place, but generally, AVS only verifies the numerical portions of a cardholder’s billing address. If the customer recently moved, makes a small typo in their input like leaving off an apartment number, or the address on record is incorrect, AVS checks will return codes to merchants that might cause them to reject a legitimate transaction. 

Experiencing a false decline can cause a great deal of inconvenience and financial stress for legitimate customers. When a transaction is declined due to AVS mismatch, the bank may put a hold on the authorized funds, which can remain on the customer’s card until the issuing bank allows it to expire. This is typically seven days for most businesses, except for hotels and car rental companies who can keep the hold for up to 30 days. The funds held can be subtracted from the customer’s available balance and create chaos in their personal finances.

False declines also hurt conversion for eCommerce stores. 4% of customers who abandon their purchases during the checkout process leave due to false declines, which adds up to significant lost revenue for merchants.

Preventing Address Verification System false declines is important for both merchants and customers. It is estimated that eCommerce merchants lose 75 times more revenue to false declines than they lose to actual fraud. False declines can occur when a legitimate transaction is rejected due to AVS mismatch or errors in the address verification process. To minimize false declines while maintaining security, consider the following strategies:

Use a Flexible AVS Policy

• Adjust your AVS settings to be more flexible. For example, you can consider a partial address match as acceptable, especially for online transactions where typos are common.
• Allow for variations in abbreviations (e.g., “St.” vs. “Street,” “NY” vs. “New York”) and case sensitivity (e.g., “123 Main St” vs. “123 MAIN ST”).

Implement Manual Review Processes

• Set up a proactive manual review process for transactions that trigger AVS mismatches. Have trained personnel review these transactions to determine their legitimacy.
• Contact the customer for address verification or additional information if needed before rejecting the transaction. Set up trigger emails that are sent out as soon as you receive an AVS mismatch that gives customers a chance to correct any mistakes.

Use Multiple Verification Methods

• Combine AVS with other verification methods such as CVV checks, 3D Secure, or device intelligence to enhance security without relying solely on AVS.
• Incorporate geo-location data to help verify the customer’s location. This can be particularly useful for online transactions where the customer’s physical presence is not required.

Implement Risk-Based Authentication

• Employ risk-based authentication systems that assess the risk level of each transaction. Low-risk transactions can bypass strict AVS checks, while high-risk transactions may undergo more stringent verification.

Balancing security and a positive customer experience is essential when dealing with AVS. While it’s crucial to minimize fraudulent transactions, it’s equally important to avoid frustrating legitimate customers with false declines. Implementing a combination of these strategies can help strike that balance.