Posts Tagged ‘credit card authorization’

Address Validation Service vs. Address Verification Service (AVS)

Some terms sound similar but aren’t actually interchangeable – like sympathy versus empathy or good versus well. In the data quality business, two similar phrases with totally separate meanings are Address Validation service versus Address Verification service (AVS) – and these have very important distinctions if you process credit cards. However, when used together, they can solve common credit card processing issues and increase sales, decrease fraud and provide better customer experiences. Let’s look at the differences between these two capabilities and how they can be used together.

Address Validation service vs. Address Verification service (AVS)

First of all, an Address Validation service ensures that your address is correct and deliverable – and often corrects addresses when necessary. An Address Verification service (AVS), by comparison, is supplied by credit card companies for fraud prevention. It is part of the credit card authorization process, ensuring that components of an address correspond to a specified credit card number the issuing company has on file.

A good example of Address Validation is our flagship DOTS Address Validation – US service (along with its Northern counterpart, DOTS Address Validation – Canada). As for credit card transactions, there are varying but very similar versions of Address Verification Service (AVS) created by most major credit card issuers in the US and other countries to use with their authorization process. Here are some key differences in the way these two systems work:

Address Validation – US is a CASS CertifiedTM service that links directly with up-to-date USPS address data, together with other authoritative data sources, to verify – and if necessary, correct – a supplied delivery address. Address Validation – US also goes far beyond simple street address checking, including Delivery Point Validation (DPV) to make sure an address is deliverable, verifying suite numbers, and flagging residential versus business addresses.

AVS, by comparison, checks an address against the one on file with the issuer of the credit card being authorized. As this article describes in detail, AVS only compares the numerical portion of a street address and the ZIP code against a credit card provider’s records. It then either approves the address or returns one of several error codes, outlined in this Wikipedia summary.

When to use Address Validation and AVS

So, should you use Address Validation or AVS for credit card transactions? The answer is that both are very important, depending on your situation. Here’s why:

  • Using AVS with unvalidated addresses can lead to false negatives that decline legitimate sales and lose business. Validating an address before submitting to AVS can help prevent false-negatives.
  • AVS doesn’t guarantee deliverability – so a misspelled street or city name could still leave your package lost at the wrong address or loading dock, causing financial losses as well as possible brand damage from unhappy customers. Address Validation checks and corrects for deliverability.

The best of both worlds

With thoughtful business logic, you can harness the strengths of Address Validation to correct addresses BEFORE submitting them for authorization, decreasing the number of false negatives.  This increases sales and provides confidence in declined authorization attempts. In addition, incorporating contact-data-hygiene best practices that ensure the address provided is accurate and deliverable reduces the cost of mis-shipped products and increases customer satisfaction.

Managing credit card transactions

It is important to understand that there are multiple approaches to managing your credit card transactions, including both automated tools and human approval procedures (we devoted an entire article to this recently), including our own BIN validation capabilities for checking credit card types and validity. Every strategy has its pros and cons, and there is always a balance between preventing fraud and chasing away valid sales and customers.

Need to take a deeper dive into credit card processing and data quality? Contact our knowledgeable product experts anytime, and we’ll be happy to discuss your own situation in more detail.

Credit Card Validation: Your Questions Answered

You’ve got questions? We’ve got answers! This is the first in a series of articles exploring common user questions about our products and how they can be used in business use cases, based on what you’ve asked our sales and technical support teams. We hope you’ll find these enlightening, interesting – and even fun to read!

For our first topic, we’ve chosen an area near and dear to many of our business clients: validating credit card transactions. We’ve previously explored some of the pros and cons of various approaches for credit card validation in a recent post, and will take a deeper dive into the differences between validation and verification of credit card addresses in a future article. Here, we will explore how to handle some of the most common use cases for credit transactions.

Let’s dive in:

Q: If we use the credit card company’s Address Validation System (AVS), we get a much cheaper processing rate. But it is very strict about these addresses, and kicks back too many transactions that are actually valid – so we are losing business and customers. Help!

A: This is an extremely common issue. One reason is that AVS only compares the numerical portion of the street address, together with the ZIP code, to verify the address. If either of these numbers are off even a little bit, it will reject the address. Often this is a good thing – because it can protect you from, say, a thief using a stolen credit card to ship to a bogus address – but this can also reject legitimate customers.

A simple solution for these “false negatives” is to use our DOTS Address Validation – US service to validate the address at the time the customer enters it. This gives you the ability to inform the customer in real time about address errors, and also offer them a validated and corrected address from our CASS-certified validation engine, powered by up-to-date USPS address data.

You can either simply validate addresses that fail the AVS check, or even better, validate every incoming address to ensure correct shipping addresses and a clean contact database. Either way, this is a simple step that will help more of your transactions go through smoothly.

Q: We are suddenly getting a lot of chargebacks and fraudulent transactions. Ironically, a lot of these fraudsters are giving us credit card numbers that pass AVS. What can we do?

A: You’ve discovered the hard way that many crooks – identity thieves in particular – open fraudulent credit accounts with legitimate shipping addresses. Of course, they never pay the bill and make off with your merchandise. Chargeback or “friendly” fraud is another way people fraudulently obtain goods without paying for them.

A 2018 Gartner report outlined machine intelligence and online fraud detection (OFD) tools as being among the most promising safeguards against these kinds of fraud. Many customers use our DOTS Lead Validation service as an automated screen for the quality of potential customers, using tests involving over 130 data points that yield an overall lead quality score from 0 to 100. Tools like these can go a long way towards weeding out the bad actors before you ship your merchandise to them.

As a bonus, the detailed results provided by Lead Validation also helps you decide whether to simply reject an order or pass it along for further human verification, making it easier to save good orders that may have raised a red flag or two.

Q: We offer a subscription service or sell products on a payment plan, billed to a customer’s credit card monthly. Increasingly people have been defrauding us by signing up with a prepaid credit card with a low balance – so they get the goodies, but only the first payment gets made. How can we prevent this kind of fraud?

A: This problem is actually quite easy to solve, using our DOTS BIN Validation product. Its output contains a value called CardType that lets you detect and flag prepaid credit cards. Armed with this knowledge, you can create business logic with options like:

  • Let the customer know in real time that you do not accept this type of card for this product/service
  • Request another form of payment,
  • Offer only a pay-in-full option for this card type, or
  • Decline the order.

Q: Is there anything else we can do to prevent fraudulent credit transactions?

A: One more pro tip is to compare the customer’s shipping and billing address with the BIN Validation’s Country field, which lists the country of the credit card’s issuing bank and the country result from DOTS IP Address Validation lookup. If they are different, you can flag certain countries (e.g. those with high fraud rates) to decline the transaction immediately or ask for another form of payment.

So what are your questions?

We would love to hear from you. Of course, you can contact our product team anytime for a personal response – and if there is anything you would like to see us discuss in a future article, let us know. Thanks!