Tag Archives: CVV

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Address Verification Service (AVS) Prevents Chargebacks

Chargebacks are among the scariest concerns you might come across when running an online business. Chargebacks can keep you from earning the money you deserve. They can hurt your company’s credit rating. The added chargeback fees some merchant service providers might charge will make matters worse. The fact that you don’t have physical access to someone’s credit card is a problem, as anyone could potentially pose as someone else, increasing the risk of a chargeback.  

The good news is that you can use an Address Verification Service or AVS system to reduce the risk of chargebacks. An AVS provides a better approach to work that entails ensuring the customer’s address is the correct one. The effort flags potentially fraudulent transactions and ensures they won’t move forward, reducing the risk of a chargeback.

Understanding the Concerns of Chargebacks

Chargebacks can be dangerous in that you’re losing the funds from a prior transaction due to a cardholder disputing the charge. You will be responsible for a chargeback because your business is supposed to prevent unauthorized card purchases. A customer who feels a purchase isn’t legitimate has the right to dispute the charge with you.

These chargebacks can occur for many reasons. Someone could use a card without the holder’s consent. The customer could also claim the product or service was not delivered or provided as one wished.

You can prevent these issues by using an Address Verification Service setup. An AVS is especially critical if you accept card-not-present or CNP transactions where you cannot access the customer’s physical card. These CNP deals are more likely to produce chargebacks.

The AVS Process

AVS entails reviewing the order’s billing address versus the cardholder’s address that is on file with the card issuer. The analysis ensures the person buying something with a card is sending something to the proper location.

Here’s a look at how the AVS process works:

  1. The cardholder provides an address in the payment gateway. This address is the one that will receive the product or service.
  2. An AVS system compares the numeric parts of the address the customer submitted with what the address on the bank’s file says.

The cardholder’s name, street name, and other non-numerical factors will not be a concern. These features are obscured for security and privacy purposes.

  1. The AVS system then generates a code. The code states if the match is complete or if there are issues.
  2. The merchant can use the code to decide whether the transaction should go forward.

Your payment gateway may set up automatic rules where transactions can go forward if the proper AVS code appears.

What AVS Codes Are There?

You’ll find a distinct AVS code with each transaction that goes through a system. The code will entail one of many points surrounding whatever the system can confirm:

  • Y – The address and the five-digit ZIP match. This point is for Visa, MasterCard, and American Express orders.
  • A – The address matches, but the ZIP does not. This code is not valid for Discover orders.
  • N – Neither the address nor ZIP matches.
  • B – The address matches the report, but the ZIP is not verified. This note is only valid for Visa orders.
  • M – The address and ZIP match for international transactions.
  • F – The address and ZIP match for UK orders.

There are many other AVS codes available, with each card network having different rules for what works. For example, the A code says that the address matches for most card networks. But the A code for the Discover network says that the address and ZIP both match.

Where Does the AVS Work?

The AVS system works throughout the United States, the United Kingdom, and Canada. There’s always a possibility it could move into other markets soon.

Is There Still a Risk?

An AVS will prevent chargebacks by keeping fraudsters from trying to complete a payment. Someone who might have acquired a credit card number might not have access to the customer’s address. Since that person cannot enter that address, it becomes impossible for the order to go through. The AVS will see the fraudster is trying to send something to a place outside whatever the client wants to use.

But there’s always a risk that a chargeback could still happen. A fraudster could use social media to try and piece together details on whoever holds a card, for example. The potential for some retailers to disobey PCI DSS standards and improperly secure credit card data could also be a threat.

Still, the risk of the chargeback will be minimal. The AVS process adds a firm barrier that ensures the transaction isn’t as easy to complete as one might wish.

What Does It Cost?

An AVS process will cost extra for each transaction, although the added cost won’t be worth as much. A credit card network will provide an extra charge of about 5 to 25 cents per deal. But the cost will be minimal when you consider the other charges you might spend in processing your transactions.

Works With Other Methods

Your AVS can work alongside other methods you utilize to prevent chargebacks. These include such methods as:

  • Ensuring you only ship to the billing address
  • Reviewing the CVV alongside the address; the CVV is inaccessible if a person doesn’t have a physical card on hand
  • Provide full terms with your customers surrounding how you can resolve disputes or other issues with these purchases
  • Watch for whether there is something unusual with a transaction; you can plan an automatic flag or stop on high-value transactions to ensure they don’t go forward without a thorough review

It takes time to get these features working. But it won’t be tough to get your business working when you see what fits in any case.

An AVS will be critical for keeping your business up and running. Look at how an AVS will work and how you prevent chargebacks from occurring through this convenient solution for your work needs.

CVV Codes: Why do They Exist?

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CVV (Card Verification Value) codes are either three or four-digit numbers that are printed on either the front or back of credit and debit cards. This system was created to provide an extra layer of security to merchants and card-issuing banks against fraudulent transactions in card not present purchases.

Two Types of Codes

These codes come in two different forms: CVV 1 and 2. The CVV1 is integrated into the magnetic strip on the back of every card. In a retail, or other card present environment, where the card is physically swiped through a reader, the first CVV is used to verify the data on the track 2 mag strip is legitimate and matches up with the information the issuing bank has on file.

The second, and some might argue more important type, is the CVV2. Just to clarify, Visa and MasterCard use the three-digit CVV2 number printed on the back of the card next to the signature line. American Express uses a four-digit “Unique card code” that is located on the front of the card. Regardless of location or length, these both serve the same purpose: to prove that the person making the purchase has the original and real card in their possession.

man showing where CVV is located on a credit card

Skimming and Fraud

The CVV2 code is commonly requested by merchants in purchases over the Internet or in MOTO (Mail Order, Telephone Order) transactions. If a fraudulent card has been produced from a skimming device, the thief will not have the CVV2 number as it is only physically printed on the card and not stored electronically. Skimming is the practice of attaching a device over the top of a real magnetic strip reader, usually on ATMs or gas station pumps, to gather the sensitive information about the card. This information is used to make fraudulent cards and/or purchases.

If a thief attempts to make a purchase with a stolen card and does not have the CVV2 when the merchant requests it, the transaction will not be approved. The problem is that according to a recent study, only around 56% of online merchants request the CVV2 in order to complete transactions. Also, if a business does require the code, they can see around a 25% reduction in chargebacks.

The Bottom Line

It is important for consumers and merchants alike to protect sensitive information about their debit and credit cards. If a thief has your name, card number, expiry information, and CVV code they can very easily make fraudulent purchases or even create a duplicate copy of your card. For consumers it is important to ensure the business you are purchasing from is legitimate. For businesses, it is critical that proper procedures be followed when recording and storing your customers’ sensitive financial data.

Industry Terms: AVS

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This is the latest installment in The Official Merchant Services Blog’s Knowledge Base effort. We want to make the payment processing industry’s terms and buzzwords clear. We want to remove any and all confusion merchants might have about how the industry works. Host Merchant Services promises: the company delivers personal service and clarity. So we’re going to take some time to explain how everything works. This ongoing series is where we define industry related terms and slowly build up a knowledge base and as we get more and more of these completed, we’ll collect them in our resource archive for quick and easy access. Today’s term is the Address Verification System, or AVS.

The system was designed by card issuers to aid in the detection of suspicious credit card transaction activity, and verify that the cardholder’s address info matches what the banks have on file. The service is provided as part of a credit card authorization for mail order/telephone order transactions (MOTO) or Internet e-commerce transactions.  A code is received with an authorization result that determines the level of accuracy of the address match. This verification helps secure the most favorable interchange rates for the merchant.

Visa, MasterCard, Discover, and American Express support this service, and when paired with a CVV confirmation the result is a secure, verified transaction. To verify a customer’s address, a merchant will need the cardholder’s billing ZIP code and the house or apartment number of the billing address.  The merchant does not need to enter in the street, city or state of the cardholder.  While AVS is not intended for use as absolute protection against suspicious transaction activity, it is an important step in securing non-face-to-face transactions. Host Merchant Services recommends to all merchants that they secure these types of orders with both AVS and CVV.

Industry Terms: CVV

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This is the latest installment in The Official Merchant Services Blog’s Knowledge Base effort.  We want to make the payment processing industry’s terms and buzzwords clear.  We will eliminate any and all confusion merchants might have about how the industry works.  At Host Merchant Services, we promise to deliver personal service and clarity.  So we’re going to take some time to explain how everything works.  This ongoing series is where we define industry related terms and slowly build up a knowledge base and as we get more and more of these completed, we’ll collect them in the resource archive for quick and easy access.

Card Verification Value (CVV)

In continuing with our E-Commerce focused blogs this week, I thought it would be appropriate to introduce the term Card Verification Value, or CVV. There are two types of CVV codes, called CVV1 and 2, respectively. The CVV1 is embedded in the magnetic stripe of track 2 of a card. The purpose of the first CVV is to verify data stored on a card is valid and was issued by a bank when used in person.

The second and more prominent CVV2 is a three-digit code (Visa, MasterCard) printed on the back of credit and debit cards.  American Express cards have a ‘Unique card code’ that is four-digits long and printed on the front. Discover has a 3-digit code on the back of its cards, but refers to this as a CID (Card Identification Number). These codes are used in card not present transactions occurring over the Internet, or MOTO as an added security feature to prevent fraudulent purchases. The code is meant to verify that the customer has the card in their possession.

Security Benefits

For Merchants:

Merchants requiring CVV2 codes for their card not present transactions can dramatically reduce fraud in their businesses. Using this extra layer of protection can stop breached or fraudulent cards from going through. Avoiding potential retrievals and chargeback fees.

For Consumers:

Entering your CVV2 code when purchasing online products verifies that you are who you say you are. Under Visa regulations, merchants cannot store CVV2 codes in their databases.  This means any card numbers lost in a breach would be less useful. In this sense, a consumer is protected on both sides of a transaction, once when verifying the purchase, and then again in terms of breach or fraud security.