eCommerce Glossary
This e-commerce glossary features over 250 essential terms every online seller should know to succeed in digital commerce.
An Address Verification System (AVS) is a service used to verify a cardholder’s billing address during a credit card transaction. It helps merchants reduce the risk of fraudulent activity by confirming that the address provided by the cardholder matches the address on file with the card issuer.
How Does an Address Verification System Work?
- Initiation of Transaction: When a cardholder makes a purchase, the merchant collects the billing address provided by the cardholder.
- Verification Request: The merchant sends the billing address information to the Address Verification System (AVS) for verification, typically as part of the authorization process.
- Comparison with Issuer’s Records: The AVS compares the provided billing address with the address on file with the card issuer. This address is usually the one associated with the cardholder’s account.
- Response from AVS: Based on the comparison, the AVS generates a response code indicating the level of match between the provided address and the issuer’s records. Common response codes include:
– Full match: The provided address matches the address on file.
– Partial match: Part of the provided address matches the address on file.
– No match: The provided address does not match the address on file. - Decision by Merchant: The merchant uses the response code from the AVS to decide whether to proceed with the transaction. Depending on their risk tolerance and fraud prevention policies, they may choose to approve, decline, or further review the transaction.
Why Address Verification System Is Important
AVS is especially valuable for online and remote transactions, where merchants cannot verify cardholder identity in person. It helps:
- Prevent stolen card usage
- Reduce chargebacks
- Comply with fraud prevention standards
- Enhance customer trust and payment security
The Address Verification System adds a critical layer of security to digital transactions by validating billing addresses against issuer records. It empowers merchants to detect fraud early, make smarter authorization decisions, and safeguard both business revenue and customer trust.