Address Verification Service (AVS)

With global credit card fraud losses projected to reach $38.5 billion by 2027, merchants and payment processors are under growing pressure to prevent unauthorized transactions.

One of the most widely used tools in this fight is the Address Verification Service (AVS), a system designed to verify that the billing address provided during a transaction matches the one on file. AVS plays a critical role in detecting and blocking fraudulent activity, particularly in card-not-present (CNP) transactions, such as those made online.

What Is AVS?

AVS is a fraud prevention tool offered by credit card processors that helps merchants verify card ownership during online transactions. It works by prompting customers to enter their billing address at checkout, which is then checked against the address on file with the issuing bank.

AVS is one of several safeguards designed to prevent the use of stolen debit and credit cards. If there’s a mismatch between the submitted and registered addresses, the merchant is notified but can choose to proceed with the transaction.

Originally developed by Mastercard, AVS is currently available in the US, Canada, the UK, Australia and New Zealand. It’s supported by major card networks including Visa, Mastercard, American Express and Discover.

If an AVS check fails, customers may see a temporary authorization or pending charge on their account. The bank typically clears this hold shortly afterward, but this does not result in a completed transaction.

If you’re a merchant using AVS, encourage customers to enter their billing address exactly as it appears on their card statement. It’s also good practice to inform them that in case of a decline, any visible charge is only temporary and will not result in an actual payment.

How Do Address Verification Systems Work?

At checkout, the customer enters their payment and billing details, which the merchant then sends to the card processor. The processor consults the issuing bank to verify the information and returns a result that helps the merchant decide how to proceed.

Here’s how this process typically unfolds:

1. The buyer reaches the checkout page where they enter their payment details, including their billing address.
2. The merchant requests an AVS check from the card processor.
3. The card processor compares the entered billing address with the one on file for the cardholder..
4. The AVS check returns one of the following results:
   • Full match
   • No match
   • Partial match – zip code
   • Partial match – address
   • Unavailable
   • International
5. The results are sent back to the merchant, who can then accept, reject or further investigate the transaction. Alternatively, machine learning rules may automate the decision process based on the AVS result and other risk signals.

It’s important to note that AVS is not supported in all countries. Transactions involving unsupported cards should be handled with care to avoid unnecessary declines.

Legitimate customers also tend to make purchases from addresses not registered with their bank or change their residence without informing their bank. AVS response codes provide useful context to help distinguish between honest mistakes and fraudulent activity.

AVS is particularly effective when a fraudster only knows the credit card number but no other data associated with the customer. Unfortunately, this is not that hard to overcome, as criminals can find out the cardholder’s address with fairly little effort. That’s why AVS should be used alongside additional signals — like mismatched shipping addresses (potential drops) or suspicious email domains — to build a more comprehensive fraud detection strategy.

What Is an AVS Decline?

An AVS decline happens when the address verification service check fails, and the merchant or processor rules are set up to decline such transactions.

If the customer is legitimate, this is considered a false positive — when a genuine transaction is mistakenly flagged as suspicious or rejected. Research shows that legitimate buyers are frustrated and discouraged by such rejections, with false positives being responsible for over 50% of subscription churn, a phenomenon often referred to as the “customer insult rate.” High false positive rates can damage customer trust and lead to lost sales. To avoid this, businesses must carefully balance fraud prevention with a smooth, welcoming checkout experience to avoid driving away their own customers.

Why Is AVS Important?

Originally designed to support mail order/telephone order (MOTO) merchants, AVS has evolved into a critical tool in all CNP fraud prevention strategies. For customers in supported countries, AVS provides an additional layer of verification that helps block low-effort attempts to use stolen card information, strengthening anti-money laundering (AML) defenses.

For merchants, AVS delivers valuable risk signals that should be integrated into overall risk scoring. This reduces exposure to chargeback fraud and helps maintain a healthier chargeback ratio with banks, protecting both revenue and reputation.
Because AVS, like all fraud tools, can produce false declines, it’s advisable to verify uncertain cases directly with customers. This helps reduce false positives in AML, which can frustrate genuine customers and disrupt business.

Sources:

•  PYMNTS: Avoidable Failed Payments Cause 50% of Subscription Churn