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:
- The cardholder provides an address in the payment gateway. This address is the one that will receive the product or service.
- 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.
- The AVS system then generates a code. The code states if the match is complete or if there are issues.
- 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.