10/18/2011

Shift4 Makes AVS Better

In our last newsletter, we discussed several mistakes merchants make that can result in costly Visa downgrades. One of these mistakes was not getting all the necessary AVS information. In an effort to demystify AVS for our merchants and advise of Shift4 features and benefits you may not currently be taking advantage of, we would like to offer the following “encore edition” of AVS education.

The Facts
AVS (Address Verification Service) is a functionality provided by issuing banks by which address and ZIP/Postal code information provided on a transaction can be verified against the billing information provided by the cardholder when they registered the card. The idea behind AVS is to prevent credit card fraud by validating that the customer is able to provide not only the card number (which is printed on the card) but also the address information (which, theoretically, only the real owner should know) before allowing a transaction to process.

What AVS checks:
-Street number
-ZIP code, ZIP+4 code, or postal code

What AVS does not check:
-Cardholder name
-Street name
-Secondary address information (apartment number, etc.)

Interestingly, half of US and Canadian issuing banks are not ready to handle AVS. Those that are ready may only have accurate ZIP codes in their systems. There is also some industry confusion as to which numbers in the street address should be included with AVS (e.g., should 1123 32nd St. be 1123 or 112332, or should 12591 Main St. Apt. 12 be 12591 or 1259112). With this still up in the air, many issuing banks are sticking with only ZIP and/or ZIP+4. The merchant is given the option of what they want to accept as a valid address: ZIP, ZIP+4, address plus ZIP, or address plus ZIP+4.

Checking for AVS optimizes discount and exchange rates for card-not-present or manually entered transactions (especially MO/TO and e-Commerce). Strangely, merchants qualify for these optimal rates just by asking for AVS verification – the AVS information provided doesn’t even have to match. We’ll explain this next.

How it Works
What many merchants don’t know is that AVS verification is not part of the authorization – it’s an entirely separate request. So, if a merchant manually keys a transaction, he or she will actually get two responses from the issuing bank. One will approve/decline the amount and the other provide a single-digit code that tells the merchant if the AVS information provided was a whole, partial, or non-match. (A full list of codes and their meanings is provided at the end of this article.)

You should know that a failed or partial AVS verification does not always stop the issuing bank from authorizing the transaction. You, as the merchant, must decide which AVS responses you are willing to accept. Restricting the number of allowed AVS responses can create customer service issues and lost revenue, especially if you do not accept codes that indicate a partial AVS match (such as ZIP verified, but not street number). The catch-22 is that accepting certain AVS responses can also increase your liability when it comes to chargeback defense. If you’re not sure which codes to handle, we recommend talking to your MSP.

Once you have determined which codes you are willing to accept, these codes are typically configured in your POS/PMS system, which will then allow or reject card-not-present/manually keyed transactions according to your specifications.

Shift4 and AVS
Shift4 makes this process easier for you by managing your AVS responses on a centralized basis. This means we take on the responsibility of approving or failing transactions based on your configured list. If a transaction you process receives an AVS response code that you indicated you don’t want to accept, we send a failure response to your POS/PMS. (If you are unsure of which AVS codes are currently configured for your account, please contact our Support department at 702-597-2480, option 2.)

Shift4’s Two-Pass AVS Feature
Shift4 provides another advantage for AVS verification. Because we manage AVS responses centrally, we can also offer merchants our Two-Pass AVS functionality. This is particularly helpful for MO/TO and e-Commerce merchants who want to validate AVS information on a transaction before authorizing the card for the full purchase amount. Rather than processing a $1,000 charge only to find out the transaction failed AVS, Two-Pass allows merchants to submit an “AVS Only” transaction to verify AVS-validation status before submitting the full amount. If the first pass fails AVS per the codes you configure, Shift4 will send a failed response to the POS/PMS thus not tying up a cardholder’s available balance (often referred to as their “open-to-buy” limit).

While using Two-Pass will increase the number of authorization requests sent via our system to the processor and therefore may involve some additional fees, the benefits far outweigh the costs when it comes to merchant protection and customer satisfaction. And, because we want to help you save as much money as possible, Two-Pass allows merchants the freedom to set a dollar-amount threshold below which “AVS only” validation request is not required. (In other words, you will only see these small additional fees on transactions that you deem large enough to warrant the additional security). For more information on Two-Pass AVS, please contact us.

Possible AVS Responses
Code Description
A Street address matches, but 5-digit and 9-digit postal code do not match.
B Street address matches, but postal code not verified. Returned only for non U.S.-issued Visa cards.
C Street address and postal code do not match. Returned only for non U.S.-issued Visa cards.
D&M Street address and postal code match. Returned only for non U.S.-issued Visa cards.
E AVS data is invalid or AVS is not allowed for this card type.
F Card member’s name does not match, but billing postal code matches. Returned only for the American Express card type.
G Non-U.S. issuing bank does not support AVS.
H Card member’s name does not match. Street address and postal code match. Returned only for the American Express card type.
I Address not verified. Returned only for non U.S.-issued Visa cards.
J Card member’s name, billing address, and postal code match. Shipping information verified and chargeback protection guaranteed through the Fraud Protection Program. Returned only if you are signed up to use AAV+ with the American Express Phoenix processor.
K Card member’s name matches but billing address and billing postal code do not match. Returned only for the following processors and card types: American Express Phoenix if you are signed up to use Enhanced AVS or AAV+, Paymentech New Hampshire for the American Express card type, Vital for the American Express card type.
L Card member’s name and billing postal code match, but billing address does not match. Returned only for the following processors and card types: American Express Phoenix if you are signed up to use Enhanced AVS or AAV+, Paymentech New Hampshire for the American Express card type, Vital for the American Express card type.
M See the entry for D & M.
N Street address and postal code do not match. or Card member’s name, street address and postal code do not match. Returned only for the American Express card type.
O Card member’s name and billing address match, but billing postal code does not match. Returned only for the following processors and card types: American Express Phoenix if you are signed up to use Enhanced AVS or AAV+, Paymentech New Hampshire for the American Express card type, Vital for the American Express card type.
P Postal code matches, but street address not verified. Returned only for non U.S.-issued Visa cards.
Q Card member’s name, billing address, and postal code match. Shipping information verified but chargeback protection not guaranteed (Standard program). Returned only if you are signed up to use AAV+ with the American Express Phoenix processor.
R System unavailable.
S U.S.-issuing bank does not support AVS.
T Card member’s name does not match, but street address matches. Returned only for the American Express card type.
U Address information unavailable. Returned if the U.S. bank does not support non-U.S. AVS or if the AVS in a U.S. bank is not functioning properly.
V Card member’s name, billing address, and billing postal code match. Returned only for the following processors and card types: American Express Phoenix if you are signed up to use Enhanced AVS or AAV+, Paymentech New Hampshire for the American Express card type, Vital for the American Express card type.
W Street address does not match, but 9-digit postal code matches.
X Street address and 9-digit postal code match.
Y Street address and 5-digit postal code match.
Z Street address does not match, but 5-digit postal code matches.