Combating Credit Card Frauds using Address Verification

Over the last decade or so, e-commerce has grown significantly. With the increase in the trend of online shopping, the use of credit cards for online transactions has also increased. Consequently, a spike in credit card fraud has also been observed. According to the Nilson Report, in 2016, the global card fraud losses were about $22.8 billion, which was a 4.4 percent increase over 2015. 

How does it happen?

Credit card fraud is a form of identity theft, and it can happen in two ways. 

  • New-account fraud 

In this case, the fraudsters apply for a new credit card account in your name, using your Social Security number, address, and other identifying information. 

  • Existing-account fraud 

In this case, the fraudsters access your current credit card account by stealing either your credit card information or your login information. 

How to Combat Credit Card Frauds? 

With the advancement in the applications of Artificial intelligence, it has become relatively easier for merchants and online retailers to detect any irregularities in the online purchases and hence detect credit card frauds. There are several ways to do that, which include biometric verification, facial recognition, CVV code, IP address authentication, address verification, etc. 

Address Verification Services (AVS)

AVS is one of the most commonly used fraud prevention tools in the US. It is an automated program that works by comparing the billing address used in an online transaction and the address provided by the consumer on the bank file. AVS is used in card-not-present transactions. 

How does it work? 

When the consumer types in the credit card number, a request is sent to the consumer to verify themselves. The billing address given by the consumer is compared against the billing address on record with the issuing bank. If the addresses don’t match, the transaction is denied. On the other hand, if the addresses do match, the bank will approve the transaction and return a response code, which will indicate how closely the addresses match. 

If the sale is approved by the bank, the merchant further decides the action be taken based on the response card provided by the bank and the merchant’s practices. Mostly, the retailers have put their rejection or acceptance settings, which automatically accepts or declines the transaction on the basis of the response codes. 

Address Verification services protect customers and retailers from identity theft or fraudulent bank transactions. Although online address verification services are becoming highly popular in countries like the United States of America, the United Kingdom, and Canada, the service has yet to come to other countries.

This service is used and supported by all major card services like MasterCard, Visa, and American Express, etc. Address verification surely provides one security and mitigates the risks of digital scams like identity theft, credit card frauds, chargeback frauds, etc. It is important to know that just using AVS is not recommended to protect your business from credit card fraud.

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