The Cost of Online Fraud – Verify Address Using AVS

The internet has undoubtedly changed the way we shop.  Shopping for many common household items and, clothing in particular, has become a way of life.  People are finding that ordering paper towels in bulk or even toothpaste through Amazon or other online merchants can be cheaper than buying at the grocery store and the product is delivered right to your door saving time and money.

Unfortunately, this has created an increase in credit card fraud activity and merchants can be hurt financially in the process without controls in place to combat the activity.  Fraudulent sales result in chargebacks to the merchant if a cardholder says they never received the merchandise or worse yet, never ordered the merchandise.  In a study by LexisNexis, merchants lost .85% of their revenue to fraud in 2014 and that number jumped up to 1.39% in 2015 indicating a very sharp rise when compared to a mere .53% in 2013.

While 1.39% might not seem like a big loss, it depends on your sales volume.  For a company like Target doing $2.5 billion in online sales in 2015, the amount lost was nearly $35 million!  That’s a lot of money for any company to lose to chargebacks.

With the current trend of online fraud skyrocketing, it is important to take the time to verify that the credit card presented matches the address where the credit card is billed to.  While the service address or shipping address might be different than where the monthly bill is sent, it is very important to match the address and zip code at the time the card is presented for payment using the AVS system offered by credit card processors.

The Address Verification System (AVS) is intended to combat fraud but if you don’t obtain the address and zip code and simply bypass this step when processing credit cards you really put yourself at risk.

A common scheme for fraudsters is to identify a house where no one is home all day and have packages shipped to that address and wait for them to arrive.  The real homeowner may never know that a package was delivered by the time fraud investigators come calling.  By verifying the address of the presented credit card you will at least have a red flag if it doesn’t match the address the caller provides during the ordering process.  Also consider using trackable shipments requiring a signature from the receiving party to help identify who received the package.

All of these methods won’t combat crooks who simply report never receiving an item or calling their credit card company to complain the product wasn’t what they ordered or the product was damaged and the merchant wouldn’t take it back or one of many other clever methods consumers use to get their credit card issuer to initiate a chargeback and get it taken off their bill.


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