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MasterCard Address Verification System (AVS): Bottom-Line Protection From Fraud-Related Losses Catalogers, airlines, shop-at-home television, telemarketers, and other direct marketing merchants conduct about $200 billion of business a year with consumers they never see. And few factors have a more negative effect on their bottom line than credit card fraud. At MasterCard International, we place a high value on our mutually beneficial relationship with the direct marketing industry. In each of the last two years, our 90 million U.S. cardholders increased their mail and telephone purchases by almost 30%. In 1990 alone, direct marketing sales created about $80 billion in volume for credit card issuers. As evidence of our sensitivity to the unique concerns of direct marketers, MasterCard International has designed the MasterCard Address Verification System (AVS) to make their credit card transactions safer and more profitable. AVS immediately and automatically compares a customerís billing address which is provided with each order, to the statement billing address on file with the credit card issuer. This gives direct marketers an extra measure of assurance that the unseen customer is the legitimate cardholder. By helping merchants to prevent fraud before it happens, AVS saves them the costs associated with merchandise losses and chargebacks, while also improving their fulfillment procedures and increasing their customersí satisfaction. MasterCard offers AVS at no additional charge to all merchants who accept U.S. - issued cards. When mail and telephone customers change their purchase to a credit card, merchants have no opportunity to compare signatures or confirm possession of the card. Thieves who use other peopleís credit card numbers to place fraudulent orders with direct merchants, typically think that the account number is the only thing checked during the authorization procedure. In most cases, they wonít have access to the cardholderís accurate billing address at the time they place the order. While the authorization indicates to the merchant that an account is valid and in good standing. MasterCard AVS provides a means to quickly check that the person placing the order is likely to be the same person responsible for payment on the account. If AVS indicates that the billing address provided with the order doesnít match the address on file with the card issuer, the merchant may have reason to suspect a fraudulent transaction and therefore choose to delay fulfillment until the customerís identity is reasonably confirmed. Merchants may access MasterCard AVS as part of the standard authorization request procedure for MasterCard and Visa transactions- incurring no additional per-transaction cost creating no delay in the response time. They also have the option to submit AVS requests separately through the authorization system. All U.S. MasterCard issuers and their credit card transaction processors are required to provide address files for AVS support. These files contain the most up-to-date billing addresses for close to 90 million MaterCard cardholders from 50 states, making AVS both comprehensive and reliable. Unlike some of the services offered by its competitors, MasterCard AVS is structured to accommodate foreign alphanumeric postal codes. This feature enables merchants to use AVS even when their customers have billing addresses outside the U.S. as long as the credit card is issued by a U.S. institution. In addition to reducing shipping delays and merchandise losses, MasterCard AVS can also cut down on chargebacks, saving merchants high customer service costs and telephone expense incurred during review and resolution. AVS users report that between 10-25% of the ìred-flaggedî transactions are eventually confirmed as frauds. The amount of savings a direct marketer can expect to realize from using MasterCard AVS depends on average daily volume and the type of merchandise sold. Leading direct marketers credit AVS with reducing their fraud-related losses by up to 75%. With the ticket size on fraudulent transactions averaging $150-200, the dollars saved can be substantial: On average, fewer than 1 in 12 AVS requests will be returned with a ìno matchî code. Merchants may follow their own policies in deciding whether or not to seek further confirmation of these transactions that before fulfilling the order and completing the sale. Most users typically require additional investigation on transactions that receive ìNî codes. ìNî codes are sometimes received on valid transactions because a cardholder has moved very recently and the card issuer has not yet received the new information or updated its system to reflect it. Or the customer may have given the address of a second residence or forgotten to include a post office box number that is part of the billing address. On the other hand, the ìNî code may be a signal that the customerî is a credit card thief, especially if the other context cues are noted by the order taker. Additional warning signals may include a difficulty in pronouncing or spelling the cardholderís name, the inability to provide a daytime or evening phone number, a request for next-day delivery, or an apparent disregard for color, size, or price. Simple investigation can usually uncover the truth. Merchants may check with directory assistance to see if the customerís address and phone number matches the phone book listing. They may also call the customer back to verify the order, send a mailgram to the billing address to confirm it, or contact the cardissuing institution. Some merchants require additional investigation only on questionable orders that exceed a defined dollar value. Remember, too, that codes indicating a matched address or zip code do not provide absolute proof of the legitimacy of the transaction. Merchants should use AVS in conjunction with their other efforts to verify a customerís identity. A ìmatchî response from AVS alone cannot provide an unconditional guarantee. The cardholderís address and zip code is transmitted electronically to the acquirer and then to the card issuer or its designated processor for comparison to information on file. A single-letter response code, indicating the extent to which the address matches, is returned with the authorization approval or decline through Banknet to the acquirer, who then relays it to the merchant. Merchant interprets the response code according to policy to determine whether or not to continue to process the order. The AVS request (0100) message will be in the CIS/8583 format. When requested as part of the authorization procedure, the AVS response code is found in data element 48 ìAdditional Dataî of the MasterCard Authorization Response Message (0110). The possible codes and their meanings are:

Codes :

X or Y Exact match on address and postal code ( X indicates a nine digit zip code; Y indicates a five digit zip code).

W or Z Zip code matches, address does not match or was not requested (W indicates a nine digit zip code; Z indicates a five digit zip code.

A Address matches, zip code does not match.

N No match on street address or zip code.

U Data unavailable from issuer or MasterCard Banknet switch.

R Retry. Issuer system down or unable to process at present.

S Service not supported by the issuer at this time.

Requirements for Merchants and Acquirers: The AVS service is optional. To be able to use the system, merchants must enhance their systems software so that billing address data is extracted automatically from the order information taken during the normal course of the transaction. They may also provide the billing address through separate input. MasterCard AVS can be requested as part of the authorization procedure using the Authorization Request/0100. Or the merchant may initiate a request through the authorization system for address verification alone by providing the address information and zero filling the ìTransaction Amount.î To match the billing address supplied by the customer to the merchant with the address on file with the issuer, MasterCard AVS uses a nine-digit postal code and five numeric values from the billing address. The issuerís system creates this 14-byte field for each cardholder. The acquirer receives from the merchant a 20-character cardholder address and zip code. The acquirer is responsible for converting to numeric values numbered street names that are spelled out. These data are condensed by the issuer or Banknet switch before comparison. Requirements for issuers: MasterCard mandates that all issuers provide cardholder address files for AVS support. They may perform AVS on their host processor or designate MasterCard International as their agent to perform the service through Banknet. Issuers must enhance their authorizations systems software to accommodate the truncated address and zip codes. If Banknet is used, issuers may choose to see the AVS data and response when the authorization request is forwarded. Issuers that elect to have MasterCard perform AVS on their behalf will be billed a monthly file residency fee of U.S. $0.02 per address, with no charge for updates. Issuers may choose from five options: Issuer provides AVS, receives condensed address data. …Issuer provides AVS, receives uncondensed address data …MasterCard Banknet provides AVS; issuer receives AVS request and response data. …MasterCard Banknet provides AVS; issuer does not receive the AVS request and response data Before installing AVS, MasterCard International suggests a review of the issuerís installation hardware and software requirements. Call today to put Mastercard AVS to work for you.

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