AVS, otherwise known as Address Verification Service, just doesn’t work. Banks know it, merchant service providers know it, and merchants should know it. Too often, AVS misleads merchants into thinking an order may be valid when it’s not. I’ve heard merchant after merchant say the same thing “but AVS said it was valid!” only to find themselves on the bad end of a fraudulent order with no support from their merchant account provider.

Let me shed some light on the false assumptions when it comes to AVS.

AVS is a service by Visa and MasterCard (NYSE MA) – False AVS is a function of the card issuing bank with no real set of guidelines, at least not ones that are properly enforced. The AVS response codes that a merchant receives, full match, partial match, or no match, are from the issuing bank and hold no weight with the associations such as Visa and MasterCard. Even though the card issuing bank are a major part of the final decision making process, when it comes to fraud or chargebacks, most of them will not recognize an AVS match, the very response they issued.

A full AVS match with proof of delivery will guarantee against a chargeback – False Combined, Visa, MasterCard, American Express (NYSE AXP) and DiscoverCard have over 100 chargeback and reason codes, very few of which will even take into account an AVS match and proof of delivery. The reality is simply that AVS is not a factor in eCommerce based transactions in virtually every situation.

AVS works with international transactions – False Very few banks support international AVS and those are typically only those with a strong U.S. presence. Also, consider that postal codes are a critical function of AVS and many countries either have alpha-numeric postal codes or no postal code at all.

A full match AVS response has validated the entire address – False AVS only checks the numeric value of the address and the zip. You can imagine in areas like New York City or Los Angeles, AVS becomes virtually useless as hundreds of people can theoretically share the same numeric address and postal code.

There are countless other falsities associated with AVS but I think the point has been made. The reality is that AVS had considerable value in combating fraud when it was first released before eCommece transactions ever existed and while it provided minimal protection in the early years of the internet, today it provides no more value than a nuisance to the average merchant and a false sense of security to the new online merchant.