The Importance of AVS And CVV for Chargebacks

The Importance of AVS And CVV for Chargebacks

You should be willing to do anything within your legal power to avoid getting a chargeback. And anything to avoid having to issue a refund,
except getting a chargeback.

Unfortunately, many retailers wind up having to deal with a high chargeback rate because they’re so eager to avoid refunds. Refunds are a last line of defense, but they are a line of defense. Chargebacks mean that you’ve lost this round, your customer decided it was easier to go over your head than it was to work with you to have their concerns addressed. On some level, you failed them.

Or, it might be because of friendly fraud, but friendly fraud will take place whether or not you make it easy to get a refund.

In any event, the trick is to do whatever you can to ensure that your customers don’t want a refund. That means making sure that product descriptions are accurate, working with reputable couriers and shipping companies, addressing their concerns before they ask for their money back, sending replacement products for free if you have to, anything you can do to keep them happy and ensure that they’re happy with their purchase. Then if they really want a refund, go ahead and give it to them, because chargebacks are far worse than refunds. It’s not always easy, but it’s simpler than some merchants make it.

AVS And CVV for Chargebacks

Preventing friendly fraud, on the other hand, can be a tricky balancing act. You need to make sure that your prevention methods prevent fraud without punishing honest customers buying in good faith. It is important to set up stumbling blocks for people who would attempt to defraud you by making a purchase in bad faith and denying the charge later on, but it is just as important, if not more so, to make sure that these stumbling blocks are effectively invisible to honest, paying customers. And this is where AVS and CVV come in.

What Is AVS?

AVS stands for Address Verification System. So it’s not difficult to guess what AVS is. It’s simply requiring people to provide a billing address when they sign up. If you have existing customers who have already made several purchases without asking for chargebacks, you probably don’t need to worry about them. Just ask for a billing address from new customers and from customers who have yet to make a purchase.

Now, AVS isn’t absolutely perfect as a checkpoint to stop e-Shoplifters. But it’s a pretty good solution. The main problem with AVS isn’t that friendly fraudsters can easily bypass it. In fact, they can’t easily bypass it. If they see that you require address verification, nine out of ten of them are going to go looking elsewhere for an easier mark.

Rather, the issue is that it’s an extra step that a legitimate customer has to take before signing up. This can result in a handful of customers clicking through your landing page and deciding not to bother. If you sell impulse buy items this can be significant. Otherwise, most customers are probably going to convert anyways. Worst case scenario you’re probably not going to lose any more money than you’re saving by keeping the charge backers out, and it’s going to be a net win in the long run as you keep your chargeback rates down.

Anyways, if you use Google Chrome, filling out your billing address just once means that it will be ready to autofill on every other website you visit. Other browsers are doing this, too. So it’s unlikely that you’re going to lose a significant amount of business because people don’t want to take an extra forty-five seconds to put their billing address in on the sign-up page. Plus it’s not as if you have to put your address in every single time you make a purchase. Once a merchant has it on file, that should be good enough.

Even so, AVS isn’t perfect, because it’s not all that difficult for a scammer to set up a billing address, or even use their own legitimate address and avoid committing fraud in such an extreme that they would ever face fines or persecution. In fact, the vast majority of cyber criminals tend to focus on stealing in small amounts from several sources. It is unlikely that someone is going to make a federal case out of a three dollar chargeback, but they will for big-ticket purchases.

This is why AVS isn’t enough on its own, you also need protection with CVV.

What Is CVV?

CVV stands for Card Verification Value. A little less obvious than Address Verification System. But it’s the three digit code that you always have to put in when you set up a new account on an e-Shop. It’s the three numbers you find on the back of your credit card, or, if you’re an Amex user, a four digit number found on the front of the card.

The verification system is somewhat similar to the AVS. They simply look at all the data and make sure it matches. If there’s a discrepancy, then the transaction is cancelled automatically.

Just as with AVS, this isn’t going to make your transactions bulletproof against chargebacks. People can still commit friendly-fraud with legitimate information. And most cybercriminals steal the physical card itself, not just the number on the front, meaning that if they have access to the card, they can still steal something with someone else’s information.

But, combined with AVS, CVV makes for a pretty potent security measure.

This is a great setup for preventing friendly-fraud most of all because it adds some accountability. Namely, if a customer had to enter their billing address and the verification numbers on their credit card, then they can’t go telling their bank or card company that they don’t recognize the purchase.


Additional Protection

You shouldn’t stop with just CVV and AVS and consider your business safe from fraud. There are a lot of extra steps that will help you to keep your business in the black. For instance, you should always keep a record of every phone call, every receipt, every everything pertaining to every sale. Once upon a time it made sense to throw old papers out when you didn’t need them anymore. Now, all of the data can be held without even using up hard drive space on your computer. You can just keep it in the cloud.

The more information you have, the more extensive the records, the harder it will be for a customer to say that they don’t recognize the purchase when you have them on the phone saying that this is a legitimate order.

On that note: Making calls when an order seems suspicious is a good idea. If an account is making a big ticket purchase, if they’re buying something that seems out of character with their shopping history, you can give them a call and make sure everything is on the up and up. You might even tip them off that their information has been stolen, and if they are making an attempt at friendly fraud, you have recorded evidence that they should be able to recognize the purchase.

These are just a few ideas to keep your business safe. Security needs will vary from one industry to another and be depending on the size and scale of your business and so on. One of the best ways to ensure that your business is secure is to go ahead and give your payment processing service provider a call and talk to them about how you can prevent chargebacks. They know better than anyone what the tell-tale signs of friendly-fraud are, they know all the tricks cybercriminals will use, and they don’t want you to get hit with chargebacks anymore than you do. They should have an in-depth knowledge of the system and how fraudsters try to game it, so they’ll be able to advise you on the best way to prevent chargebacks.

Can CVV And AVS Help Beyond Fraud?

The short answer: Not really.

If someone makes a legitimate purchase in good faith and they decide that they’re not happy with what they’ve received, there’s nothing stopping them from filing a chargeback if that’s what they want to do. And to the bank or credit card company, it really doesn’t matter if the customer is being fair. They’ve already refunded the purchase, and now they’re going to come after you for their cut.

AVS and CVV are great at preventing fraud and helping to deal with friendly-fraudsters, giving you a sort of plausible deniability when the customer says that they do not recognize the charge. However, it’s not going to be a big help against other chargeback instances.

For example, if someone decides to file a chargeback just because they can’t find the refund button on your website, then AVS and CVV can’t really be that much of a help. If the product showed up damaged and you’ve refused them a refund, then, of course, they’re going to ask for a chargeback, and the bank is going to take their side.

This is another reason to talk to your payment processing service provider. It’s not just about security. When they add up on your BBB report when they rack up on your record, one chargeback is the same as any other, and it doesn’t really matter why someone asked for a chargeback, just that they did. It makes your business look bad even when it’s no fault of your own.

Preventing chargebacks by any means necessary, even if that means giving refunds when you’d rather not, is going to pay off in the long run. When you get hit with too many chargebacks you can wind up having to pay more to your payment processing service provider, or being dropped by them entirely and having to seek out a company that specializes in “high-risk” merchants, that is merchants who have high rates of chargebacks, such as gun sellers and online gaming sites. You don’t want that, and your payment processing service provider doesn’t really want that, either, so prevention is the best medicine here.

When you are hit with a chargeback, contest it. Even if you don’t think there’s any chance that the bank or credit card company is going to overturn their decision, having a record that you did contest the chargeback means that you at least did not admit fault, and that’s going to come in handy.

In any event, AVS and CVV are a great tool to help prevent fraud and friendly fraud. Simply by having more data on the record, you have a more extensive resource of information to draw on when contesting chargebacks, and this is going to help you keep your record clean. Treat your customers fairly, stay secure, and you might not be able to prevent every chargeback, but you’ll be ahead of the game.

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