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The role of address verification in the rising world of e-commerce

After the covid pandemic, the world has evolved quickly towards digitization. The global retail trade share of e-commerce has risen rapidly in the past two years, from 14% in 2019 to 17% in 2020. Address Verification is becoming essential for e-commerce businesses to ensure that their business runs smoothly. Because with the rise of e-commerce, the online fraud ratio has also gone up.

Online address verification is crucial to authenticate and ensure that you are dealing with the right customer. People try to do credit card fraud like criminals trying to use fake or snatched IDs to perform transactions that affect the seller’s business. The real owners of the IDs can chargeback for that particular transaction because they were not aware of that. It will make it hard for the sellers to run their online business smoothly. They have to deal with different banking issues. Sometimes they can lose money or even face account freezing.

Now, most online stores ask the consumer to provide the validated address to ensure that they have a smooth transaction and they are dealing with a valid person. Because of the rise of e-commerce, there are a lot of age-restricted products that are up for sale, and minors try to purchase these products by using the credit cards of their parents. Address verification allows sellers who sell age-restricted products to verify their customers to avoid minors buying their products. Because these types of products can harm their health or even their future like they can buy drugs or alcohol which can destroy their physical and mental health. And there are some laws to sell these types of products to the underages in almost every country. So most e-commerce businesses try to avoid minors as their customers and they try to follow rules and regulations.

What is an address verification service (AVS)?

AVS is a system that verifies the authenticity of the user by the address-related information. It ensures that the user is legitimate and it also ensures a smooth transaction.  The user provides some official documents having addresses on them. The system extracts related information and uses that information to verify the users.

Use cases 

Businesses use address verification systems to prevent fraudsters and unauthorized transactions. The fraudsters purchase the product and after some time they claim that they did not buy anything and they claim chargeback or they claim that they have not received that product.58% of the companies think that their chargeback rate has increased in 2020 and the biggest reason of the chargeback is fraud which is 57.9%. Address verification allows sellers to target certain areas they can verify the legitimate customer. Some sellers want to sell their products in particular areas and want to avoid customers from other areas. It verifies the physical address of the customer to onboard the legitimate customers of the targeted areas.

In the banking sector, they use the address AVS  to verify the customers before opening the account, and Insurance companies also use this system to verify their customers.

How its works

In most of the services, the user uploads a selfie at the first step and then he uploads the document, and the OCR system extracts data from the document then the system verifies the end user. 

When a fraudster tries to perform a fraud transaction it originates from a physical address. The system then verifies the address from where the transaction is performed with the valid address of the card and tries to identify the potential fraud.

For example, if a transaction is performed from New York but the actual and valid address is in Washington, the system will identify and flag the transaction for further investigation.

Conclusion

Online businesses approximately bear the loss of 6.7$ billion dollars due to chargebacks and from which  4.8$ billion dollars are because of fraud chargebacks. But thanks to some fraud prevention services the ratio of chargeback to transaction ratio is dropped to 25% in 2020. E-commerce business owners are now using fraud prevention services like address verification, document verification, identity verification, and biometric authentication. Now it is proven that fraud prevention mechanisms like address verification are playing a vital role in making e-commerce procedures smooth and safe.

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