How does CVV (card verification value) work?
Comparing the customer-provided CVV to the value on file with their bank is a great fraud detection tool. Cloned or stolen cards won't have the value and receive a mismatch response, allowing you to decline the sale.
CVV, or Card Verification Value, works just like AVS (address verification service). When you process a a sale while adding in the CVV, that value is passed through the processing network to the issuing bank for confirmation. Should it match, you’ll receive a response letting you know! If you get a mismatch, that's a strong indicator of fraud. Depending on your gateway, you may be able to auto-decline any sale that receives a ‘mismatch’ on the CVV.
Another item to keep in mind in regard to CVV is it will not affect the interchange rates paid whatsoever. This is contrary to the AVS system, which does grant lower rates for usage. The reasoning makes sense, though - if a thief steals your physical card, they stole the CVV code, too. This check would do nothing for a card that's been physically stolen. But the AVS system, however, would definitely help in that scenario, as the thief likely wouldn't have the cardholder's full billing address - so the rates are reduced for AVS responses. If you had to choose, you'd want to check AVS before CVV. But the CVV check still has value, since many fraudsters will buy "lists" of cards, and the CVV code isn't included in the list. We recommend requesting this information during every sale to help reduce fraud!
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