December 21, 2004, 12:00 AM

Gift cards could create havoc with online buying, ClearCommerce warns

Online retailers may be inadvertently rejecting valid transactions if they rely on card companies’ Address Verification Services when they process purchases paid with gift cards, payment processing and fraud prevention company ClearCommerce Corp. warns.

Kurt Peters

Executive Editor

 

Online retailers may be inadvertently rejecting valid transactions if they rely on card companies’ Address Verification Services when they process purchases paid with gift cards, payment processing and fraud prevention company ClearCommerce Corp. warns.

Julie Fergerson, vice president of ClearCommerce, reports that a number of retailers have contacted ClearCommerce within the past few days inquiring about how to handle MasterCard, Visa and American Express gift card transactions that come back with rejected addresses. The problem is thorny because only American Express has a code-U-that indicates a gift card. MasterCard and Visa systems only report that the transactions fail the address verification check and retailers have no way of knowing that they are gift cards, Fergerson says.

The issue arises when customers indicate they are paying with a card, then input their own address as the billing address. Since there is usually not an address associated with a gift card, the issuing institution reports an invalid address. Retailers often reject transactions that do not obtain a full match AVS response.

The challenges of dealing with gift card transactions will be bigger this year than in the past as the popularity of gift cards-many of which will be received on Christmas morning-soars. “I expect this problem will be really big after the holidays,” Fergerson says.

Fergerson says retailers have little recourse for now, other than to alert their fraud teams to the problem and encourage them to contact customers when an AVS rejection comes back. She says ClearCommerce is creating a database of bank identification numbers that indicate gift cards. Retailers can call 866-497-0343 for a free check of those numbers.

 

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