Popularity of Gift Cards May Cause a Problem for Online Merchants

The expected surge in gift cards received this holiday season may cause a problem for online merchants that try to match billing addresses given by consumers at checkout with those on file with issuers before authorizing transactions, says ClearCommerce Corp. Online retailers will usually set their address-verification systems (AVS) to reject orders exceeding certain dollar thresholds when they don't get a match for parts of a street addresses and zip codes. But gift cards branded by American Express, Visa, and MasterCard aren't issued to a specific consumer, the Austin, Texas-based payments gateway for e-commerce sites says, and that can pose a problem when merchants try to perform AVS, a common anti-fraud technique. Issuers in these cases will often send back codes indicating the address could not be validated, ClearCommerce says, adding that some retailers have set their AVS systems to reject all orders for which they can't get a complete match. ClearCommerce recommends that online merchants review their AVS rules in light of an expected wave of gift card usage after Christmas. The company specifically recommends that merchants include in their AVS rule sets the responses typically returned on gift card transactions. It also recommends extra training for internal review personnel to allow them to isolate rejected gift card-based orders that are probably valid. Introduced eight years ago, gift cards continue to soar in popularity. The prepaid plastic is now bought or used by some 64% of the adult population, according to a recent survey conducted by ValueLink, a stored-value processing unit of First Data Corp., up from 59% in 2003 (Digital Transactions News, Oct. 18). During last year's holiday season, the cards accounted for $17.3 billion?8%–of sales, according to the National Retail Federation.