The rise of online shopping made it easier than ever to expand your customer base and encourage more purchases through a convenient platform, but it also ushered in a new era of fraud. Whether you run a multinational corporation or a small local business, it’s important to have systems in place to block fraudulent actors from buying your products with stolen credit card numbers. Credit card CVV codes are an important tool to help your business prevent fraudulent charges and, in turn, lost revenue. Financial identity theft, including stolen credit card numbers, is the most common form of identity theft globally, and the amount of money lost to fraud rises every year. Overall, ecommerce losses to online payment fraud were estimated at $20 billion globally in 2021.

Businesses rely on credit card CVV codes to ensure purchases are valid and prevent customer disputes, preventing time and resources from being wasted on fraudulent purchases. Here’s what you need to know to start verifying purchases with CVV codes.

What’s in this article?

• What does CVV stand for?
  
• What is a card verification value (CVV)?
  
• Where is the CVV located on a credit or debit card?
  
• How do CVV codes work?
  
• How CVV codes help protect businesses against fraud
  

What does CVV stand for?

CVV stands for card verification value and is sometimes referred to as CVC (card verification code) or CSC (card security code). American Express differentiates its verification codes by calling them card identification numbers (CID).

What is a card verification value (CVV)?

Today all credit and debit cards have CVVs to help prevent fraud. A credit card CVV code is a three- or four-digit number that businesses use to authenticate a card (along with the credit card number and expiration date) when a purchase is made. CVV codes prove a card’s validity and make it more difficult for fraudulent actors and hackers to use stolen credit card numbers, protecting both cardholders and businesses. CVV codes are typically three-digit sequences, with the exception of American Express cards, which use a four-digit sequence. Some financial institutions are experimenting with dynamic CVV codes that replace the static number with one that changes periodically and can be accessed through an app rather than via a physical card, but those are not yet common. Cardholders should do their best to keep their CVV codes secure to avoid being victimized by scammers.

Where is the CVV located on a credit or debit card?

For most credit and debit cards, the CVV code is printed on the back of the card near the signature panel. The CVV codes for Visa, Mastercard, and Discover credit cards are three-digit numbers on the back of a card, to the right of the signature box. American Express cards differ slightly: their four-digit code can be found on the front of the card. Because a credit card CVV code is not part of the credit card number, it’s located in a different area of the physical card.

How do CVV codes work?

A CVV code functions as an extra security measure for transactions. When a customer makes a purchase online or over the phone, the credit card CVV number must be verified to make sure the transaction is authorized. Payment processing software like Stripe Radar, a machine learning–based fraud prevention solution that’s integrated within the Stripe platform, will block any payments that fail the CVV verification check. If you enable your Stripe Dashboard to collect the CVV, postal code, and billing street address for each card at checkout, Stripe provides that information to a card network for verification. The card issuer then checks the information against the details it has on file for the authorized cardholder. If the information doesn’t match, the verification check will fail, and the purchase won’t go through. You can perform CVV verification by providing the CVV code either when you create a payment with a new card payment method or when you attach a new card payment method to a customer.

For instance, if someone steals a credit card number and tries to buy something from your online shop, they won’t be able to complete the purchase with only the credit card number and expiration date. (Unfortunately, if a thief steals a physical card, they will have access to the CVV.)

How CVV codes help protect businesses against fraud

Credit and debit card CVV codes serve one purpose: to stop fraudulent charges before they happen. Ecommerce losses from online payment fraud rose from an estimated $17.5 billion dollars in 2020 to $20 billion globally in 2021, and the total cost to businesses is even higher, due to increased operational costs and network fees. Integrating CVV verification into your checkout flow is a key part of protecting your business from fraudulent payments and avoiding chargeback fees.

Verify the card
CVV codes prevent fraud by verifying a credit or debit card before a payment can be processed. If your business sells products in person, using EMV-certified card readers—like Stripe’s precertified payment readers that work with Stripe Terminal—makes verifying payments simple. For online shops, tools like Stripe Checkout provide real-time card validation to ensure the authorized cardholder is the person making the purchase. The key is to use a software that seamlessly integrates CVV code verification into the mix, without disrupting the flow or prolonging the checkout process.

Prevent customer disputes
When a fraudulent actor uses someone else’s credit card details to make a purchase, the situation can become a huge headache for the business. While the account owner typically receives a refund for the fraudulent charge, the business owner loses revenue, has to write off the cost of the lost products, and often must pay a chargeback fee to the payment processor. Plus, racking up a long list of disputes can lead to bigger problems down the line. If your business is placed on a network chargeback monitoring program due to a high volume of chargebacks, you can incur higher costs from your payment processor and, in some cases, be banned from accepting card payments altogether.

Balance is key. Businesses must do everything in their power to prevent disputes and fraudulent charges without making the checkout process difficult for customers or turning away legitimate transactions. A survey conducted in 2020 found that one-third of customers said they would never shop with an online business again if their order was declined on suspicion of fraud. Fraud detection tools like Stripe Radar prevent fraudulent payments before they go through without driving away real customers, saving your business time and money.

Protect against hackers
Card issuers don’t allow businesses to store credit card CVV numbers in transaction databases, making them difficult for hackers to steal. Even if hackers are able to infiltrate a business database or website and steal credit card numbers and expiration dates, they won’t retrieve any CVV numbers. While this doesn’t prevent fraudulent actors who steal physical credit cards from making purchases, the added protection makes hacking schemes less harmful to both business owners and cardholders.

Protecting your business against fraud doesn’t have to be complicated. Covering the basics, such as using card and CVV code verification, goes a long way toward preventing disputed payments. Stripe Radar’s advanced machine learning, which verifies CVV codes, is available to every Stripe account. To better understand how Stripe Radar uses machine learning to evaluate every transaction for fraud prevention, learn more here.