A Relic of a Different Time
Signatures are now considered an antiquated form of proving one’s identity, and now the major credit card brands are acknowledging this fact. Signing for a purchase has its roots in the first half of the twentieth century when charge cards were popularized as a form of merchants extending credit to consumers to encourage shopping at their business. But now we live in an age where we have new technologies for identity verification that are more secure and easier to provide, so signatures are now being supplanted by personal PINs and NFC transactions that often don’t require any further personal verification.
Signatures have slowly been phased out over recent years as cardholders around the world have been issued more sophisticated EMV enabled cards, and it now appears chip cards have finally arrived en masse in the US as well. This change has been a slow-moving one in the US, especially after EMV enabled chip cards have become the new standard in Asia, Canada, and Europe, but the US is now catching up, with the number of chip cards issued more than quadrupling since 2016.
Over the past decade, card networks have stopped requiring signatures on smaller purchases, but the many varying and contradictory rules by all the different card brands was understandably confusing for merchants, who often chose to simply require signatures just to be safe. It seems old habit really do die hard.
Moving Verification Forward
Now with swiped transactions being slowly phased out, and merchants being penalized for not using EMV technology, signatures are officially being phased out entirely. With new types of transactions such as tap and pay and chip and pin becoming more popular, and moving toward becoming the new standard in the US, fewer customers are being asked to sign a receipt or screen when authorizing a transaction. Now the card brands are acknowledging this payment trend and removing the requirement for signatures in certain countries.
Amex, Mastercard, and Discover have all stated that merchants can stop requesting signatures as of April 2018 and Visa is expected to follow suit shortly. The change applies to customers in multiple countries depending on the card brand. Here are the countries each card brand is applying the changes to:
- Amex is applying the change worldwide
- Mastercard is applying the change in Canada and the US
- Discover is applying the change in Canada, the US, Mexico, and the Caribbean
- Visa has made the change optional for merchants in North America who are able to process chip and pin transactions instead, it’s important to note that Visa applies this change only to merchants who have EMV enabled terminals, if your terminal is only able to accept swipe transactions then you are still required to obtain a signature as your customer verification method
The change will have the biggest impact on customers in the US, the country that processes the highest number of swipe transactions. The US market has been slow to roll out the EMV enabled credit and debit cards, or “chip” cards, to consumers and, as a result, fewer merchants have taken steps to update their terminals to accept the new technology.
Benefits of Replacing Signatures
Removing the signature requirement from transactions is beneficial to your business by helping you save time, serve more customers, and by helping to prevent fraud. Removing the need for a signature helps you process transactions faster because customers are able to complete all of the authorization steps for the transaction from the terminal, you don’t need to wait for a receipt to print and for the customer to sign it. When you rely on NFC and EMV technology for your transactions, as soon as the terminal displays an approval, the transaction is complete, your customer can exit the checkout, and you can move on to helping the next customer.
No signatures also means no signed receipts, so you no longer need to worry about filing receipts for future reference or the possibility of misplacing a receipt or not being able to find it when you need it. As long as your terminal is EMV enabled you no longer need to worry about storing transaction receipts.
Removing the signature requirement can also help you provide a more consistent customer experience for each transaction. Prior to doing away with signatures, customers most likely encountered a different transaction experience at different retailers. At one retailer they may have been able to pay using their EMV chip card without having to provide a signature, at another, the transaction amount may be low enough that no signature is required, and at a third, they may have been asked to sign for their purchase. These variations in customer experience could lead to frustration on the customer’s behalf as they do not know what to expect during the checkout process.
Finally, relying on EMV technology as opposed to signatures to validate transactions can help protect your business from fraud. While signatures can be easily forged or written illegibly, EMV transactions are much more secure and have had a big hand in helping to reduce fraud. This is because chip cards create a unique transaction id for each transaction and are very difficult to replicate and require the customer to enter their PIN to complete the transaction. Updating your terminals so they are EMV enabled will help to shift the liability from the transaction away from your business, helping protect yourself from the risk of fraud and chargebacks.
The Future of Payment Verification
While EMV has slowly phased out the old swipe standard and is generally considered the new standard, in the future you could see new technology, like biometrics, used to validate transactions. Visa is currently testing the use of biometric payment cards as an alternative to using a PIN or signature to authorize a transaction. Much like how you unlock your phone using your stored fingerprint data, the cardholder would place their finger on their payment cards sensor to confirm they are the authorized cardholder.
Until customer verification methods like biometrics are used on a wider scale, EMV will most likely remain as the payment standard. If you are a Canadian Merchant, Visa Canada has an EMV mandate of 2020 that requires all terminals to be able to be EMV enabled by that time. While a similar mandate has not yet been issued to US merchants, there is still a strong push by the card brands to ensure only EMV enabled cares are being issued and that 99.99% of transactions will be processed using EMV enabled cards.
What Does This All Mean for Merchants?
The card brands are removing the signature requirement for transactions to encourage merchants to utilize the new payment technologies with chip cards because it is considered more secure than swiping a card to process a transaction. Some businesses, including those in the restaurant or service industry space where the customer is asked to enter a tip on the receipt in addition to signing it, may still ask for signatures because the tip will change the total of the final bill after the fact. If your business provides products or services that include special terms or conditions along with the purchase, then you may find it beneficial to still obtain a customer signature agreeing to those conditions. However, in all of these cases, there is still added security and reduced liability if you process the transaction using an EMV enabled terminal and then require the signature as a secondary customer verification method.
Ultimately, it will still be up to you, the business owner, to decide if you want to require a customer signature to authorize a transaction, but if your terminal is EMV enabled to accept chip and pin transactions, then you are no longer required to do so.