A Relic of a Different Time
Signatures are now considered an antiquated form of proving one’s identity, and the major credit card brands are finally 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 them to shop at their businesses. But now we live in an age where we have new technologies for identity verification that are much 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 currently, the amount of chip cards issued in the US has more than quadrupled since 2016, so they can no longer be ignored by merchants.
Even in 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 habits really do die hard.
Moving Verification Forward
Now along with swiped transactions being slowly phased out, and merchants being penalized for not using EMV technology, signatures are also on their way out. With new types of transactions such as tap and pay and chin 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 their transactions. Now the card brands are officially acknowledging this payment trend and removing the requirement for signatures in certain countries starting this month.
Amex, Mastercard, and Discover have all stated that merchants can stop requesting signatures as of April 13th, and Visa is expected to follow suit very shortly. This change applies to 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
The change will have the biggest impact on customers in the US because it's the country that still 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, save paper, prevent fraud, and mitigate potential chargebacks. 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. 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 for the future.
Removing the signature requirement can also help you provide a more consistent customer experience for each transaction. Prior to doing away with signatures, customers 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 at all. These inconsistencies in the payment 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 reliable, and because of this, have had a big hand in helping to reduce fraud. This is because chip cards create unique transaction data for each transaction and are very difficult to replicate, which can significantly cut down on card-present fraud. These transactions also require the customer to enter their preset PIN to complete the transaction, which is a much more reliable method of verification. 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 any potential chargebacks that may result.
The Future of Payment Verification
While EMV has slowly phased out the old swipe standard and is generally considered the new standard for credit and debit card transactions, 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 card's sensor to confirm they are the authorized cardholder.
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 that use 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.
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, mostly for your own records. But if your terminal is EMV enabled to accept chip and pin transactions, then you are no longer required to.