by Brian Hassan As of 2018, signatures are no longer required for credit card purchases. The four major credit cards let go of the requirement for cardholders to provide a signature for purchases when using a chip-enabled card.
The paradigm shift was been prompted by leaps in credit card security and fraud protection, along with consumer trends such as the rise of mobile payments technology (e.g., Apple Pay), and of course the now-ubiquitous chip card.
What changed, and does it affect your business? Let’s take a look.
What Changed
Under the prior signature authorization system, a cardholder signs for credit card purchases and for debit purchases not authorized with a PIN. As of 2018, when the changes took effect, signatures are no longer required for any chip or contactless purchases. (Note that businesses that don’t use a chip reader will still need to obtain signatures.)
Small transactions (typically under $25) have not required a signature for some time. This change simply expanded on that. The policies regarding no signature requirement went into effect in April 2018.
Related Article: PIN Debit vs. Signature Debit.
Credit Cards Go Signature Free
Mastercard
…was the first card brand to state that it would no longer require signatures for purchases. The company announced the change in October of 2017. The company claimed that there will be no decrease in security due to the removal of the signature requirement. Executive Vice President of Mastercard Linda Kirkpatrick wrote:
“What consumers will find reassuring is that removing the need to sign for purchases will not have any impact on safety. Our secure network and state-of-the-art systems combined with new digital payment methods that include chip, tokenization, biometrics and specialized digital platforms use newer and more secure methods to prove identity.”
Kirkpatrick’s reference to payment biometrics calls attention to the company’s recent announcements regarding fingerprint scan credit cards that work in conjunction with chips and fingerprint scanners on smartphones for payment authentication. Those technologies are not available worldwide yet, but the company does intend to roll them out over time.
Discover
…quickly followed Mastercard’s lead on signature removal, stating in a press release in December 2017:
“As the payments industry continues to evolve and introduce new methods of transacting, we’re making sure that Discover is providing customers and merchants with a smooth and more secure payments experience,” said Jasma Ghai, vice president of Global Products Innovation at Discover. “With the rise in new payment security capabilities, like chip technology and tokenization, the time is right to remove this step from the checkout experience.”
In its press release, Discover specifically references the goal of providing a smooth payment experience. The removal of signatures as a required step in the checkout process will offer a slightly faster transaction time. That can be particularly beneficial at peak sales times during the day and during higher traffic holidays.
American Express
…then followed suit, also in December 2017:
“The payments landscape has evolved to the point where we can now eliminate this pain point for our merchants,” said Jaromir Divilek, Executive Vice President, Global Network Business, American Express. “Our fraud capabilities have advanced so that signatures are no longer necessary to fight fraud. …The majority of American Express transactions today already do not require a signature at the point of sale as a result of previous policy changes we made to help our merchants.” – AMEX press release, 12/11/2017
Amex’s statement includes commentary about advanced fraud capabilities, highlighting the fact that the company is not concerned about security issues from signature removal.
American Express also references eliminating the “pain point” of signature requirements, reinforcing Discover’s comment about a smoother transaction process.
Visa
…was the last to jump on board, not announcing until mid-January 2018 that it would also join the signature-free revolution, signaling that the requirements of signature authentication were officially coming to an end. Dan Sanford, vice president of consumer products at Visa said:
“Our focus is on continually evolving the market towards dynamic authentication methods such as EMV chip, as well as investing in emerging capabilities that leverage advanced analytics and biometrics. We believe making the signature requirement optional for EMV chip-enabled merchants is the responsible next step to enhance security and convenience at the point of sale.”
Visa’s statement mentions an important point that we discussed earlier: The signature removal is for chip cards. You’ll still need to obtain customer signatures for purchases made with non-chip credit and debit cards. So if you don’t use a chip reader, you’ll need to collect signatures for all transactions.
Effect on Small Businesses
So, how does the signature removal affect you?
The short answer is that the use of chip cards and signature-free transactions benefits business owners. It speeds up the checkout process. Chip cards offer increased fraud protection and identity security, increased efficiency and improved customer experience, and no need to hold onto paper receipts.
Since many businesses don’t compare signatures on a receipt to signatures on a card (and since many cardholders simply scribble a line), it’s unlikely that the removal of the signature requirement will have an effect on transaction security.
However, if you haven’t already done so, you’ll need to upgrade to chip-capable processing equipment. It pays to shop around and get a competitive quote on your credit card processing hardware. You can browse CardFellow’s credit card equipment directory or get quotes from leading credit card processors.
Written by Brian Hassan and Justin Roberts, Co-Founders of Kickfin.
CardFellow staff also contributed to this article.
by Ben Dwyer