It's been almost a year since all four major credit card networks – American Express, Discover, Mastercard and Visa – stopped requiring EMV-compliant merchants to collect signatures for credit and debit card purchases. Major retailers such as Walmart and Target applauded the decision, noting that removing this step helps them speed up the checkout process and eliminates the requirement to save receipts, and the cost of storing them safely. But, even though these large retailers quickly dropped the signature requirement, many merchants are still asking their customers to sign receipts.
For decades, credit card companies relied on receipt signatures to prevent fraud. They required merchants to collect and store customer signatures so that if a transaction was disputed, the merchant could produce a signed receipt proving the customer was physically in the store and personally approved the purchase. Without this proof, merchants were on the hook for losses due to chargebacks. They were also liable if the signature on the receipt didn't match the signature on file or on the card.
In 2015, credit card companies began issuing chip cards to consumers and shifted liability for fraud occurring at the point of sale (POS) so merchants who hadn't yet updated their processing hardware to include EMV-compliant card readers. This laid the groundwork to shift away from signatures, and since then, chip cards and digital wallets have advanced antifraud technologies to authenticate transactions, such as tokenization and biometrics, making signature requirements obsolete.
Why, then, do some merchants continue to collect signatures on debit and credit card transactions, and what should your business do?
Some merchants still aren't EMV compliant
In some cases, merchants haven't yet updated their credit card readers to EMV-compliant models and, therefore, aren't eligible to skip signature verification. Visa reports that, as of September 2018, 68 percent of U.S. storefronts have embraced EMV technology – but that leaves 32 percent that have yet to upgrade their systems. If you're still holding out, you should speak with your credit card processor about updating your card reader.
Of those that have upgraded their systems, some may be waiting on a software update from their POS system provider to remove this step from the checkout process. But, in many cases, the systems have been updated and the merchants have chosen to continue requiring customers to sign for purchases.
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Merchants may use signatures as proof of approval
If businesses use receipt signatures for other purposes, such as approving a work order, accepting completed work or agreeing to a sales policy (such as "all sales are final"), they may still be useful for merchants.
Writing for 360 Payments, Lisa Coyle says, "Even if you decide that you are ready to do away with them on your EMV credit card receipts, you may find value in adding a signature requirement to your contract or work order. Signatures are good for much more than authorizing a credit card transaction."
Security concerns linger
Other merchants that have chip card readers in place and continue to request signatures may have security concerns about forgoing signature verification. These concerns aren't new. When the credit card networks announced EMV compliance requirements (the October 2015 liability shift), critics worried that the chip-and-sign process was less secure than the chip-and-PIN process used in Europe.
"Card networks should have adopted the global-standard PIN requirement as part of the U.S. EMV rollout," said Monica Eaton-Cardone, COO of Chargebacks911. "With no signature or PIN required, it's easier for fraudsters to use lost or stolen cards at point-of-sale terminals and harder for retailers to defend against card-present chargebacks."
But the credit card networks predicted that a PIN requirement would cause too much friction at checkout. They'd witnessed the slow adoption of contactless payments like Apple Pay and Google Pay and saw how reluctant Americans are to adopt new payment technology and processes – even when they're improvements.
Consider the irritation that consumers and merchants expressed when chip card transactions took a few more seconds to complete than swipe transactions. Then imagine the frustration of shoppers who haven't ever used a PIN number for credit card transactions – especially those who then forget their new PIN (and the exasperation of the shoppers waiting in line behind them and the cashier who's been trying to help customers learn the new process all day long for weeks).
Card-present fraud has declined with EMV adoption
Despite the lack of a PIN requirement, and the lack of a signature requirement for the past year, EMV technology has been effective against fraud. Visa reported that, as of September 2018, EMV-compliant merchants saw counterfeit fraud drop 80 percent since September 2015. More than 3.1 million merchant locations now accept chip cards, and more than 511 million Visa chip cards are in circulation in the U.S. [Interested in credit card processing for your business? Check out our reviews and top picks.]
Mastercard notes that before the no-signature requirement went into effect, more than 80 percent of in-store Mastercard transactions didn't require a signature; furthermore, removing the signature requirement hasn't negatively impacted security because of its antifraud technology. It has multiple security layers in place, including an Early Detection System that prevents attacks by proactively alerting issuers when cards and accounts have been exposed to security incidents and data breaches.
How no-signature transactions work for each of the big four card networks
Below is a summary of how each credit card network handles no-signature transactions, noting merchant location and any caveats to this policy. Remember, the credit card networks say the move to signature-free transactions is optional, so if you still prefer to collecting signatures for purchases for your business, you may continue to do so … at least for now. Eventually, credit cards may be issued without a magstripe, but that isn't likely to be anytime soon.
- Applies to all merchants who accept American Express worldwide
- American Express notes that in some jurisdictions, merchants may be legally required to continue collecting signatures. It also states that the program is optional, and merchants who wish to continue collecting signatures may do so.
- Applies to credit and debit transactions in the U.S., Canada, Mexico and the Caribbean
- Discover says that some merchants may need to update their POS systems if they no longer wish to require customer signatures.
- Applies to credit and debit transactions in the U.S. and Canada
- Applies to all EMV-enabled merchants in North America
- Visa says the signature requirement is optional for EMV-enabled merchants. If you haven't yet upgraded your system to accept chip cards, you'll need to continue requiring signatures.