All Four Major Credit Cards to Go Signature-Free
By April 2018, purchasing by signature will be a thing of the past. Like dominoes falling one after another, the four major credit cards are letting go of the requirement for cardholders to provide a signature for purchases when using a chip-enabled card.
The paradigm shift has been prompted by recent 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 rapidly becoming ubiquitous chip card. The US is now quickly catching up to the rest of the world: chip cards have been in widespread use for over a decade in Europe, Russia, parts of Asia, and Australia.
What are the changes, and how do they affect your business? Let’s take a look.
- What’s Changing
- Announcing the Changes
- Effect on Small Businesses
Under the existing signature authorization system, a cardholder signs for their credit card purchases and for debit purchases not authorized with a PIN. Once the changes take effect, signatures will no longer be required for any chip card and contactless purchases, whether credit or debit. 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 expands on that. The new policies regarding no signature requirement go into effect in April 2018.
Related Article: PIN Debit vs. Signature Debit.
Announcing the Changes
Mastercard was the first card brand to state that it would no longer require signatures for purchases, announcing the change in October of 2017. The company claims 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, which can be particularly beneficial at peak sales times during the day and during higher traffic months such as the winter 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
As with Mastercard’s statement, Amex’s statement includes commentary about advanced fraud capabilities, highlighting the fact that the company is not concerned about security issues from the removal of signatures.
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, or for all transactions if you don’t utilize a chip-capable machine at your business.
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 will likely benefit business owners by speeding up the checkout process. Just a few of the benefits of chip vs. signature include increased fraud protection and identity security, increased efficiency and improved customer experience at point-of-sale, and no need to hold onto those cumbersome 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 your point-of-sale system or credit card processing hardware to ensure chip processing capability. When it comes to updating POS systems, 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.
April 2018 is just around the corner, so you want to make sure that your systems are ready to go for the chip card revolution.
Written by Brian Hassan and Justin Roberts, Co-Founders of Kickfin.
CardFellow staff also contributed to this article.