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Credit Card Companies Are Eliminating Signature Requirements, So What Should Your Business Do?

Caroline Goldstein

Staff Writer at Fundera
Caroline is a small business and finance writer at Fundera. Before coming to Fundera, she received an MFA in Fiction from New York University. She loves finding creative ways to help entrepreneurs grow.

When’s the last time you used your signature on anything other than a credit card receipt? If you need to stop and think about it, then you’re among the 55% of consumers who only sign their names a few times a month. Credit card issuers know that—and that’s why, starting April 13, four major credit card companies are eliminating signature requirements for in-store purchases.

Visa, Discover, Mastercard, and American Express announced plans to do away with signature requirements as early as last year. But those plans are in effect, and will continue to roll out throughout the remainder of April 2018.

Keep in mind, though, that the no-signature option is only viable for point-of-sale systems with chip-reading capabilities. And even then, this option isn’t universal. There are specific places and instances in which credit card companies are eliminating signature requirements.

Here’s where the no-signature option is taking effect:  

Here’s more on why these companies are making the move, and what this means for small businesses—particularly retail and other consumer-facing entities.

Why Are Credit Card Companies Eliminating Signature Requirements?

Most major credit card companies in the US now use EMV technology, which has increased card security and minimized credit card fraud. Unlike magnetic strips, which contain static data, EMV chips create new codes for every transaction—making it impossible for hackers to steal, replicate, and use that data. Although credit cards do still have magnetic strips, card issuers have widely rolled out EMV technology across credit cards, and most merchants now process payments with these chips, taking advantage of the increased security—effectively eliminating the need for a signature.

American card companies began issuing chip-and-signature credit and debit cards a couple of years ago, though chip cards have been the norm in Europe and Asia for decades.

Data conducted by researchers at Visa shows that counterfeit fraud was down 70% at retailers with chip-enabled point of sale systems. And Jaromir Divilek, an executive vice president at American Express, told CNN Money that Amex’s fraud protectionshave advanced so that signatures are no longer necessary.”

A Welcome Change in the Works for a While

This policy change isn’t exactly sudden. You might have already noticed that your signature isn’t always required for small transactions, and you may have even enabled this no-signature option at your own business. Point-of-sale systems ShopKeep and Square, for instance, both allow small business owners the option to forgo signatures on transactions less than $25.

Plus, we imagine we don’t have to tell you that doing away with printing and signing receipts at the checkout counter makes the point-of-sale process more efficient. Who wouldn’t want to save both the merchant and the customer valuable time, and make the end of a transaction as pleasant as possible?


What Eliminating Credit Card Signature Requirements Means For Small Business Owners

Some policy changes are big a big deal for small business owners—like the Trump Tax Plan, for instance. But don’t expect this policy change to affect you as a small business owner all at once—or period, if you don’t want it to.

These four major credit card issuers are simply doing away with the requirement for customers to provide their signatures on receipts. That means, at the end of the day, it’s up to the individual merchant to decide whether you want to hop on the no-signature bandwagon. Or, you can happily maintain the signature requirement at you stores and keep business as usual.

So, to require the signature, or not to require the signature? You’ll need to ask yourself this question, and consider what’s best for your small business. And there are arguments on both sides of the division.

Why You Shouldn’t Require a Signature on Credit Card Purchases

Target and Walmart are firmly on the side of the credit card companies’ decision to eliminate signatures: Target plans to oust signatures by the end of April, while Walmart has been a vocal defendant of chip technology for years: In 2016, Walmart sued Visa for forcing their customers to sign receipts on transactions made with chip debit cards. Then, Walmart said that “PIN is the only truly secure form of cardholder verification in the marketplace today,” and old-school signature verification was dangerously “fraud-prone.”

Fraud protection is a huge argument in favor of the no-signature movement—after all, fraud protection is one of the key motivations behind the credit card companies’ decision to spearhead the no-signature movement in the first place.

But larger merchants will also profit from the speed and ease of the checkout process when signatures aren’t required. The adage “time is money” is especially applicable to larger retailers, for whom long, lagging lines and inefficient processes at point of sale means wasting serious earning potential.

As a small business owner, you’re likely not missing out on earning millions of dollars if your point-of-sale process takes a few extra minutes. But speeding up the checkout process certainly spells less time and hassle for your customer.

Why You Should Continue to Require a Signature on Credit Card Purchases

Although EMV technology has proved successful in mitigating credit-card fraud, some small business owners still see the benefit of manual verification. In a New York Times article, restaurant owner Mikiah Westbrooks expressed her concern that customers wouldn’t add tips for their servers if they didn’t need to provide signatures on their credit card receipts.

Other small retailers might want to take the wait-and-see approach before phasing out signature requirements entirely.

ShopKeep, for instance, is in no hurry to implement these changes immediately. Michael DeSimone, ShopKeep’s chief executive, told the New York Times: “We’ll play it a little bit by ear … Let’s get the changes in place and see how they work operationally, and then we’ll adapt.” Square also has no immediate plans to eliminate signature requirements on their point-of-sale products.   


Eliminating the Credit Card Signature: How Do You Choose?

How do you decide whether to opt your small business into the no-signature required movement? Well, the shift away from signatures on credit card receipts makes sense, because the shift toward fraud-proof EMV technology also makes sense—and credit and debit cards embedded with EMV technology make manual signatures simply unnecessary.

Although EMV debit and credit cards are not standard in the US, they may soon become that way: Data on EMV technology shows that the US saw a 58.5% adoption rate in deploying EMV chip cards in 2017. That’s a huge leap from the 26.4% adoption rate in 2015. So, even if chip cards make up the minority of your daily transactions now, you might be seeing more of them in the future.

So, at the very least, even if you still want to keep signatures in your daily routine, you’ll want to consider upgrading your point-of-sale system to accept chip cards if it doesn’t already. Paper-free transactions also makes the checkout process much faster, both for you and your customers. Unlike mega-retailers, though, you’re not necessarily gaining profitability by shortening your checkout time.

Ultimately, it may be too soon to tell whether the new rule works for small retailers. So, you may want to take ShopKeep’s approach, and wait until the results come in before implementing a no-signature policy at your small business.

Editorial Note: Any opinions, analyses, reviews or recommendations expressed in this article are those of the author’s alone, and have not been reviewed, approved, or otherwise endorsed by any of these entities.

Caroline Goldstein

Staff Writer at Fundera
Caroline is a small business and finance writer at Fundera. Before coming to Fundera, she received an MFA in Fiction from New York University. She loves finding creative ways to help entrepreneurs grow.

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