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As of April 2018, four major credit card companies—Visa, Mastercard, Discover, and American Express—all enacted credit card signature no longer required policies. Although these companies eliminated their credit card signature requirements, businesses still have the option to remove or keep signatures. Therefore, whether you require a signature on credit card purchases, or not, is a decision you can make based on your individual business and preferred transaction process.
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, you’re not alone. What was once an essential part of credit card security—signing your name on a receipt—has become a necessity of the past. Through progression in technology and security, you can now use your card to pay for transactions relatively safely—credit card signature no longer required. In fact, in 2017 and 2018, four of the major companies, Visa, Discover, Mastercard, and American Express effectively eliminated credit card receipt signature requirements for in-store purchases.
However, as the credit card companies have rolled out these new initiatives, each has done so with specific rules and security measures for merchants to keep in mind. This being said, you might wonder what credit cards not requiring a signature means for your small business. We’re here to help. We’ll break down how these major credit card companies have changed their requirements, the reasoning behind the policy change, and what you, as a business owner, need to know to continue to accept credit card payments.
Starting in 2017, credit card companies began to announce their plans to end credit card signature requirements, beginning with Mastercard’s announcement in October. In the following months, Visa, Discover, and American Express also released news of their intentions to no longer require a signature on credit card receipts and all four companies rolled out their respective plans in April 2018:
Although these companies have all ceased to require merchants to ask customers for a signature on a credit card receipt, it’s still an option for merchants, even today. Additionally, in order to no longer require credit card signatures, a merchant must have a point of sale system with EMV chip-reading capabilities. The EMV chip is the fraud protection technology that now makes these credit card signatures essentially obsolete. Furthermore, despite these major companies changing their requirements, certain point of sale systems did not immediately follow suit. Although most have now added this functionality, business owners often have to make the settings change in the software themselves. At the end of the day, then, not requiring a credit card receipt signature is not a hard-and-fast policy—and how an individual business handles credit card signatures depends on a variety of factors.
Before we discuss exactly how the credit card signature no longer required policy affects small businesses, let’s explore the credit card companies’ reasoning behind this change. As we previously mentioned, credit card signatures were historically used as a security and fraud prevention method. Now, however, as credit card technology has developed, these signatures are no longer serving the same purpose. Instead, most major credit card companies in the U.S. now use EMV technology, which has increased card security and minimized 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—again effectively eliminating the need for a signature. 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 protections “have advanced so that signatures are no longer necessary.”
Additionally, many credit card companies implement additional digital authentication technologies such as tokenization, multifactor authentication, and biometrics that are faster, more secure, and enable a streamlined transaction process. With all of these added security measures, requiring receipt signatures on credit card purchases doesn’t deliver significant value in protecting customer security. Furthermore, for a receipt signature to provide any real fraud protection, merchants would actually have to compare the receipt signature with the one on the back of a customer’s card, a practice that most businesses don’t adhere to.
As you might have noticed, this credit card signature no longer required policy change isn’t exactly sudden. You might have already noticed in recent years that your signature wasn’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, initially allowed small business owners the option to forgo signatures on transactions less than $25 and have now expanded to not require them at all. The elimination of required signatures for small purchases was the beginning of this policy change and a test, not only of more advanced fraud protection techniques but of the efficiency of the point of sale process.
Credit card companies have stated that another reason behind this signature requirement change was to improve the checkout experience for merchants and customers alike. By not forcing businesses to print and have customers sign receipts, credit card companies are allowing merchants to speed up their process, save their customers time, and ultimately improve their transaction experience.
Some policy changes have a big impact on small business owners—like the Trump Tax Plan, for instance. Luckily, the credit card signature requirement change doesn’t necessarily affect you as a small business owner and if it does, it’s not something you have to worry too much about. Why is that? Well, as we mentioned, the four major credit card issuers have only eliminated the requirement for customers to provide their signatures on receipts. At the end of the day, this means it’s up to the individual merchant to decide whether you want to make your customers sign credit card receipts or not. If you prefer to keep the signature requirement, you’re free to do so. On the other hand, if you’d like to eliminate signatures, or only require them after a price threshold, you will probably have to enact this change yourself. The specifics depend on your individual point of sale system, however, generally, you’ll have to manually adjust the setting in your POS software. After you’ve made the adjustment, you should be good-to-go and your POS system will no longer prompt customers to sign after making a purchase with a credit card. 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. Here are points to consider on both sides of the coin:
The arguments in favor of not requiring credit card signatures for small businesses are very similar to the reasoning behind this policy change in the first place. As we’ve discussed at length, credit card receipt signature requirements no longer serve their purpose. With EMV chips and other fraud protection technology, you don’t need to require a signature to ensure that your customer’s information is safe. Target and Walmart, as examples, have supported credit card companies’ decisions to eliminate signatures, favoring EMV technology over receipt signatures. Larger merchants, like Target and Walmart, in fact, will greatly benefit 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, however, you’re likely not missing out on earning millions of dollars if your point of sale process takes a few extra minutes. Speeding up the checkout process, though, certainly spells less time and hassle for your customer. Ultimately, eliminating the signature is a quick and easy way to optimize your checkout. Therefore, since this signature is an added step in the transaction process, takes more time, and no longer serves as a fraud protector—why not support the credit card signature no longer required policy?
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. Additionally, even though it’s relatively easy to change the setting on a point of sale system, some business owners may choose to leave their current process in place. If you don’t believe that eliminating the signature will add any value to your checkout (for you or the customer), there’s really no harm in keeping the signature requirement. And of course, you also have the ability to take the wait-and-see approach. At the end of the day, you do have the option to remove your signature requirements and if you see no benefit, you can add the requirement back.
As credit card companies have made this change, and point of sale systems have adjusted their software to adhere to the credit card signature no longer required policy, how do you decide which route your business should take? Ultimately, you have to consider what works best for your business and credit card processing. You’ll want to keep in mind, however, that credit and debit cards continue to shift towards EMV technology—making manual signatures even more unnecessary. Therefore, even if you decide to keep signatures as part of your business routine, you’ll want to make sure your point-of-sale system can accept chip cards if it doesn’t already. Paper-free transactions also make the checkout process much faster, both for you and your customers—and are much more eco-friendly as well. Unlike mega-retailers, though, you’re not necessarily gaining significant profitability by shortening your checkout time. That being said, regardless of what you decide regarding signature requirements, you’ll want to continue to keep an eye on how credit card policies change—and how these changes might affect your day-to-day business operations.