Should Businesses Still Require Credit Card Receipt Signatures?
· Collecting receipt signatures is now optional if you have an EMV-compliant credit card reader.
· EMV is more effective than receipt signatures for deterring credit card fraud. Since 2015, EMV-compliant merchants have seen counterfeit fraud drop 80%.
· Receipt signatures may still be useful for some small businesses, such as restaurants that use receipts to collect tips or service professionals that use them as proof of approval for work orders or for acceptance of completed work.
For decades, credit card companies relied on receipt signatures to prevent fraud. Merchants were required to collect and store customer signatures so 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 liable 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 counterfeit fraud occurring at the point of sale to merchants who hadn't updated their processing hardware to include EMV-compliant card readers. This began the movement shifting away from signatures. Chip cards and digital wallets have advanced antifraud technologies to authenticate transactions – such as tokenization and biometrics – making credit card signature requirements unnecessary.
Last year, the major credit card companies – American Express, Discover, Mastercard and Visa began no longer requiring EMV-compliant merchants to collect signatures for credit and debit card purchases. Walmart and Target and other large retailers responded positively because the move helps speed up the checkout process and eliminates the requirement to save receipts and the cost of storing them.
The credit card networks note that the move to signature-free transactions is optional, so if you still prefer to collect signatures for credit card purchases for your business, you may continue to do so. No-signature credit card transactions work for each of the four card networks like this:
Applies to all merchants who accept American Express worldwide.
American Express says 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 card transactions in the U.S., Canada, Mexico and the Caribbean.
Discover says that some merchants may need to update their point-of-sale systems if they no longer wish to require customer signatures.
Applies to credit and debit transactions worldwide.
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.
Should your business stop asking customers to sign credit card receipts?
Even though large retailers quickly dropped their credit card signature requirements following the card brands' announcements, some merchants are continuing to collect customer signatures on debit and credit card transactions.
Before you decide which option makes the most sense for your business, here are a few factors you should consider.
1. Is your business EMV compliant?
If your your credit card readers are not EMV-compliant models, you need signature verification for Visa and Discover transactions.
Visa reports that, as of September 2018, 68% of U.S. storefronts have EMV technology – but that leaves 32% that have yet to upgrade their systems. If you're still holding out, you should speak with a credit card processor about updating your card reader. In addition to enabling you to stop collecting receipt signatures, it significantly lowers your risk of experiencing counterfeit credit card fraud at the point of sale.
Despite the lack of a signature requirement for the past year, EMV technology has been highly effective against fraud. Visa reported that, as of September 2018, EMV-compliant merchants have seen counterfeit fraud drop 80% 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?]
2. Does your POS system give you the option of eliminating signature authorization for credit card transactions?
If you have an EMV-compliant credit card terminal or card reader, the next step is to check with your POS system provider to find out if the software has been updated to remove this step from the checkout process.
Many POS providers have updated their systems to allow merchants to choose whether they want to continue requiring customers to sign for purchases. Some give multiple receipt signature options. You can choose to always require receipt signatures, never require receipt signatures or only require receipt signatures for transactions over $25.
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