In late 2017 and early 2018, the card brands revealed a major change to their long-held signature requirements for credit card transactions. MasterCard, Discover and Amex announced they would no longer require signatures for magstripe and EMV transactions beginning in April 2018. Visa announced that signatures would still be required in the event of a chargeback dispute for magstripe transactions, but would be optional for EMV.
There are a few motivations for this protocol change. The card brands want to reduce payment friction and hope that eliminating a step in the payment process will entice merchants to upgrade to EMV-ready technology. Point-of-sale fraud has declined by 66 percent in the two years since EMV cards were introduced in the United States, so this technology is working. Furthermore, it’s believed that customer signatures were not being used effectively to combat fraud, as many signature pads render customer signatures unrecognizable.
As a merchant you might be eager to throw away your paper receipts, printers and supplies and simply drop signatures entirely. But it's important to note that U.S. EMV adoption is currently at 52 percent, according to EMVCo. That means about 48 percent of card payments are still made with traditional magstripe cards. A good portion of which are Visa cards.
Here are a few reasons why you can’t do that just yet, along with a few edge cases for when obtaining a signature — while not required — could be beneficial.
How to Process Credit Card Payments Post-Signature Requirements
The most obvious reason why you should not throw away your receipt stock or signature pad is that Visa still requires signatures for its magstripe cards. They are decreasing in circulation as more and more EMV cards are issued, but it’s worth noting that having a Smart Terminal that can recognize the different card brands and adjust to brand-specific guidelines is the easiest way to ensure your cashiers are following the new rules (and not ignoring edge cases).
Additionally, it would benefit your business to obtain signatures for high-ticket items. You can establish a cutoff that makes sense for your business and train your staff to obtain a signature for items exceeding that value. This way, you have further proof in the event of a chargeback dispute that you did your due diligence to verify the customer and prevent fraud.
If your business ever wants signed authorization for terms and conditions, you can select a Smart Terminal that’s programmed to present all terms and conditions on the signature pad. This setup creates a digital copy for both you and your customer, reduces paperwork and further protects your business.
If you store customer cards on file, you also must obtain a signature for Visa transactions, per new guidelines. This applies to recharging and refunding customers via their cards on file, as well. Storing cards on file can offer numerous benefits to your business, but it also means you may want to continue your signature capturing practices across the board to protect yourself from this edge case.
Running a restaurant or other service-industry business? If tips are common, you’ll still need to either print a receipt or prompt your customers to enter a tip and sign on a digital signature pad.
Getting Ready for the Future
Chip-and-PIN transactions, and even biometrics, are in the works for future fraud prevention. Both of these security measures will require that your business has a customer-facing terminal to maintain customer privacy and provide easy access to the card reader. Given the edge cases detailed above and Visa’s plans to explore biometrics, it makes sense to select a POS terminal that is EMV-ready, customer-facing and features a signature pad. This way, you’re covered across all edge cases and will not risk needing a new card reader in the near future.
Were you aware of these authorization changes? What steps are you taking to retrain your staff? We’d love to hear from you.