In our daily lives, we sign a variety of paperwork. We do this in person, for example with receipts at restaurants, and digitally, by signing something like an online banking form. Many of the products and services we use every day require our signatures. But, should small businesses require receipt signatures? Let us discuss it in this article.
Some consider this an outmoded formality, particularly in low-stakes contexts such as a restaurant or retail store, however, legally binding signatures are required for contracts and professional agreements. Each person or business that signs these documents agrees to the terms and accepts responsibility if something goes wrong.
Whether you sign documents in person or electronically, it’s critical to understand the many types of agreements that require a legal signature and what makes a signature legally enforceable. As businesses continue to become more modern and offer digital solutions, they rely more heavily on electronic documentation. The following explains the reasoning behind why many small businesses no longer are required to collect signatures, and what they are using as another layer of security.
Should my Customer Sign Receipts
Do Small Businesses Require Receipt Signatures?
If you have an EMV-compliant card reader, collecting receipt signatures is optional. EMV cards are chip cards, and since the card’s information is kept on a chip rather than a magnetic stripe, the information has different encryption and is more secure.
When it comes to preventing credit card theft, EMV outperforms receipt signatures. According to Visa, counterfeit fraud has decreased by 76% for EMV-compliant merchants since 2015.
Some small businesses, like diners, use receipts to collect tips or as evidence of permission for work orders or recognition of work that has been done, and may still find receipt signatures valuable. Businesses no longer need to get signatures for chip cards and contactless transactions, putting an end to a practice that had become a mundane task for both customers and businesses.
Signature Requirements For Receipts
The receipt signature requirements don’t really do anything to reduce fraud, as evidenced by users drawing smiley faces or nonsensical gibberish on signature lines for years. Many retailers have long stopped checking receipt signatures against cards, preferring to speed up checkout lines rather than add an extra layer of chargeback protection. So it is not mandatory that small businesses require receipt signatures under some laws or for some additional advantage.
Signature requirement
Of course, merchants of all sizes can still request identification from customers before consenting to conduct a transaction, so the signature is substantially less important in this situation. Due to the technological developments of contactless payments and EMV terminals, merchants are likely extremely relieved that they can remove the signature requirement as a part of their transaction process.
Signatures, especially with chip cards, add a little bit of added security to EMV transactions and will only slow down the checkout process. Swiped cards are a different story; their signature requirement still applies. A signed credit card receipt isn’t a huge deterrent against fraud, but it’s better than nothing and should still be applied when customers are swiping cards.
Why Were Customer Signatures Required
Credit card businesses have relied on receipt signatures to avoid fraud for decades. They required merchants to collect and record customer signatures so that if a transaction was challenged, the shopkeeper could produce a signed receipt demonstrating that the buyer was physically present in the store and accepted the purchase.
Without this proof, retailers were liable for chargeback losses. They were also held accountable if the signature on the receipt did not correspond to the signature on file or the card. Chip readers have supplanted customer signatures with the introduction of EMV-compliant card readers.
How Does No-Signature Transaction Work
Before EMV technology, the typical method of validating a credit card purchase was to sign a receipt. Signature restrictions did not keep fraud away, and the procedure was less secure. Credit card firms discovered a more secure approach to safeguard cardholders from fraudulent or unauthorized transactions while expediting the in-store checkout process. Here are three things you should know about the non-signature transaction process:
Card duplication
Due to the fact that EMV readers and NFC terminals are being used more frequently, card duplication fraud is significantly decreasing. This is the process where after a customer makes a card transaction, the merchants’ credit card terminals capture the customer’s card information illegally. This is called credit card skimming – or card duplication – and this has significantly decreased since the implementation of EMV chip cards and contactless payments.
Authentication
When you place your chip card into a top-of-the-line POS system, you will see an alert like “do not remove your card.” During this time, the chip, the small microprocessor on the credit card, sends a unique code to the issuing bank and back to the terminal in order to verify the card. Only when the card has been verified will the customer be told to “remove card.”
Unique code
EMV cards generate a unique code for each transaction that your bank validates each time, and the code cannot be re-used. A scammer or person trying to impersonate you cannot replicate a transaction using a fake card with stolen data at an EMV terminal because it would not generate the proper code and end it to the bank. This is why it is courageous for businesses to have EMV terminals in order to protect all customers from credit card fraud.
Conclusion
Many merchants believe it is “better to be safe than sorry” and continue to require signatures. Putting a signature on the receipt really won’t help much regarding chargebacks and fraud allegations. Payment technology has progressed much beyond that. It is entirely up to you whether you require signatures for credit card transactions, but remember that credit card brands do not require it from any merchant at any time for any transaction. Sometimes, merchants will require a signature for purchases over a certain dollar amount, typically over $1000.00.
There are certainly advantages and disadvantages to eliminating signatures. Even if you remove them from your EMV credit card receipts, you may find it useful to include a signature requirement in different types of contracts or work orders. Signatures are useful for more than just authorizing credit card transactions, and they can protect you as a merchant many ways depending on the type of business that you do.
