Most American adults are very familiar with the credit card signature. When your new credit or debit card arrives in the mail, it comes with directions to sign the back. Then, nearly every time you swipe that card for a purchase, you are required to sign on the line and verify that you agree to your end of the credit card customer agreement. But those signatures we all know so well are coming to an end. Continue on to learn about the demise of the credit card signature and what to expect going forward.
The rise and fall of credit card signatures
Credit card signatures are a longtime staple of the credit card industry. Credit card signatures exist for two primary purposes: identity verification and transaction security.
Using signatures for identity verification has become a laughable practice today. In the past, before the internet and before modem style credit card authorization over the phone lines, merchants didn’t have any way to know if a card was real or fake, and the only tool they really had to know that you were really the person who is supposed to use the card is signature verification. They would compare the signature on the back of your card to the signature on the receipt to ensure you were really you.
Now credit card transactions are authorized and completed with a live network connection to the card issuer. The retailer knows the card is good or bad instantly. Very few retailers really check signatures, and for online transactions signatures are impossible. Many in-person transactions use digital signature pads, where your name rarely looks anything like your real signature. Clearly signatures have huge limitations when used for identity verification.
The second purpose of the signature is to secure a transaction. If, in the future, the transaction were in dispute, the merchant would be able to hypothetically produce the signed receipt proving it was you indeed who made the purchase. But if the signatures rarely match and are illegible, this feature becomes a moot point.
New methods to combat fraud
Fraud is a major problem in the modern payments industry. In 2016, fraud losses totalled more than $16 billion for consumers. Clearly this is a serious problem, and one that needs to be addressed. The age old method, credit card signatures, simply is not working any longer.
Because these fraud losses, which are generally paid for by the issuing bank or credit card company, are so big, they are willing to spend billions to combat the problem. These dollars have gone into some new technologies we see in new credit cards, and some that work silently behind the scenes.
One method that helps combat fraud is the relatively new EMV security chip on our credit and debit cards. The chip became a standard in the United States in October 2015. However, it had been around in Europe since the 1980s! We were way behind when it comes to card security. The name of the security chip, EMV, is an acronym for Eurocard, Mastercard, Visa, the three companies that built the chip standard.