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Credit card signatures may soon be obsolete

Already, they aren't needed in smaller transactions; microchipped cards also provide some security

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Card networks have inched towards dropping signatures for transactions below US$25 or US$50 since 2010. But they have differing policies on this, so smaller merchants are continuing with the practice.

New York

FOR nearly a decade, Doug Taylor, a sales manager who travels often for work, has signed credit card receipts with a doodle of a dog wagging its tail.

No cashier has ever rejected his "signature" as invalid.

The 44-year-old who lives in Mobile, Alabama, said: "It gets a laugh, most of the time. Or they just glance at it and don't really notice."

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Credit card networks are finally ready to concede what has been obvious to shoppers and merchants for years: Signatures are not a useful way to prove someone's identity. Later this month, four of the largest networks - American Express, Discover, Mastercard and Visa - will stop requiring them to complete card transactions.

The signature, a centuries-old way of verifying identity, is rapidly going extinct. Personal checks are anachronisms. Pen-and-ink letters are scarce. When credit card signatures disappear, handwritten authentications will be relegated to a few special circumstances: sealing a giant transaction like a house purchase, or getting a celebrity to autograph a piece of memorabilia - and even that is being supplanted by the cellphone selfie.

Card signatures won't vanish overnight. The change is optional, leaving retailers to decide whether they want to stop collecting signatures.

Discount store Target plans to eliminate them this month. Walmart considers signatures "worthless" and has already stopped recording them on most transactions, said its spokesman Randy Hargrove. The company will soon get rid of them completely.

Mastercard said it has been wanting to make the change for years, but held off until cards embedded with computer chips became common.

Microchips

Card companies, which cover the costs of fraudulent credit card spending, started adding the microchips more than a decade ago to reduce fraud-related losses. The chips create unique codes for each transaction, making the cards much harder to copy. They have long been popular in Europe and Asia, but took off in the United States only three years ago, when the card networks began punishing merchants that still relied on the old card-swipe technology. At that point, signatures became largely irrelevant in resolving fraud claims.

Linda Kirkpatrick, Mastercard's head of business development in the United States, said: "The signature has really outrun its useful life."

It took nearly a century for technology to overtake the hand-scrawled name. The charge card dates back to the 1920s, when stores started issuing embossed metal plates with paper signature strips that allowed customers to add purchases to their ledger and settle the bill later.

Thirty years later, banks and merchant networks introduced cards that worked at a variety of retailers. By the late 1950s, a shopper could leave home without any cash and buy groceries, gas and dinner, secured only by a signature.

Investigators scrutinised signed credit slips to determine whether cardholders were present when transactions were made. Signatures were required on all purchases; merchants that failed to collect them generally had to absorb the losses if transactions were disputed. Retailers could also be held liable if they failed to notice that the signature on a receipt did not match the one on the back of the customer's card.

Then online shopping took off, forcing card issuers to come up with new ways to detect and adjudicate fraud. As their forensic systems improved, signatures became a relic.

Card networks began inching toward getting rid of signatures years ago. Most stopped requiring signatures on transactions below a certain threshold, typically US$25 or US$50, as far back as 2010.

But old habits die hard, and the jumble of rules about which transactions required signatures and which did not - every issuer has its own policies - discouraged many merchants, especially smaller ones, from scrapping signatures altogether.

This time, though, the card networks are sending a consistent message: Signatures are obsolete.

Mark Horwedel, chief executive of the Merchant Advisory Group, a trade group that represents large US retailers, said: "I think they're done."

Faster checkouts

He said he expected that three-quarters of his group's members will have stopped asking customers to sign their names on credit card receipts by the end of the year. Speeding up checkout lines is a powerful incentive, he said.

Smaller retailers will probably lag behind. ShopKeep and Square, two popular small business-payment systems, say they do not plan to immediately update their systems to allow retailers to skip signatures on all transactions. (Both currently allow merchants to disable them on transactions below US$25.)

"We'll play it a little bit by ear," said Michael DeSimone, ShopKeep's chief executive. "Right now, I don't think there's a high level of awareness about this. Let's get the changes in place and see how they work operationally, and then we'll adapt." The new rules will vary at each card network. American Express is dropping its signature requirement on all of its cards globally; Mastercard is ending the requirement only in the United States and Canada; Discover's change applies in those countries plus Mexico and the Caribbean; Visa is making signatures optional in all of North America, but only for retailers with payment systems that read chip cards.

Some merchants are hesitant to mess with a process that customers have built into their muscle memory. Mikiah Westbrooks, the owner of Brix, a wine bar in Detroit, said she worried that skipping signatures will affect her workers' tips.

She has also occasionally found signatures useful when fighting fraud claims. A customer who challenged a bill last summer backed off when she produced a signed receipt.

"They were lying, and I had proof," she said.

But others are ready to cast them aside. At Snowy Owl Coffee Roasters in Brewster, Massachusetts, pausing for signatures noticeably slows things down at rush hour, said Shayna Ferullo, the shop's owner.

"Any extra second is valuable," she said. "And everyone knows the signature is a joke. No one really signs any more; it's all scribbles and squiggles. Some people do smiley faces."

Mark Malkoff, a New York comedian, and his friend Greg Benson posted a YouTube video that vividly illustrated just how widely ignored card signatures are. They went on a spree through a dozen Los Angeles stores, signing obviously fake names on all of their receipts: Justin Bieber, Jessica Alba, Vin Diesel, Oprah. On one bill, they went with "Mr Fake Name." None were rejected.

"Fifteen years, a decade ago, they would look at your signature, they would ask for ID if it seemed off," Mr Malkoff said. "Now, no one cares. It's the most useless, pointless thing." NYTIMES

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