Beginning in April 2018, American Express will no longer require Amex-accepting merchants globally to collect signatures for any purchases at the point of sale. Merchants, however, can continue to ask for signatures if they choose. Merchants must also continue to collect signatures should a law in
a particular jurisdiction require them to do so, according to Amex.
“Our fraud capabilities have advanced so that signatures are no longer necessary to fight fraud,” said Amex executive vice president of the Global Network
Business division Jaromir Divilek.
Amex had already eliminated the signature requirement in certain countries for purchases under a certain amount. For example, for transactions under $50 in the U.S., under CAD100 in Canada and under GBP30 in the UK.
The card network said that eliminating the need for a signature will improve the speed of payment, thereby improving the merchant experience. Amex’s continued investment in fraud prevention methods, data analytics and technologies, including machine learning algorithms, allows it to evaluate
thousands of data points quickly to make a risk decision, said an Amex spokesperson. Amex also has partnered with merchants to develop “advanced” transaction authentication and deploy “advanced” fraud-detection techniques, the spokesperson added.
“Machine learning models allows us to delve much deeper in understanding the unique patterns of our customers and of fraudulent episodes… we can more precisely detect fraud while minimizing disruption of our customers’ genuine spending,” the Amex spokesperson said.
A Joint Effort
In October, Mastercard became the first network to announce it would eliminate signature requirements for transactions beginning next April. Discover followed suit last week. A Visa spokesperson told BTN that it has not changed its policy on signature requirements, nor did it have anything new to
announce at this time, noting that more than 75 percent of in-store Visa transactions in North America today do not require a signature.
Similarly, Mastercard noted that more than 80 percent of Mastercard in-store transactions in North America today don’t require a cardholder signature. New payment methods like chip, tokenization, biometrics and mobile wallets, combined with its secure network, has allowed Mastercard to
deploy more secure methods to authenticate a user’s identity, according to the card network.
“At first glance, this might sound like a radical proclamation, especially to people who have had credit and debit cards for decades,” Mastercard said in October. “However, the change matches all of our expectations for fast and convenient shopping experiences... removing the need
to sign for purchases will not have any impact on safety.”
Fraud Incidence
According to a report by The
Nilson Report released in October 2016, fraud incurred by payment card issuers, merchants, merchant acquirers and acquirers of card transactions at ATMs on credit, debit and prepaid general purpose, and private label payment cards issued worldwide totaled $22.8 billion, a 4.4 percent year-over-year
increase.
The U.S. accounted for 39.5 percent, or $9 billion, of worldwide gross card fraud, less than a percentage point year-over-year increase, according to The Nilson Report. “Fraud fighting is improving in the U.S., while the criminals are doing better
outside the U.S.,” The Nilson Report publisher David Robertson stated in the report.
Specifically, card issuers worldwide reported $16.1 billion, or 70.7 percent, of gross fraud losses. These losses owed to various forms of fraud, including counterfeit fraud, which is when card details are skimmed to make new cards for illegal sale and use. Other fraud methods included account
takeover, lost/stolen cards, and fraudulently opened accounts, among others. Chip cards are said to help reduce counterfeit fraud. In the U.S., issuer losses from counterfeit cards declined nearly 60 percent below 2015 levels as chip cards and chip-enabled terminals “continued to provide an effective
defense,” according to The Nilson Report.
Liability
Cardholders typically are not liable for fraudulent transactions. However, fraud loss is factored into the cost of usage, whether through fees for membership, late payments or other transaction fees.
The American Consumer Institute Center for Citizen Research has long favored chip and PIN over chip and signature for combating fraud. ACI President Steve Pociask believes that networks “always shift costs (liabilities) to merchants, who can only recoup these costs through pricing. In
other words, these costs are directly paid by [the] merchant, but ultimately by consumers.”
A Mastercard spokesperson said there is no current change to its existing liability structure and that “the entity—whether the issuer or merchant—with the more secure system is rewarded by not being held responsible for fraud.” The spokesperson added that the responsibility to
ensure that point-of-sale terminals and cards meet the accepted Europay, Mastercard and Visa chip standards resides with the merchant and the issuer. In a fraud case where a chip card is used in a chip terminal, then the bank typically would be held responsible, she said.