Mastercard Getting Rid of Signatures for Credit/Debit Payments

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In an age when credit and debit cards have smart chips inside them to provide an added layer of security, signing for a purchase feels somewhat antiquated.

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A signature is, of course, not needed for online or mobile payment. But if you use your credit card in a brick-and-mortar store, you often still have to sign on the dotted line.

Mastercard (NYSE: MA), however, plans to end that practice. The credit card company said in a Web post that while 80% of in-store transactions with its cards currently do not require a signature, that number could reach 100% by April 2018.

What is Mastercard doing?

Mastercard will become the first credit card company that no longer requires a signature at checkout for any credit or debit purchase in the United States and Canada. That could lead its rivals at Visa (NYSE: V) and American Express (NYSE: AXP) to do the same, or it could leave Mastercard with a lasting edge. What it won't do, according to the company, is compromise security.

"It is important to know that the levels of security for credit and debit cards remains a priority," wrote executive vice president Linda Kirkpatrick. "What consumers will find reassuring is that removing the need to sign for purchases will not have any impact on safety. Our secure network and state-of-the-art systems combined with new digital payment methods that include chip, tokenization, biometrics and specialized digital platforms use newer and more secure methods to prove identity."

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Realistically, requiring signatures has been outdated for a long time. Even stores that ask for a license or other ID rarely reject purchases because the buyer doesn't look exactly like the person in the photo.

Will this be good for business?

Retailers like anything that speeds the checkout process, and Kirkpatrick wrote that her company's research showed a "large majority" of consumers are not concerned about no longer having to sign. Ending this practice throws down a gauntlet for American Express and Visa.

If a signature doesn't make your purchase safer, then the other two major credit card companies will be pressured to do the same. If they don't, there will be confusion at the checkout lines if some cards require signing and others do not. Were that to happen, it's likely many merchants would simply ask customers to sign whether it's needed or not.

This isn't a significant business advantage for Mastercard because of the scenarios listed above, but it's a smart move for the credit card provider. If safety can be maintained, then holding on to old practices makes little sense.

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Daniel B. Kline has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Mastercard and Visa. The Motley Fool recommends American Express. The Motley Fool has a disclosure policy.