WSJ Your Money Briefing - To Sign or Not to Sign: Why Your Signature Has Become Obsolete

Episode Date: October 15, 2024

Your signature is no longer needed on most electronic transactions as a way to prevent fraud. But customers are still being asked to sign at many restaurants, bars and other businesses, and people keep signing out of habit. Wall Street Journal personal finance reporter Oyin Adedoyin joins host J.R. Whalen to discuss when a signature is and isn’t required . Sign up for the WSJ's free Markets A.M. newsletter.  Learn more about your ad choices. Visit megaphone.fm/adchoices

Snakes, zombies, public speaking, the list of fears is endless. But the real danger is in your hand when you're behind the wheel. Distracted driving is what's really scary and even deadly. Eyes forward, don't drive distracted. Brought to you by NHTSA and the Ad Council. Here's your Money Briefing for Tuesday, October 15th. I'm JR Whalen for The Wall Street Journal. In the era of swiping and tapping, your signature has become virtually meaningless. But the rules for putting your name on the dotted

line aren't always clear. Sometimes you're signing, sometimes you're not. So some businesses have more updated point of sale systems. You might be used to seeing those toast or square pads where you can make your purchase on. In those types of things, businesses can actually choose to not have the signature portion as part of the transaction. We'll talk to Wall Street Journal personal finance reporter Oyin Adedoyan after the break. For centuries, someone's signature was like a final official stamp on things like contracts and documents, but your signature may now be obsolete. Wall Street Journal personal finance reporter Oyen Adedoyan joins me.

Oyen, when did signatures become meaningless? Well, signatures, at least in the day-to-day sense for things like shopping at the grocery store or buying a drink, are not as relevant today, and they haven't been relevant at least in the last couple decades, actually. Once Once upon a time merchants used to have to collect your card information manually and imprint those numbers onto a piece of carbon paper when you made a transaction. I'm old enough to remember that. Oh you remember that? Well yeah they used to use these

devices called knuckle busters I think. Do you remember those? Oh with the bar that you ran across the carbon paper back and forth. Yeah, exactly. And the signature in that case was really important because we didn't have an electronic way to authorize that transaction. And so when someone would sign it, you were also supposed to look to make sure that that signature matched the signature on file for that account. Today, a merchant can easily swipe a card or accept a tap to pay and that goes

to the bank immediately and that charge can be authorized. But the signature was proof that someone agreed to a purchase. How are the merchants working around that? In 2018, the major payment networks including Visa, MasterCard, Discover, and American Express, announced that merchants no longer needed to collect signatures when it came to purchases. They even encouraged individual consumers that they didn't have to sign the back of their cards anymore. That's because technology has advanced so much when it comes to payments.

There are chips that are embedded in our credit cards and debit cards that secure those transactions. And there are pin codes now associated with the purchase. So whenever a customer buys something, they can press a three or four digit code that also secures that transaction. All of these advancements are making the signature essentially obsolete. And yet many people insist on signing almost everything.

Is that just a habit that's hard to break? Exactly. It's one of those weird things that's lingered around for years and people are so used to doing it that old habits die hard. Even for some merchants they don't have to include the signature line. Are there rules for when a signature is required and one isn't? That's what makes it so confusing, right? Yeah. Sometimes you're signing, sometimes you're not. And the interesting thing here is that it really depends a lot on technology. So some businesses have more updated point of sale systems, right? You might be used to seeing those toast or square pads where you can make your purchase on. In those types of things, businesses can actually choose to not have the signature portion as part

of the transaction. But if you're seeing maybe an older register, that is still going to print out a paper receipt that's going to have that signature line on the bottom. So it really depends on the business and what kind of technology they have when it comes to payments. So there are some risks of people not using a signature, but it could speed up the line of the checkout counter, right? Exactly. Merchants and business owners say

that not including that last step of signing makes transactions go by faster, and that makes customers happier. A lot of the everyday people that I spoke with for this story find signing for things tedious. I spoke with a bartender who expressed that usually younger customers tend to be a little bit more annoyed at the request for sign.

And maybe they'll put a smiley face in its place or put an X, whereas maybe customers who are a little bit older like to stay and sign their full name. So you're really seeing this shift towards faster transactions, more frictionless transactions. But could this phasing out of signatures cause an increase in fraud? That's a little harder to say. Let's take checks, for example. We've seen a really steep increase in the amount of check fraud that's been happening over the past couple of years.

A lot of that has to do with the fact that there is a physical signature and writing component when it comes to checks, and fraudsters are now washing those checks chemically and rewriting signatures and amounts. And so when it comes to fraud detection, many companies and banks are now looking beyond the signature when it comes to whether or not a check is valid. They're looking at what type of account this purchase is associated with.

They're looking at how much money the check is written out for. Things like that, more circumstantial things, are now playing a bigger role when it comes to identity verification. And it's the same way with our credit cards and debit cards. We don't realize this, but the payment processors and banks

have something of a profile when it comes to the types of purchases we make. They know where we live, they know the stores that we frequent, and they're taking in that information every time we make a purchase. So if you're maybe somewhere that you're not usually located or if you're making a purchase for an amount that's not typical of your character and your spending behavior, your bank might send you a text message or give you a call.

How does the digital world we live in and less writing with pens and pencils impact the declining use of signatures? People seem to care less about their signatures. Signatures aren't even included in many of the elementary school curriculums anymore. I spoke with a lot of individuals for this story who expressed to me that their signatures have gone from this eloquent, cursive, extravagant signature to something that's more like a line on a piece of paper or maybe an X or an unrecognizable squiggle and it's so interesting because when we're signing things like our passport or our ID card

we have these really nice signatures but then when we're making a purchase for a bottle of milk or a bar of soap it's's going to look more like a squiggle. And that looks nothing like what's on our ID. But on what kinds of documents will a signature always be required, no matter what? Well, at least for now. We know that signatures are required on checks, on leases, any type of contract that you're going to have to sign that signifies an agreement between two parties. But even with that, laws

are starting to change. Electronic signatures are valid for a lot of those things today. So it's really interesting watching the culture of signatures morph and advance with technology. I spoke with a notary in California who mentioned that she'll meet with people who don't even know how to sign their signature anymore because they're so used to automatically clicking on something online. They've lost that ability to do it. They've lost that ability she had to sit him down give him a pad and a pen so that he could practice his signature because it had to be right in that moment it was in person the signature had to look as closely to his name as possible. People are so used to

these electronically generated systems that they're not really practicing their signature anymore. And it's gonna be interesting to see how it continues to evolve in the future. That's WSJ reporter Oyin Adedoyin. And that's it for your money briefing. We'll be back tomorrow with WSJ's Ray Smith to discuss what questions you should be asking

to calculate if the out-of-pocket cost of benefits at a new job will take too much out of your paycheck. This episode was produced by me, J.R. Whelan, with supervising producer Melanie Roy. Thanks for listening.