Beyond Convenience: The Legality and Security of eSignatures

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By Michael Ball, Vice President of Markets and Strategy, IMM


The way banks engage and conduct business with their customers continues to change dramatically. Digital transformation has dominated the discussion, and the banking industry as a whole has acknowledged the strategic role digital has and will continue to play in ensuring a bank remains relevant for years to come. In fact, a 2018 report from Ernst and Young titled Digital Enterprise Transformation indicated that 65 percent of financial executives believed their revenues improved thanks to their digital transformation plans. About 62% thought that customer experience improved thanks to that, and about 60% believed that having such a plan promoted innovation.

Digital transformation, however, is about more than just providing online and mobile functionality. Traditional bankers need to combine digital speed and convenience with human interactions that are both thoughtful and caring at crucial moments in the customer’s journey. The banking industry is rapidly adopting electronic signatures (eSignatures) as the foundation of a broader digital transformation strategy. According to a 2017 Forrester study, The State of e-Signature Implementation, the market for these services is expected to grow at 60% and exceed 90 million transactions by 2020.

Elevating the consumer experience, making it fast, easy and convenient to complete critical business transactions, documents and forms, coupled with the substantial operational efficiencies gained, are the primary benefits of deploying an eSignature platform.  New account opening, loan document signing or a simple address change can be electronically completed in a single online session, fulfilling a complete digital transaction lifecycle. This can eliminate paper, the need to be physically present to sign, as well as the traditional printing, signing and mailing of paper documents.

Lake City Bank in Warsaw, Indiana implemented eSignatures throughout the entire organization as a key component of its digital strategy to drive greater efficiencies and faster processing of transactions. Kevin Deardoff, EVP of Lake City Bank, explained that in addition to the quantifiable savings the Bank realized, one of the greatest benefits is a more relaxed environment for employees and customers.

“Our bank staff often noticed that customers would come in to discuss opening new accounts or funding options, but due to limited time and schedule constraints, these interactions would often be rushed and would typically require the customer to come back to the branch to finalize paperwork,” Deardoff said. “Since implementing eSignatures, we have been able to eliminate much of the pressure and time constraints that were associated with these transactions. More importantly we have elevated the overall customer experience by providing modern, digital transaction capabilities.”

Financial institutions today are at a unique crossroads in needing to accommodate the growing evolution toward self-service, while still being expected to create personal relationships with customers. And in this digital era, data breaches continue to pose a threat requiring banks to find a balance between offering a superior customer experience and maintaining the appropriate security risk thresholds.  Electronic signature platforms use some of the highest forms of security and data integrity technologies to protect both the financial institution and its customer, while providing the convenience demanded in today’s digital environment.

Recently, Lake City Bank expanded its use of eSignatures to include treasury management agreements, unsecured loans, as well as in its Consumer Solutions department, digitizing re-payment agreements and other relevant documents. Deardoff shared, “Treasury management agreements often range from five pages to 50 depending on which services the customer needs. We couldn’t have digitized this process without having a technology platform that had  the necessary  flexibility and security.”

An invaluable benefit to banks that is often overlooked entails meeting compliance requirements by controlling the signing process and ensuring all information remains secure and is fully legally enforceable.  Paper documentation can easily be tampered with, altered or even forged. However, eSignatures offer additional security including signer verification and document integrity protection;  banks can protect sensitive consumer information, ensuring personal and financial data is encrypted, confidential and secure.

Signer verification, or front-end authentication, can be accomplished using a variety of methods such as knowledge-based authentication (KBA), two-factor text-code authentication and unique transaction passwords.  Using KBA’s “out-of-wallet questions” or cellphone text messages to confirm signing party identity protects the legal enforceability of the transaction by documenting attribution to each signing party.

Throughout the process, an audit trail is created and produced that records all activities that have taken place throughout the transaction, by whom, including date and time stamps – as well as the associated IP address of the devices used by the Bank and the consumer.  This results in comprehensive documentation that becomes the Bank’s “insurance policy”, protecting the legal enforcabilty of the transaction if the validity of the transaction is every questioned.  The audit trail is stored along with the eSigned documents in the Bank’s Imaging/ECM system for future research and service requirements.

As a final thought Deardoff said, “Our advice to any bank is to look at eSignatures as the foundation to its electronic environment and digital banking initiatives.”


Michael Ball is Vice President of Markets and Strategy for Rahway, N.J.-based IMM, the leading source of eSignature and eTransaction Management for Banks and Credit Unions.