The Opportunity of E-signatures in Banking

The Opportunity of E-signatures in Banking

An electronic signature also called e-signature refers to data in electronic form, which is logically associated with other data in electronic form and which is used by the signatory to sign the document. The legal standing of this type of signature depends upon adherence to the exact requirements of the specific regulation under which it was created. If allowed, it could replace a handwritten signature. E-signature may find a lot of usage and acceptance in banking because of convenience, security, and business continuity. Read more to understand challenges around using e-signature in banking and some ideas to effectively use this technology.

Let us start by drawing the distinction between e-signature and digital signature. Digital signatures are based on a cryptographic mechanism often used to implement electronic signatures whereas an electronic signature can be as simple as a name entered in an electronic document. Hence electronic signatures are a legal concept distinct from digital signatures. Digital signatures are increasingly used in e-commerce and in regulatory filings to implement electronic signatures in a cryptographically protected way. Lot of country-specific and global agencies provide standards for their implementation.

Electronic signature provides convenience as it could be used to sign a document by using a handwritten signature itself on a touchscreen. Whereas for the digital signature you need to follow standards and it must be issued by an authorized agency to ensure protection against identity theft and is encrypted in the document. Please note that depending on the legal law in operation, both can be accepted and might be used by companies and organizations irrespective of the fact that digital signature offers a higher level of security.

In this article, we want to focus on what are the challenges faced by a bank that wants to start with the usage of e-signature. What are the benefits and barriers to incorporate this among their other technologies?

Some examples of usage to draw benefits for banks could come from using them on all customer-focused forms right from offering a fully digital account opening and onboarding process supported by e-signature. Using integration with facilities like Aadhaar can even eliminate the need for presenting a physical ID document. In 2015, some top banks started testing mobile-based e-signature capture integrated directly into the banking app, so the entire process remains digital.

On the lending side of banking, business opportunities can be explored on the consumer and small business loans and retail financing. These can be used for signing loan applications and borrower contracts as well as for electronically delivering the many consumer disclosures at the heart of these processes. U.S. Bank has nearly eliminated loan exceptions by incorporating e-signatures into their consumer and business loan processing, which was deployed across more than 3,000 retail branches in 2011. Globally, banks and retail finance providers are experiencing similar benefits.

What is the current business challenge?

E-signature usage in banking is getting a strong pace, especially with corporates because of convenience, security, and business continuity.

Although e-signatures have the potential to strongly support banks' willingness in straight-through processing and decreasing transaction costs, lack of generally accepted e-signature solutions, and as expected, corporates demanding tailor-made solutions" take the situation to a threat as well as to an opportunity. Moreover, there should be a mechanism on the bank side that can not only validate the e-signature but more importantly trace the type and amount of transactions the related signature(s) has the authority as per the power of attorney of the corporate.

What is the goal of this project?

Finding the right e signature application for corporates to increase the usage of e-signatures together with the validation mechanism on the bankside can be defined as the goal of the project.

  • Review banks' current approach to e-signatures
  • Screen best practices around the globe from other banks
  • Compare and contrast the different approaches
  • Identify required adjustments to approaches
  • Define the commercial benefits

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Creation Date Tuesday, 28 July 2020 Hits 758

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