Episode 34: eSignatures in Banking – A Signature of Digital Transformation
In the digital era, convenient eSignatures have evolved from a “nice to have” to a “must have.” But where are they going, and how can your institution get the most out of this digital transformation enabler? We invited an eSignature expert to walk us through how the landscape has changed, new developments in eSignatures and the values of a bank-centric solution.
Laura Sewell (LS): Back in 2000, the E-Sign Act gave electronic signatures the same legal standing as their paper based counterparts.
Saxon Prater (SP): Nowadays, digital eSignatures are commonplace in fields as varied as eCommerce sales, professional onboarding and even tax filings.
LS: Financial services are no different. As digital banking grows, customers and members are increasingly comfortable with and even expect quick-to-sign, legally binding documents electronically.
SP: Today, we welcome Michael Ball, Senior Vice President of Markets and Strategy at IMM, the eSignature company with a focus on financial institutions, to discuss the trends in eSignatures and the applications at your institution. We asked Michael how eSignatures are driving digital transformation and he said:
Michael Ball (MB): You can go through an online account application. You can even have a sophisticated decisioning engine that will automatically qualify the client/automate the decision. But once you get to go, without eSignatures, you’re going to tell the customer you’ve got to come to a branch to sign your documents. And that’s not the promise of digital banking.
LS: I’m Laura Sewell.
SP: I’m Saxon Prater. And this is Fintech Focus from CSI.
LS: Michael, thanks so much for coming on the show. It’s a pleasure to have you.
MB: Thanks, Laura and thanks, Saxon. It’s a pleasure to be able to join you both today.
LS: To get us started, could you provide a little background about the rise of eSignatures and their adoption?
MB: Oh, certainly. Well, I’ll tell you that IMM has been around for 26 years now, focused solely on providing technology solutions to financial institutions. And of course, our flagship platform is called IMM eSign. And over that 26-year window, it’s been quite an interesting journey. When we first started in this, we were one of the early pioneers in eSignatures. eSignatures were very much as I would classify them a nice to have. It was kind of a convenience to get rid of paper and, you know, save the financial institutions some money.
And through that process, we began to see other benefits, some value that could be realized from that implementation. And we’ve now moved into, over the years, went from the focus on getting rid of paper to now being more about driving a modern, dynamic customer experience and how that experience reflects back on the financial institution.
Our technology, for whatever reason, was picked up early on by credit unions. And banking, I’m going to say largely, is still coming online today. It is the highest growth area at our company. But like I said, we moved from getting rid of paper to moving into a phase focused on the customer experience. And then along came COVID. And that drove a whole new need that we had never anticipated, and that was providing a technology that allowed the bank to navigate challenging situations where traditional in-person contact and interactions were not really possible there.
Maybe not only not possible, but only not preferable by our clients. They didn’t want to have to come in and have face to face contact with people in order to complete a banking transaction. We’ve moved now from a nice to have to a must have for eSignatures.
LS: Yeah, so as you said the pandemic really lit this on fire and now people are used to it – much more used to and comfortable with eSignatures, I imagine, because, you know, they had to do it before for their own physical safety. And now I imagine the qualms for the security of eSignatures has been reduced as a result of just the necessity. Would you say that that’s the case?
MB: Yeah, that’s interesting, Laura. I think that rather than saying the security, I would say the reluctance.
MB: The barriers that sometimes banks have had in, you know, this is new. Is it’s safe? Is it secure? Is it legal? Are we taking on any risks with our transactions and our assets by allowing our customers to complete the transaction through electronic signatures? A lot of that has become more accepting, somewhat due to the parameters that are in place for security within our platform, within the cloud-based services that are a part of this.
All of that now has kind of come mainstream. And I think it’s alleviated those concerns that people may have had five years ago when they were exploring this technology.
LS: Yeah, that makes sense.
SP: Well, not to mention the fact that those early environmental perks of cutting out paper are still valid and it’s still something that, you know, people care about. You know, speaking of the technology, though, could you talk a little bit about how that’s evolve through the years?
MB: Well, we started focused on in-branch, in-person signing. That’s kind of what was readily a need and what financial institutions were willing to embrace in those early days. Over the years, it quickly became a need to be able to allow that customer to sign documents wherever they were. Not having to come into the branch, being able to do it at home or in the office, or maybe while they’re on vacation and traveling. And so, we refer to that as remote signing. That very much has become a prominent part and requirement. Again, escalator through the pandemic itself.
But the technology overall has remained relatively unchanged other than perhaps the fact that from the time the E-Sign Act was written, you know, 22 years ago, technology was in a whole different place. You couldn’t just facilitate a transaction and expect that the signing party had a device and the software that was required to be able to view and sign the documents.
So early on, that was of high concern and a consideration. And how not only do we know that the customer can see the document and sign it, but how can we document that and demonstrate that?
And that became early on a focal point. Over the years, technology changed and HTML5 has become pervasive in our society. And that technology allows documents in our case to be seen and viewed and signed from literally any device, any manufacturer, any operating system. So, some of the early elements of the E-Sign Act have been changed and transformed through technology innovation.
And I don’t know how much research you’ve done on the E-Sign Act, but there is a E-Sign Modernization Act in Congress right now. That’s being considered to update the E-Sign Act and align it with current technology.
LS: Very interesting. So, Michael, what impact have you seen eSignatures making when it comes to digital banking?
MB: Well, I think it’s certainly been an enabler. If you think about it, digital banking without eSignatures is only going to go so far before you hit what I call the paper wall. Account opening or landing are primary examples. You can go through an online account application; you can even have a sophisticated decisioning engine that will automatically qualify the client/automate the decision. But once you get to go without eSignatures, you’re going to tell the customer you got to come to a branch to sign your documents. And that’s not the promise of digital banking.
LS: Yeah, you’re delivering this very modern experience and how disjointed would it be to then say, okay, we’ve done all this stuff electronically and it’s been super smooth, but now you’ve got to take time out of your day to come in and sign. So that just breaks that seamless experience.
MB: Well, and what we’re talking about exactly, talking about experience, think about the customer experience. You know, they’re hopeful of getting a frictionless transaction and all of a sudden, they’re all excited, “Oh, I can do this online. I don’t have to go anywhere.” And then they get the message, stop, do not pass, go. You’ve got to come to the branch to sign your documents. So, it’s not very fulfilling for a customer.
And so, eSignatures are that enabling technology that allow digital banking to deliver on the promise of creating that frictionless electronic experience. And then what we’ve found is once people in the financial institutions become comfortable, they start to quickly appreciate what the eSignature element has done in that digital banking environment. And then they start exploring how they can use the technology elsewhere and open up new channels for digital banking applications, such as what I like to call account service or account maintenance functions.
You know, if you had a change of address or want to issue a stop payment order, for example, typically you’ll call the financial institution or you’ll go to a branch, fill out the paperwork, sign it, in order to transact that service or maintenance request. Now, with eSignatures, we can put those forms online and create a self-service digital banking environment so the customer can go and access the form they need online, fill it out and electronically sign it. And it becomes delivered back to the operating area, the bank where they can review and post that particular requirement back into the banking system.
It’s really expanding a lot of different areas now for where eSignatures and digital banking can be applied across the institution.
LS: You’re listening to FinTech Focus. We’re talking with IMM’s Michael Ball about today’s trends in eSignatures and their benefits.
SP: Michael, you called eSignatures an enabler of digital banking, which is perfect for a partner focused solely on financial institutions. Why do you think that’s an important differentiator for banks and credit unions?
MB: Well, Saxon, I think there’s a couple different answers to your question. The first one would be primarily we understand the unique elements of working with financial institutions. We understand their regulations. We understand their business operation. We understand the demands and expectations of their customers. And we understand how both systems operate and function and where our product fits into that ecosystem and the role that it plays.
It allows us to deliver a solution to the customer you know, where it’s tailored to their specific requirements, how their business flows, how they like an account opening, our lending process flows. And we know the role we play and the importance of ideas and how to establish our product to be of the best service and suitability to that particular application.
By virtue of that, we’ve seen a dramatic uptick now in the value customers are placing on that focus, the knowledge and the expectations of how you work with and service and maintain a client who happens to be a bank or credit union.
This industry has reached a turning point in our life cycle where you go from being a new technology that everyone’s embracing to now that it’s a part of their ecosystem, they want to make sure they’ve got the right vendor and the right technology energy to continue to support that going forward. That really is what seems to be of great interest to banks and credit unions because they believe in eSignatures, but they’re wanting a better experience from their partner or their vendor.
LS: Well, that’s important. You know, you mentioned the regulatory aspect. Not every provider is going to understand the rules and regulations that financial institutions must abide by. So, you know, I see that possibly as one of the biggest benefits. Are there other benefits we haven’t covered yet?
MB: Well, I think the one element is to think about the benefit to your customer. Yeah, we talked about a law earlier making driving that higher level customer experience. Customers today expect that frictionless experience. They are used to Amazon, call it Amazon one click. The online retailers have really set a precedent on that expectation that is now being ported over to the financial industry and your customers at your bank have an expectation that’s been established by others and eSignatures allows your institution to meet those expectations of fulfilled those.
For a modern customer base, which is largely becoming a significant percentage of a financial institution’s client base. You know, we want to make it easy for them convenient so they can sign on any device, wherever they might be, and complete that transaction without having to get on a farm, go to a branch or wait for a form to be mailed to them, sign it and return it back.
They want immediate fulfillment and eSignatures allows that to occur.
SP: You kind of alluded to this earlier, but what about the employees or rather, you know, any kind of frontline staff at the actual financial institution?
MB: Well, I like to say that when we think about the benefits to them, it’s going to make them smile. It’s going to make their day go easier. First of all, transactions get completed far more quickly using electronic signatures than they do through traditional document and web signature processes. You know, there’s industry trends that show that I believe it’s like over 50% of the transactions get signed within the hour or 2 hours of when has been made available to the customer for completion.
And everything else largely gets done in 24 hours or less. So, the employee doesn’t have to chase the customer down to get them to come into the branch or mail them a form and follow up, getting them to send it back. It just eliminates a lot of the hassles that surround a bank employee as a part of their-day to-day function.
I think eSignatures are as attractive to them and important to them as it is to the customer.
LS: Now, Michael, we have brought up the topic of regulations for financial institutions and how stringent they are and wide reaching. So, what are the regulatory concerns around eSignatures with the E-Sign Act and what can you say to I guess, quell those concerns?
MB: Yeah, I would say that we’ve reached a point of adoption and understanding across the financial services industry, especially in the regulatory agencies, the examiners, the auditors. They’re pretty knowledgeable now about the E-Sign Act and eSign governance such that they actually are looking for the institution that has adopted it as a positive and favorable thing. A lot of the questions we used to have have gone away because of scrutiny from examiners or auditors that just weren’t familiar with the technology or the E-Sign Act itself.
And so, I think a lot of that concern has dissipated, kind of, as we talked about earlier, people are more familiar. People have an understanding, and they understand that they can take advantage of the value and the benefits, not only for them, but for their customers, without bringing on the burden of additional risks to the institution.
SP: Yeah, that makes sense. As it’s been used more and more, it becomes normalized, and institutions are going to be more comfortable with it on that end. You did mention that there may be some updates to the E-Sign Act or there are at least proposals out there for ways to bring it in line with modern technology.
Do you want to speak to that a little bit and what the industry might be looking ahead to?
MB: Well, I think that the way the sign act was written then and I’ll kind of couch this, this is my personal view and perspective on it. So, not necessarily represent the industry or IMM as a whole. But I think largely, the E-Sign Act as it was written was you know, it was an entry-level, first-time swipe at this.
So, there’s a lot of ambiguity and areas that need to be clarified because at the time the original authors didn’t want to promote or in any way suggest that a particular technology or a particular vendor were required as a part of this electronic signature ecosystem that they were about to endorse. And in doing so, I think it left a lot of uncertainty and elements up for interpretation that have now…they now need to be clarified and brought in line with modern business and modern technology.
And so, there’s a number of different little elements that are being incorporated or are incorporated into the Modernization Act. And I think it’s just a good thing overall for the industry because where you may have a point where maybe a compliance officer in an institution might have a different interpretation because of the ambiguity – that’s now going to go away.
And I think it’s going to just further promote the technology and the adoption of it across anyone that might be hesitating today.
SP: Well, let’s talk about those people who might be hesitating today. You know, what would you say to any of those holdout financial institutions that still have reservations, or haven’t adopted eSignatures or haven’t adopted the right technology?
MB: Well, I would say that now is the time to get serious about it, because your customers are expecting it. I think it’s becoming more and more a determining factor in where a consumer decides to bank today. They want to understand the services/how easy is it for them to conduct business with the institution. And if that bank doesn’t get serious about it, they need to be aware that their competitors are. Maintaining relevance in your particular customer base is incredibly important to the ongoing health and growth and sustenance of the institution.
And this technology is one of those elements that has a multi-faceted impact. And I think if you have ignored it largely to this day and you’re still ignoring it in spite of what we all just saw through COVID, I think that it’s a great time to really rethink that strategy and look at making eSignatures that important part of your overall business system infrastructure.
LS: Let’s leave it there. That’s it for this week’s episode of Fintech Focus. Thanks again to Michael Ball for joining us today. And thanks to all of you for listening.
SP: You can find previous episodes of this show and learn more about what we do and who we serve by visiting csiweb.com. You can also subscribe to Fintech Focus wherever you get your podcasts. We’ll be back soon. But until then, check out CSI on Twitter @CSIsolutions or on our Facebook page, facebook.com/csisolutions. Until next time.