Switching to new technology can sometimes be met with a lot of skepticism. Organizations and individuals or even government agencies marvel why they have to fix a process or something that is not broken. If something or a process is not broken, it doesn’t mean it is perfect. It can be difficult for financial institutions to think that they cannot grow and succeed because of something as simple as embedding a signature. However, the formalities witnessed in the typical way of signing documents can hinder the fast, and speedy growth of these institutions. Consider the time it takes for loan documents to be signed, they are held up for a long time awaiting signatures. Not only that, the documents have to be mailed or faxed to get signed or have them checked for signatures before they can be pushed along within the process. There are a lot of inefficiencies that come along due to the delays and other bottlenecks experienced in the signing process using traditional methods. Today, eSignatures are widely accepted in many industries including financial institutions as they are advanced, secure, and effective in providing digital signature solutions.
With the increased online stores and brick-and-mortar stores placing their services and products online, it makes sense to embrace the use of eSignatures. Over the coming few years, digital signature is expected to witness a compound annual growth rate (CAGR) reaching 26.5 percent. The primary driver to this growth is facilitated by the heightening adoption of the technology by financial services, insurance sectors, and banking, according to data from P&S Market Research. Financial institutions including banks and credit units that adopt eSignature solutions for financial services expect to enjoy many benefits.
The Support for eSignatures
Over the past years, electronic signature solutions within the financial services have faced an increased approval rate. This has been driven by the huge acceptance of eSignatures in electronic commerce as a way to cut down on costs and eliminate the use of physical paper documents. The need to quicken business processes including loan processing by banks and other lending institutions has been propelling the growth and acceptance of eSignature solutions. On top, legislations like ESIGN Act and Uniform Electronic Transaction Act (UETA) or eIDAS Regulation that aim at doing away with certain legal, security, and compliance issues have in addition made the use of eSignature more appealing. Top eSignature vendors have arisen to align themselves with the increasing demand for digital signature solutions. The vendors provide more secure and fraud-proof eSignature services compared to the typical pen ‘n’ paper signatures.
Although there are many industries utilizing eSignatures, the financial services sectors seem to be adopting the technology on a larger scale. So why should financial institutions offer eSignature services in their business operations?
1. Increased Efficiency and Transparency
In the lending process, it can be a lengthy, drawn-out ordeal to the banking institution and the borrowers when they can have documents signed quickly. There may be many parties involved in a lending process. For example, if you’re purchasing a home, there is the seller, the buyer (you), the mortgage company, and other parties. All these in one way of the other have to sign documents.
Many loan applications that are filled by borrowers also require that people or businesses embed their signatures. When you have loan agreements sent out through paper documents or faxed to the recipients to sign, it can be frustrating and challenging to locate the clients. There are often delays experienced to have the docs signed. eSignature for financial management, on the flip side, allows for increased transparency for banking and other institutions to find where the customers are within the signing process. You can know who has received a document to sign, when they received it, and when they signed it and sent it back.
Bankers are in a position to take action to send or move the document along the signing process by sending notifications or reminder emails or even sending the doc to another signer when there seem to be delayed so that the document is signed pretty quickly. Borrowers utilizing eSignature solutions don’t need to reschedule their time to head down to the bank branches to sign documents or deliver the paper document.
2. Save and Make Money
Digitizing the bank’s lending process from the bank’s side to the borrower’s side gives an end-to-end solution that allows the institutions and individuals to have the capacity to be able to take on more loan facilities and build their portfolio. Besides saving costly time, eSignatures also allow institutions to save valuable dollars that are used to obtain materials related to underwriting. The printing costs, paper costs, mailing costs, notary services fees, administration fees, and other expenses tied to traditional document signing can be a huge impendence to the growth of banking institutions.
The Ombud Open Research has indicated that companies that adopt eSignature solutions or electronic signature solutions can save approximately $20 for each document while also being able to reduce the turnaround times by approximately 80 percent. eSignatures for financial services agreement help organizations and banking institutions to save money and at the same have an opportunity to grow their business by streaming their lending processes, and channeling away the money they save from electronic signature solutions to grow their businesses.
3. Enhances Security
The use of paper documents allows easy tempering and forging of signatures. Even when you have the paper docs locked away in cabinets, there is still the risk of having the documents stolen, misplaced, or lost. eSignature solutions offer more security in not only signature verification but also the storage and accessibility of the signed documents. To help in verifying individuals by their eSignatures, the eSignature vendors use the encryption verification process referred to as Public Key Infrastructure (PKI) technology. This verification offers the highest level of standard for verifying and identifying an individual.
After a document is signed electronically, it is sent back to the sender. Since financial institutions are striving to accommodate the increasing need for self-service platforms while also being demanded to enhance their relationships with customers, it makes sense to integrate eSignatures in their business operations, especially the lending process. eSignatures help prevents the hassles and headaches of having documents signed while also giving the banking institutions or lenders the time to concentrate on their customers as well as the growth of the businesses.
4. Streamline Customer On-Boarding
The stakeholders in the financial sectors need to adhere to the protocol of Know Your Customer (KYC) verification measures in order to ensure the clients signing the documents are who they claim to be or say they are. The Know Your Customer (KYC) verification process can be quite complex when it comes to lending institutions because they have to gather legal agreements, liens, notes, social security cards, titles, and other documents of great importance. eSignature vendors help in streamlining this process by cutting back on the time that is needed for KYC processes to be initiated and completed.
5. Economies of Scope
Financial services companies are embracing eSignatures because of reduced paper and the tied transportation costs. Reduced transaction times are contributing to increased return on investment (ROI) and improved security in record keeping and storage of data is creating confidence with customers or borrowers. When you have less paper used financial brokers, banks, and other players within the lending sectors can save hugely on printing costs besides transportation or couriering expenses. eSignatures also expedite the authorization and approval process for transactions and allows for easy access to documents that have been signed as well as contractors. All electronic documents can be accessed in real-time.
6. Improve Compliance Stance
Organizations like The Federal Financial Institutions Examination Council (FFEIC) and The Consumer Financial Protection Bureau (CFPB) put pressure on the financial services sector with the regulations these bodies bring forward. Use of eSignatures helps boost the compliance stance of the banks and financial institutions when compared to the use of paper and ink signatures. eSignatures present great authentication techniques, secure encryption, tamper-evidence seal, and legally binding and court-admissible audit trail, it ensures that the banks and financial institutions comply with the regulations. Besides, electronic Signature financial services firms strictly conform to laws set by the ESIGN and UETA while also meeting auditor’s requirements.
7. Reinforce Brand Image
At the customer level, eSignature solutions create a positive experience. Lenders and other financial services companies like insurance firms that utilize eSignatures are regarded as innovative. This gives the customers the feeling that the companies mind about customer service as well as fighting fraud. Using eSignatures creates confidence and trust with customers allowing financial services companies to succeed in their business endeavors.
In the financial sector, eSignatures are utilized in lending, wealth management, banking, mortgage industry, and other general and ad hoc e-contracting processes. In lending, eSignatures are adopted by retail financiers, in small business loaning processes, and in consumer loans. Consumers, businesses, and financiers can sign loan applications and contracts online and deliver them electronically. Various consumer disclosures associated with the lending processes can be delivered to the respective recipients.
In wealth management, eSignature solutions help curtail the lengthy sales process that involves numerous meetings in addition to redundant errors whereby a single sitting is sufficient enough to complete the process. The financial advisors along with their clients have to sign contracts and forms which makes the process time-consuming. eSignatures try to eliminate that lengthy process by ensuring that documents are signed pretty fast. In banking services, eSignatures speed up the bank lending process and enhance the process of opening new accounts while ensuring convenient customer service.
The ever-demanding mortgage processes benefit from eSignatures since the transactions can be expedited fast. The documents involved in mortgage deals are signed quickly. eSigning solutions are used in financial sectors for other ad hoc processes such as e-contracting, procurement, HR, IT, legal, and corporate processes.