First of all, what is an Electronic Signature?
That may seem like an easy question to answer: most people would think that it just a digital version of their “wet”, physical, handwritten signature. Well, in some cases, that’s exactly what it is. However, there is so much more to it than that, even to the point that it can get quite confusing. For example, did you know that a “Digital Signature” is a form of “Electronic Signature” even though not all “Electronic Signatures” are considered a “Digital Signature”? Some Electronic Signatures are not even remotely similar to your handwritten signature. Let’s take a look at the various shapes and forms of Electronic Signatures, how they differ from each other and why they should be an important part of your Institution's automation and Customer Experience strategy.
Types and Definitions
As we look at each type of Electronic Signature, it is important to note that each is considered a legally binding and carries the same legal weight as a handwritten signature based on the laws that apply within a given jurisdiction.
In the United States, an Electronic Signature is defined as “an electronic sound, symbol, or process, attached to or logically associated with a contract or other record and executed or adopted by a person with the intent to sign the record”. In the European Union the definition is slightly different: “data in electronic form which is attached to or logically associated with other data in electronic form and which is used by the signatory to sign”. Notice that the “electronic form” of the signature can be a sound, symbol or process - at least in the US. For example, just a check box or even just typing your name is acceptable, so it doesn’t necessarily need to be a digital or electronic copy of your handwritten signature. Now let’s look at the different types of signatures and how their purposes differ:
- Standard Electronic Signature: this is the most basic “electronic form” of a person’s signature. This standard signature doesn’t use any type of encryption, it is typically done in person using a signature pad, and it includes a human (visual) verification of the signer’s identity. This type of Electronic Signature relies on the user’s “intent to sign” as proof that the document is valid, and is used mainly to verify a document. In Financial Services, this would be used to automate document signing during new account openings, opting in/out of services, account maintenance requests or even cash back on transactions. Some signature pads can also be used to display Digital Marketing messages - a bonus function called "digital signage".
- Digital Signature & Advanced Electronic Signature (AES): these are types of Electronic Signature which include the extra step of being secured through Public Key Infrastructure and a Certification Authority. With this method of signature, authenticity of the signer must be verified before the signature takes place and the Digital Signature must be uniquely linked to the signer. This creates a virtual fingerprint which encrypts and identifies a person's identity and is linked to the document in such a way that if document is altered, the signature becomes invalid. Based on this additional security layer, Digital Signatures and AES are typically used when a customer is signing a document remotely and they are coupled with an automated ID Verification process. This type of Electronic Signature is used mainly to protect and secure a document and is used more for High Value signatures such as those on Mortgages and Consumer Loans.
- Qualified Electronic Signature (QES): this form is excusive to the EU and it has no equivalent in the US. Although it includes requirements for Digital Signature and AES, it adds requirements for the device upon which the signature is provided. Signature devices must be acquired from an EU authorized certification authority - so it offers an even higher level of security.
Why an Electronic Signature? the Benefits.
From onboarding new customers remotely to automating in-office paper-based processes, Electronic Signatures provide many benefits to Financial Institution and other types of businesses. Some of them include:
- Reduced Costs: going paperless is an environmentally friendly solution that saves the cost of paper, printing, postage and file storage.
- Greater Efficiency: save time and increase productivity by integrating electronic signature within your workflow processes while eliminating the need to scan paper documents after they've been signed for digital storage.
- Flexibility: customers can sign from anywhere, independent of location and time, which increases convenience. Even more evident when multiple signers are geographically separated.
- Lower Risks: Electronic Signature provides increased security, especially when coupled with digital authentication.
- Improved Customer Experience: the process enhances customer convenience and drives increased satisfaction and loyalty.
Cost savings by eliminating use of paper can be significant, while creating a more efficient process greatly improves both employee gratification and customer satisfaction. With the ability to expand past your brick-and-mortar footprint while allowing your customers to transact business with you from wherever they are thanks to online and in-app signing capabilities, adopting an Electronic Signature strategy for your business becomes a very sensible decision.