A Primer On Electronic Signatures

Service is often cited as a leading reason to bank with a credit union. But in the same breath, some also find fault with reduced hours and the lack of widely located branches. The same people who are shopping on their computers, smartphones and tablets are also looking to conduct business with their credit unions electronically. Whether opening an account, signing a loan or completing a credit card application, members want the convenience to bank anywhere, at any time, on any device. As a result, the traditional way of signing forms and documents is changing – from paper to paperless.

With an e-signature solution, credit unions can render these complaints obsolete by delivering the experience members are demanding. “Providing the ability for our members, who are disbursed across a wide geographic area, to sign documents from anywhere creates an edge that allows us to compete with larger financial institutions,” explains Kathy Clark, vice president of sales, service and operations with Teachers Credit Union in Hamilton, Ont., in regards to the credit union's adoption of e-signatures. “We are offering a higher level of service, which today is important to retaining existing and attracting new members.”

E-signature adoption among credit unions is catching on quickly but there are a handful of foundational questions that recur during the exploration process. The first is usually about the legality of e-signatures. Recent legal disputes indicate that e-signatures can actually provide a stronger legal defense than is possible with paper. However, the e-signature requires a proper framework to stand up in court. This leads to the second question often asked: What does an e-signature solution need to include?

An e-signature is first and foremost a legal concept. It is about having a lasting record of someone's intent. The U.S. federal ESIGN law defines an electronic signature as “an electronic sound, symbol, or process attached to, or associated with, a contract or other record and adopted by a person with the intent to sign a record.”

The term “e-signature” is often confused with “digital signature.” Digital signature refers to the encryption technology used in a number of security, e-business and e-commerce applications, including e-signatures.

To ensure a secure solution, a credit union needs to implement an electronic signature application that is built on digital signature technology. This combination makes the e-signature legal and compliant by delivering unprecedented visibility into transactions executed across multiple branches and controlling compliance requirements via automated workflow rules.

The digital signature technology also makes the signature secure, another top question asked when a credit union is in the online signing solution buying phase. To make this iron-clad, there need to be three levels of security included in the solution:

User authentication to reduce fraud and ID theft. Verification can be made through traditional log-in or password, secret question and answer, SMS code or a third-party authentication service.
Document authentication to provide irrefutable documents that meet regulations. Documents must include a way to digitally sign and encrypt the e-signed document to produce a tamper-evident seal. Any attempt to make an unauthorized change after the fact marks the document as invalid.
Process evidence to provide peace of mind for members and reduce odds of litigation and fraud. The goal of process evidence is to prove what took place throughout the progression of the workflow. This is accomplished by gathering electronic evidence such as Web pages, documents, disclosures or pop-up windows that were displayed; emails or SMS messages sent; any voice or image capture; IP addresses and the time and date of each event.

Finally, it all comes back to the member experience. To ensure a seamless online e-signature experience, it is important to integrate the solution with the credit union's business apps, customer portals and websites, and user interface. Best practices for online transactions show that customizing the member's experience builds trust. If the member doesn't recognize the interface they are dealing with, they may lose trust and abandon the process in favor of paper, especially if it involves entering personal information into a Web form.

According to Mitchel Chilcott, North Peace Savings and Credit Union CEO in British Columbia, “By taking our business digital we are not only reducing paper, we're also uniting our widespread membership by making it easy to access our services. The convenience and speed for members together with the elimination of inefficiencies like printing, tagging, scanning and shredding, makes this a win-win for everyone.”

For credit unions that are not ready to flip the switch completely on e-signing, proof of concept and pilot implementations are common. The first phase of a rollout works out any bugs attached to the larger IT infrastructure and assists in providing uniform attention and service for users. A license plan allows for cost-effectively expansion across branches and call centers.

Whether opting for an on-premise, cloud or a SaaS e-signature solution, the result eliminates manual, paper-based processing and enables banking transactions to be electronically executed from start to finish.

Michael Laurie is vice president of product strategy and a co-founder at Silanis Technology in Montreal, Quebec.

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