There are still some unknowns with electronic signatures, but growing enthusiasm for this technology is steadily tipping the scales in favor of its adoption. Slightly more than 10% of credit unions larger than $20 million in assets offered this service as of June 2013; that is 25% higher than just one quarter ago. In the first six months of 2013, 88 credit unions, ranging in size from $20 million to almost $6 billion, reported adding esignature capabilities. And data from Gartner Research indicates the market for eSignatures has increased 48% from 2011 to 2012.
By eliminating the extra step of appearing in person to sign documents or incurring the costs of sending paper back and forth, credit unions are finding they can grow their loan portfolio even if the number of applications does not increase. At two recent Callahan Leadership Roundtable events, credit unions who had launched esignatures for their loan documentation reported increasing their pull-through rate on applications as much as 20%.
Credit unions interested in offering this option to their membership should first consider incorporating best practices forged by the technology’s early pioneers. Below are several tips to help an institution hit the ground running — and signing.
Electronic Versus Digital
The terminology associated with the different stages of electronic document workflows can be complex, but the foundation is an understanding of the difference between electronic and digital signature processes. Montreal-based provider Silanis helps clear up some misconceptions regarding these seemingly interchangeable terms.
Digital Signature — Digital signature is the process of encrypting electronically signed documents to secure them from modification. In other words, the term refers to the handling of the electronic signatures after they are created, not to the actual process of capturing them.
Electronic Signature —The term electronic signature, on the other hand, refers not only to the capturing and digitizing of signature data but also the legal process of capturing signer consent, which is what makes the agreement enforceable.
How (NOT) To Put Pen To Paper
An electronic signature doesn’t necessarily need to involve a signature at all. Depending on the system, users may also be able to identify themselves and agree to applications, notices, and other documents using typed names, personal identification numbers, or biometrics.
Putting The ID in “I Do”
A signature without the proper context and attribution behind it is just a scribble. According to David Whitaker, counsel for BuckleySandler LLP and a presenter at the E-Signature Summit for Banking Executives in New York, electronically signed documents are frequently accompanied by an additional credential, such as a password or token, and supported by the presence of audit trails and other processes to demonstrate the document was protected against later alteration.
An Option For Each Use Case
Institutions will want to have separate processes for their mediated, high-value signature segments and their low-value, unmediated use cases, says Craig Le Clair, vice president and principal analyst for Forrester, speaking to attendees of the E-Signature Summit.
However, simplicity and ease of use remain key to fostering adoption in either circumstance, he says. Whichever system the credit union puts in place, it needs to make sure the process works in the interests of the institution, its employees, and its members.
Play Your Part
Digital signatures are subject to a slew of regulations, and the requirements are equally complex when it comes to notifying signers of changes to their existing agreements, Whitaker says.
For example, how credit unions provide the necessary information to their members is important. Typical examples include having the information automatically appear on the screen of the application itself, placing information on the same page as the application with a notice referencing its location and contents, or using a non-bypassable hyperlink that the member must view to continue.
The location of this information in relation to the call to action, where the member actually consents to the agreement or notice, can also come under scrutiny, Whitaker says. In the case of Vistaprint, the agreement terms and disclosures in question were deemed enforceable because — in addition to meeting other requirements — they were placed above or to the left of the call-to-action button.
In the end, whether members will actually read the terms provided before agreeing is out of the institution’s hands. But by following the best practices based on past precedents and working closely with an in-house or external compliance specialist, credit unions can save themselves future headaches down the line.
Extra Measures For Mobile
With few exceptions, the same rules for electronic signatures online also apply to mobile devices. This includes the requirement that signers be able to retain a copy of the document, despite the obvious challenges that printing or saving documents from a mobile device creates.
There may be some gray areas with signature processes designed for a desktop but accessed through a mobile browser, Whitaker says. However, credit unions should generally plan ahead and invest in ways to limit or negate any potential delivery rule issues that may arise from members signing documents on mobile devices.