E-Signatures: Answers to the 5 Most Common Questions

Sameer Hajarnis, September 22, 2021

E-signatures are quickly becoming a foundational technology for all banks and financial institutions. Over the past year and a half in particular, e-signatures have enabled banks and financial institutions to maintain critical business continuity by providing consumers with digital access to key services like bank account openings, auto financing, loans, and insurance agreements.

While COVID-19 spurred an increase in digital banking and a need for secure e-signature technology solutions, this trend was already on the rise to improve the user experience and make banking convenient for all consumers. In fact, the global digital signature market is expected to grow by 28.9% from 2019 to 2027.

As e-signature adoption increases, it is critical for financial institutions and banks to educate and raise awareness of the legal and secure processes e-signature technology provides for online banking transactions and agreements, such as account openings, credit and finance applications, transaction and account maintenance, and more. While the use of traditional handwritten signatures is coming to an end, there’s still concern among banking customers surrounding the legality and validity of e-signature technology. With a number of common consumer misconceptions surrounding the legality and security of e-signatures, banks and financial institutions must educate their customers and provide guidance when using e-signature technology.  Here are the five most common questions – answered – surrounding e-signatures.

1. Are e-signatures legally valid?

Yes. The Electronic Signatures in Global and National Commerce Act (ESIGN Act) was signed into law on June 30, 2000, making it legal to use electronic signatures to sign and store digital documents at the federal level. At the state level, e-signatures are also governed by the 1999 Uniform Electronic Transactions Act (UETA) with slight variations in 48 states.

However, these only apply to certain documents – and do not include recognition of wills, family law documents, official court documents, health insurance benefits, and testamentary trusts.

2. Are e-signatures as legally binding as “wet signatures”?

E-signature tracing and authentication methods make them safer and more secure than traditional paper documents and ink signatures. E-signatures are designed to reduce the risk of fraud and help to ensure compliance through audit trails.

The American Bar Association states that the electronic trail created by e-signature solutions can provide more information that would not have been available before the digital age. For example, the ability to virtually view who, when, and where someone signs the document.

E-signing platforms can also be supplemented with digital encryption technology, and identity verification tools, such as biometric authentication or ID document capture to help prevent tampering.

3. Are e-signatures and digital signatures the same?

No, while the concepts are similar, an electronic signature captures a person’s intent to sign as a legally binding agreement.

A digital signature is a type of electronic signature that creates a virtual fingerprint that is distinct to individuals during a transaction. This can then be used to verify the authenticity of the signed record through public-key cryptography and encryption/decryption technology.

While digital signatures do not capture the intent of the signer, it can be beneficial to use in addition to an electronic signature app to add more comprehensive security to the data and transaction overall.

4. How difficult are e-signatures to trace?

Secure electronic signature solutions should be able to authenticate users prior to e-signing and tie that authentication to the e-signature and the e-signed document.

As such, multi-authentication methods can have the flexibility to configure in the same transaction, while fitting the risk profile of the organization. The digital audit trail of each transaction can make it easier than ever to trace signatures and documents from point A to point B.

5. Do e-signatures on complex financial agreements remove the human interaction and customer service element?

No. One of the key benefits of e-signatures is that they enhance the customer experience. Although it is undeniable that emerging technologies like artificial intelligence (AI) improve the capabilities of online banking and transactions, it does not eliminate the need for human interaction. The human element is still a vital part of financial services – particularly for loans, investment management, and mortgage agreements. Banks and financial institutions are now integrating solutions that offer virtualized human-assistance to deliver secure, video-enabled customer interactions to guide customers through complex, multi-step financial agreements.

Collaboration features and web-enabled video conferencing can now be built into the e-signature process to make it easy, convenient, and secure for customers to complete key financial agreement processes online, while still receiving an optimal user experience. By adding the human element back into complicated and complex financial agreement processes, e-signature technologies can ensure secure and interactive experiences between financial services providers and their customers.

More and more businesses are adopting e-signature technology to meet the demands of customers in today’s digital-first world. E-signatures can provide the optimal user experience from any geographic location with the ability to interact with customers virtually, driving the rate of document completion, convenience, and speed. At the same time, this technology enables the required level of transparency, efficiency, and security for all transactions that a pen on paper simply cannot beat.

Electronic Signature

The Beginner's Guide to Electronic Signatures

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This blog, written by Sameer Hajarnis, E-Signature Practice Leader at OneSpan, was first published on BAI.org on September 17, 2021.

Sameer is an e-signature practice leader with OneSpan and has over two decades of experience in enterprise software and SaaS companies. He leads a team of sales professionals helping customers digitize e-Signature and ID verification workflows.