Critical Considerations When Offering E-Signing at Your Financial Institution

Your customers want to e-sign their documents. They expect the ease of being able to handle financial documents and loan applications remotely, and they may get frustrated by processes that require them to come into the branch and put down a wet signature.

Although some customers still prefer the perceived security of paper documents, the financial environment is shifting quickly toward digital, and if your financial institution doesn’t keep up, you risk losing customers and creating an outdated brand image.

However, accepting digital signatures can be a complicated process. To protect your financial institution and your customers, you must consider several critical elements before accepting e-signatures.

1. Creating a compliant e-signing environment

Arguably, the most important tip about implementing e-signing is to understand the compliance requirements. If your financial institution is not compliant with the relevant regulations, you risk facing penalties, and you may end up with documents that are not legally enforceable.

E-signatures are legally binding, and someone cannot get out of a contract based on it having an e-signature instead of a wet signature. However, they are only legally binding to the extent that the document manager is/was compliant with relevant regulations.

The Uniform Electronic Transactions Act (UETA) outlines most of the compliance requirements for banks and other financial institutions that want to accept e-signatures. Make sure that you understand these requirements inside and out before you initiate e-signing at your financial institution.

There are detailed regulations related to how you store, manage, and deal with disaster recovery of documents. Your financial institution must also have identity verification processes in place to ensure the validity of the e-signatures. Depending on the size of your institution and the resources you want to devote to this process, you may want to work with a third-party certificate authority or handle your own certification processes.

A certificate authority issues digital certificates that bind identities to cryptographic keys used to validate identities. To verify a signer’s identity, the authority may use the customer’s email address, IP address, and tools that make sure the document hasn’t been manipulated. In contrast, a banker, teller, or loan officer can simply verify identity by looking at an account holder’s ID or having them obtain a multi-factor authentication code from a known device.

As you review the requirements, however, it’s important to note that only 49 states use the UETA; As of 2024, New York State uses the Electronics Signatures and Records Act (ESRA). Financial institutions and other organizations that accept e-signatures in New York State must be aware of these rules, but beyond that, anyone who does business with someone in New York, including transferring loan maintenance to a NY-based financial institution must be aware of the differences between the two types of legislation.

You also must be aware of any regulations governing international transactions and other local or state laws that may go beyond and supersede the federal requirements. Ultimately, you want to create an environment where your accountholders can e-sign safely and conveniently.

2. Setting up digital documents

If you want to accept, e-signatures, then, you also must have digital documents at your financial institution. If you don’t currently use digital documents, you need to map out the process of instituting and maintaining these documents before your financial institution rolls out digital signatures.

Consider the following:

• How are you going to store documents?
• How are you going to share documents with clients?
• How are you going to manage documents internally?
• What type of disaster recovery system do you need?

 

Answering these questions goes far beyond your personal preferences. You also have to think about compliance issues, technology challenges, and user adoption. Setting up digital documents at your financial institution may require you to invest in new technology or potentially even hire new talent.

There are third parties that can help you with both set-up and hosting. Choosing the right partner can help eliminate recruitment, onboarding, and IT equipment costs, while also providing you with top-level guidance. But, you need to choose third-party vendors carefully as their security protocols, industry knowledge, and reputation can have a strong effect on your financial institution.

As you set up digital document storage and access, you will need to consider the following:

• How long do you need to store your digital documents? In a lot of cases, you may need to store documents for at least 30 years. Once the documents are inactive, you may need to store them even longer for reference purposes.
• Do you want to convert existing paper documents? If you decide to make a comprehensive transition to digital files, you will need to convert paper files to digital records. When doing so, make sure that you stay compliant with relevant regulations and follow best security practices.
• How will clients access digital files? You can use e-signatures exclusively on digital files in your branch or you may want to offer clients the ability to sign documents remotely. These options require different approaches to technology and different types of customer authentication processes.
• How will you train your current employees? Changing to digital tiles that support e-signatures can change a lot of your internal processes related to everything from opening a new account to applying for mortgages. You will need to train your employees on the new processes, and you may need to be creative to minimize disruptions to your regular operations. You need to ensure that you can continue to operate as usual, even during the transition period.

You may want to work with a project manager who can provide you with guidance as you prepare for and implement e-signatures at your financial institution.

3. Establishing processes for obtaining customer consent

Before implementing e-signatures, you need to ensure that you have a set process for obtaining customer approval. Your customers must consent to digital records, and you must advise them of their right to withdraw consent.

The Electronic Signatures in Global and National Commerce Act (E-Sign Act) says that digital records can be provided in any situation where you are required to provide information in writing based on a statute, regulation, or rule of law. The rules of the E-Sign Act apply to all transactions related to interstate or foreign commerce, and often, these regulations are stricter than those outlined by UETA.

Thanks to the E-Sign Act, you can provide your customers with all kinds of information digitally, helping to save you money on paper and postage. However, you must obtain consent from your customers before doing so. You must inform your clients that they have the right to obtain information on paper or in a non-electric format, and if they consent to digital records, they can rescind the consent at any time. Additionally, you must inform clients whether they are consenting to receive a single document electronically or an entire category of documents electronically.

You also must inform the consumer about how they can withdraw consent and how to update their electronic contact methods. Finally, you have to let them know how they can access digital documents on paper and whether or not there is a charge for that service.

E-Signing and Signature Verification

At SQN Banking Systems, we have the services and solutions that you need to support e-signing at your financial institution. Our eSigning technology lets you easily collect e-signatures in person or remotely. It can embed electronic signatures into PDF documents and is compatible with all new account paperwork and loan applications.

With eSigning, you can store multiple signatures on a single file, and if you’re worried about the legitimacy of a presented signature, you can compare it to the stored signature on file.

We also offer automated signature verification tools that help reduce check fraud related to forged signatures. Unfortunately, although check use has fallen, check fraud has increased as bad actors exploit this payment method. Often, when financial institutions hyper-focus on digital offerings, they overlook threats to their traditional payment methods.

When you work with us, we help you spot all of your vulnerabilities. We assess the gaps in your current fraud prevention and detection methods, and we help you craft an anti-fraud strategy that protects your assets from current and emerging threats, while also working in line with your budget and operational strategies.