In the knowledge era, financial institutions like banks, credit unions, and wealth management companies can thrive in the digital world by securely streamlining transactions for their customers. Recent trends in the digital finance field point are shifting due to a variety of pressures, including regulatory oversight and customer expectations.
A Growing Trend
Over the past few years, one emerging trend has been esignatures, with 48% of the industry adopting it by 2011.
Esignatures have been useful in a number of ways, and have been widely adopted in Request For Proposal (RFP) documents, where a bank announces funding available for a particular program and invites bids for its completion. Even firms that are not yet using it plan to use it for commercial loan origination.
The U.S. Bank Case Study
One reason for the growing trend in the use of an electronic signature for financial services is the improved efficiency at the branch level. U.S. Bank proved the value of esignatures when the bank adopted these digital signatures four years ago in over 3,000 retail branches for their business and consumer loan processing.
By adopting the use of esignatures, the bank benefitted in the following ways:
- · It eliminated almost all its loan exceptions.
- · It slashed the bulk of costs for document handling.
- · It exceeded compliance regulation standards.
- · It freed up more staff to focus on selling loans.
- · It improved branch customer satisfaction.
Industry Challenges
A wide range of financial institutions—banks, credit unions, mortgage companies, and retail-finance firms—are faced with 3 difficult industry challenges:
1. They need to balance cost reduction while championing new investments in technological innovations.
2. They need to support the modern, tech-savvy customers who mainly run their businesses from computers and mobile devices.
3. They need to meet with tougher compliance requirements during the Obama Administration by making fewer paper-based mistakes, including compliance with the Dodd-Frank Act and the Gramm-Leach-Bliley Act.
7 Benefits of Using Esignatures
The esignature trend is well-past the early adopter phase because the benefits far exceed any hesitation in adopting a digital solution.
Here is a list of at least 7 benefits enjoyed by financial institutions using esignatures:
1. Since transactions are more transparent, as there is now real-time evidence in the signature process, it is much easier to improve compliance and enforce regulatory rules.
2. With a stack of paper documents, errors are easy to miss, but digital signatures are easy to spot. Documents are now less likely to be pushed through despite missing signatures.
3. Digital documents are centralized in a computer system. Paper documents are easy to lose as they may be sitting in a branch, a client’s office, or lost in transition.
4. Customers can sign immediately from their office, instead of waiting for the mail or going to a particular location to sign a document. Moreover, there are no geographical or temporal limitations. A customer can sign in any time zone and from anywhere in the world.
5. The time it takes to complete a transaction has become incredibly fast.
For instance:
- · It would take 16 steps to get a consumer loan, now it can be done in 4 steps.
- · It would take 3 visits for a wealth management transaction, now 1 visit is enough.
- · It would take 2 weeks for a retail credit transaction, now it takes 10 minutes.
- · It would take almost 2 hours for a mortgage closing transaction, now it only takes 15 minutes.
6. Document preparation is faster and much more efficient.
Esignatures have created a system called STP, or electronic straight-through processing.
Before the invention of STP, a banker had to go through the following steps to prepare a document package:
- · Manually prepare the package.
- · Do a quality control of the loan.
- · Scan records.
- · Index records.
· Repeatedly ask busy customers to make time to sign the documents.
7. There is a tremendous level of savings of time, money, and effort for financial institutions.
For instance, the following processes have been eliminated:
- · The need to spend millions of dollars to employ couriers to deliver green bags.
- · The need to scan 26 million pages a year.
- · The need for a sales teams to spend 82,000 hours selling to clients. (Which is the cost of hiring 41 sales people full time)
- · The need for bank personnel to spend 95,000 hours working directly with clients.
- · The need for 20 full time employees to do back office paperwork.
- · The need for customers to spend 30,000 hours to complete signage on document package.
Esignatures are easy to use for a large number of transactions. For instance, they can be used for account openings, retail and credit card applications, disclosures, investment products, and a variety of loans from commercial lending to a student loan. Additionally, there are also numerous ways to facilitate this signature—capturing a signature at a branch on a tablet, asking for a click-to-sign from a home or office computer, asking for a click-to-sign after a point-of-sale transaction, or sending a secure link via email.