The Opportunity of E-signatures in Banking
An electronic signature also called e-signature refers to data in electronic form, which is logically associated with other data in electronic form and which is used by the signatory to sign the document. The legal standing of this type of signature depends upon adherence to the exact requirements of the specific regulation under which it was created. If allowed, it could replace a handwritten signature. E-signature may find a lot of usage and acceptance in banking because of convenience, security, and business continuity. Read more to understand challenges around using e-signature in banking and some ideas to effectively use this technology.
Let us start by drawing the distinction between e-signature and digital signature. Digital signatures are based on a cryptographic mechanism often used to implement electronic signatures whereas an electronic signature can be as simple as a name entered in an electronic document. Hence electronic signatures are a legal concept distinct from digital signatures. Digital signatures are increasingly used in e-commerce and in regulatory filings to implement electronic signatures in a cryptographically protected way. Lot of country-specific and global agencies provide standards for their implementation.
Electronic signature provides convenience as it could be used to sign a document by using a handwritten signature itself on a touchscreen. Whereas for the digital signature you need to follow standards and it must be issued by an authorized agency to ensure protection against identity theft and is encrypted in the document. Please note that depending on the legal law in operation, both can be accepted and might be used by companies and organizations irrespective of the fact that digital signature offers a higher level of security.
In this article, we want to focus on what are the challenges faced by a bank that wants to start with the usage of e-signature. What are the benefits and barriers to incorporate this among their other technologies?
Some examples of usage to draw benefits for banks could come from using them on all customer-focused forms right from offering a fully digital account opening and onboarding process supported by e-signature. Using integration with facilities like Aadhaar can even eliminate the need for presenting a physical ID document. In 2015, some top banks started testing mobile-based e-signature capture integrated directly into the banking app, so the entire process remains digital.
On the lending side of banking, business opportunities can be explored on the consumer and small business loans and retail financing. These can be used for signing loan applications and borrower contracts as well as for electronically delivering the many consumer disclosures at the heart of these processes. U.S. Bank has nearly eliminated loan exceptions by incorporating e-signatures into their consumer and business loan processing, which was deployed across more than 3,000 retail branches in 2011. Globally, banks and retail finance providers are experiencing similar benefits.
What is the current business challenge?
E-signature usage in banking is getting a strong pace, especially with corporates because of convenience, security, and business continuity.
Although e-signatures have the potential to strongly support banks' willingness in straight-through processing and decreasing transaction costs, lack of generally accepted e-signature solutions, and as expected, corporates demanding tailor-made solutions" take the situation to a threat as well as to an opportunity. Moreover, there should be a mechanism on the bank side that can not only validate the e-signature but more importantly trace the type and amount of transactions the related signature(s) has the authority as per the power of attorney of the corporate.
What is the goal of this project?
Finding the right e signature application for corporates to increase the usage of e-signatures together with the validation mechanism on the bankside can be defined as the goal of the project.
- Review banks' current approach to e-signatures
- Screen best practices around the globe from other banks
- Compare and contrast the different approaches
- Identify required adjustments to approaches
- Define the commercial benefits
Banking Domain Knowledge - Resources
Related Links
You May Also Like
-
Definition of Bank: Meaning of the term Bank and the Business of Banking
What do we mean by the word bank? How did the word bank originate? What is the most simple and concise definition of a bank that explains the fundamentals of the banking process? Does the definition of banking vary from country to country? What are the key differentiators between any other business and a Bank? Get answers to all these questions and explore the basics of bank and banking as an industry.
-
History of Banking: Evolution of Banking as an Industry
Banking is one of the oldest industries and banking in the form that we know of began at about 2000BC of the ancient world. It started with merchants making grain loans to farmers and traders while carrying goods between cities. Since then, the banking industry has evolved from a simplistic barter system and gift economies of earlier times to modern complex, globalized, technology-driven, and internet-based e-banking model. In this article, we will take you through the major events and developments in the history of the banking industry.
-
History of Banking: Famous Banks from the Past
Seven hundred years ago a bank was established in Venice, which made transactions resembling modern banking. In 1407, another bank was founded in Italy under the name of Banco di San Giorgio which was one of the oldest chartered banks in Europe. Sveriges Riksbank (Riksbanken), is the central bank of Sweden and the world's oldest central bank. The Bank of England is the second oldest central bank in the world, and most modern central banks have been based on that model. Let us explore some interesting events as we learn more about these early banking institutions.
-
History of Banking: The Gold Standard & Fractional Reserve Banking
Gold has always been considered as a safe economic investment and treated like a currency. All of the economically advanced countries of the world were on the gold standard for a relatively brief time. Under a gold standard, the value of a unit of currency, such as a dollar, is defined in terms of a fixed weight of gold and banknotes or other paper money are convertible into gold accordingly. Explore the fascinating history of the gold standard through the lens of history and also learn why banks hold back a certain fraction of deposits as reserves.
-
Overview of Banking Industry: The Industry Basics
Banks play a key role in the entire financial system by mobilizing deposits from households spread across the nation and making these funds available for investment, either by lending or buying securities. Today the banking industry has become an integral part of any nation’s economic progress and is critical for the financial wellbeing of individuals, businesses, nations, and the entire globe. In this article, we will provide an overview of key industry concepts, main sectors, and key aspects of the banking industry’s business model and trends.
-
Banking Sector, Segments & It's Classifications
The banking industry players deal in a variety of products from savings accounts to loans and mortgages, offer various services from check cashing to underwriting, caters to different types of customers from individuals to large corporates, serve diverse geographies from rural villages to cross-border operations. Thus the banking industry is made up of several types of banks, with their own objectives, roles, and functions. In this article, we will explore the various sectors, segments, and classifications of banking based on parameters like products, customers, types, etc.
-
Type of Banks: Different Types of Banks in India & their Functions
This article explains the banking structure in India and how different banks are classified as per RBI Norms. The Indian banking industry has been divided into two parts, organized and unorganized sectors. The organized sector consists of Reserve Bank of India, Commercial Banks and Co-operative Banks, and Specialized Financial Institutions (IDBI, ICICI, IFC, etc.). The unorganized sector, which is not homogeneous, is largely made up of money lenders and indigenous bankers. Learn what we mean by nationalized banks, scheduled banks, public sector banks, private banks, and foreign banks.
-
Types of Banks: Different Banks & their Classifications (Global)
The banking industry caters to various sections of society thus the focus of banking becomes varied, catering to the diverse needs of clients through different products, services, and methods. To meet this, we need distinctive kinds of banks addressing complex business & social needs. In this article, we will explain various types of banking institutions ranging from retail banks, commercial banks, co-operative banks, investment banks, central banks to various other types of specialized banks.
-
Banking Operations: Understanding Various Transactions & Activities
Banks perform a variety of operations ranging from basic or primary functions like day to day transactions at a branch to others that maybe the agency or general utility services in nature. The transactions that are incidental to revenue/sales or sustaining the business are an important element of the banking industry value chain. In this article, we will look at the key operations performed in the course of banking.
-
Banking Industry Business Model - Understanding How the Banking System Works
Banks are commercial profitable institutions and need to increase their business, grow their revenue, and provide returns to their owners. Unlike other stores and shops, banks are providing services rather than selling their products. Learn how banks get their funds and how they make money on services. Read more to learn how the banks earn their profit!
