Remember the early 2000s, when a bunch of electronic signature and electronic form products came out that were going to revolutionize work? No more paper forms! All forms were going to be electronic documents, signed digitally. You would verify your identity, read the document, type in any information that hadn't been prepopulated for you, and hit the submit button. If need be, you could sign your name on an electronic keypad or tablet with a stylus. There would be little need for printing, faxing or filing.
But the world was not quite ready for this. Legal departments and the IRS balked at accepting electronic signatures on important documents like mortgage applications. Banks were wary of trying the technology until it was proven in court and by regulators. And business processes that relied on older software programs were too hard to change. Companies that provided this technology found narrow windows of opportunity and waited patiently for the broader market to be ready.
Then a few things happened. The Uniform Electronic Transactions Act was passed, which pushed most states into accepting electronic documents and signatures as official records. The IRS began accepting digitally signed tax forms. Stores began using signature pads at the point of sale. People began carrying tablets and smartphone around and clicking on "I agree" on disclosures.
Electronic signatures can help accommodate two competing forces in retail banking: the ongoing evolution toward self-service and the need for a friendly human interaction when customers do visit a branch. "Branches are still the cornerstone of the retail relationship," says Craig Le Clair, vice president and principal analyst at Forrester.
But the human element is often vacant. "When I call the pizza place, they know who I am," LeClair says. "When I call my bank, they have no idea who I am."
Electronic records electronically signed, stored and linked by individual and household relationships can help customer-facing employees regain that understanding of the people they serve.
At a conference last week sponsored by Silanis and IBM, bankers and lawyers testified to an emerging legitimacy of e-signatures in the world of banking. Royal Bank of Canada is already making extensive use of the technology throughout its business, starting with wealth management. U.S. Bank has rolled out e-signatures across 3,000 branches for consumer loans and leasing. Chase is testing the technology in pilots, with broad rollouts planned for its branches. Federal and state courts have for the most part supported e-signatures in civil lawsuits, with a few hiccups around methods of authentication and delivery of disclosures.
Chasing a Better Branch Experience
JPMorgan Chase recently hired Alan Varrasso away from Verizon Wireless to be its senior vice president of consumer banking IT, sales and services. He is responsible for the digital sales and service experience of Chase's retail branches and call centers. He oversees customer-facing digital initiatives such as new processes supported by electronic signatures.
The bank is implementing e-signatures in branches to facilitate interactions between branch staff and customers. "We're moving away from the banker sitting across the desk from the customer, we're making it a more interactive experience," Varrasso said in an interview at the conference last week. "The technology is helping with account origination and other basic banking tasks, with the banker and customer having interaction utilizing the tablet as needed to complete the necessary paperwork."
The primary goal is to simplify the customer engagement. "The paperless component is a huge win for us, but it's also around us being able to make sure the document is being signed and being put into a vault," he says. "This has changed the way we open accounts, manage workflow, and provide checks and balances and controls."
The bank's technology roadmap has it using e-signatures for credit card opening, mortgage originations, CDs, and most other transactions that require signatures by the end of 2014. The technology will be introduced not only in consumer banking, but treasury, mortgage lending and private banking as well.
As to what devices to support, Varrasso is a firm believer in device agnostic solutions. "We didn't want the tablet decision to hold up the progress of e-signatures," he says. "We're almost treating end devices like TV screens."
This calls for a change in the way developers write applications. Rather than creating for a website or a native app, Chase's developers are creating "native hybrid" programs that wrap a browser page written in HTML5 with the look and feel of an app. This gives the bank more control over what's being rendered, and the program can run on any operating system or browser. "You lose some things and it will require to you to implement other software tools to take advantage of the GPS or camera resident in a smartphone or tablet," Varrasso said. But the advantages far outweigh such shortcomings, in his view. "The delivery of the app experience is not a heavy lift but simple to do," he says. "The hardest part isn't the generation of HTML5, it's extracting the business rules and the complexity of the business operations from the user experience." If the business rules are intertwined with the user interface, the app becomes overweight and flexibility is lost.
Integrating the electronic signatures and the new workflows that of necessity must be built around them with a legacy platform is not easy. "It's a heavy lift and complex," Varrasso says. The electronic signature itself, in Chase's architecture, is a web service that can be plugged anywhere in a workflow. The capture and storage of documents is another service that can be called by other programs used at Chase.
The physical manifestation of the signature will vary. In some places, electronic keypads will be offered to let people sign their name with a stylus. In other cases, it will be a click. "Verification happens whether you use a tablet or keypad or not," Varrasso says. "Our legal teams have talked through the quality of the signature."
Chase's wealth management division is already using the electronic signature technology, and its private bank is starting to look at it. It's running in a couple of branches as a proof of concept and more will be added in 2013. "We'll get really aggressive in 2014," Varrasso says.
E-Signing in Canada
Royal Bank of Canada had a number of reasons to consider e-signatures. One was a quest for efficiency through operational improvements that could be assisted by electronic signatures. Another: regulatory barriers to the technology fell in Canada. And customer adoption seemed certain.
"Consumers are ready to embrace e-signatures," says James McGuire, vice president, digital strategy and experience at RBC Royal Bank, Montreal, who also spoke with us in an interview at the conference last week.
A prime use case for the bank is wealth management. "These people visit clients in their homes and do transactions there," he says.
RBC mortgage professionals, too, go to people's homes, often carrying a bag of peripherals with them such as scanners and printers. "This has not made a good impression on customers," McGuire says.
RBC has created an infrastructure to support electronic documents throughout the company, consisting of e-forms, workflow and content management technology. A 20-person team performed vendor evaluations, although 250 people wanted to be in on it. "We tried to manage the scope on this," he says. "As soon as you say something is going to run across everything, that has a connotation to it. We needed to keep it small."
There was no build vs. buy debate within the bank. "We felt there were solutions available that we should use," he says. The ultimate choices were Pegasystems for workflow, IBM for content management and Silanis for e-signatures.
"I always look for technology that's out there," McGuire says. "There are a lot of good industry players out there."
The implementation was reasonably smooth, he shares. "There wasn't the level of complexity with this initiative that I've had with others," he says. "We've been fortunate and made prudent decisions. We were able to insulate the impact on legacy solutions."
Like Chase, RBC takes a write once, support multiple devices approach using HTML5. "HTML5 is good, we have a lot of experience with it," McGuire says. "You do want to make sure the experience the customer has fits the device."
Wealth management salespeople now use a tablet or a laptop with an e-signature pad to sign customers up for new products.
In surveys, 63% of wealth management staff said the e-sign process saved time, though
36% experienced technical problems in the pilot. Compliance staff have reported that they're able to avoid certain checks that are taken care of automatically by the software.
Implementing the e-signature technology wasn't hard, McGuire says. "There's no rocket science, the heavy lifting is in looking at this end to end, and creating an efficient process," he says.
By the end of 2013, the bank will have e-signature software rolled out across its sales force and self-services channels for deposits and credit documents. "By the end of the year, we will have fundamentally changed our products across channels," McGuire says.
McGuire's advice to others is to start simple. "Don't make it more complicated than it is," he says. "Don't let lawyers design your user experience."
But although banks like Chase and Royal Bank of Canada have made the investment and are embarking on large e-sign projects, challenges remain for the adoption of electronic signatures. For documents with "downstream afterlife," such as mortgage documents for which the loan is sold to another bank or collateralized and sold to investors, disputes can arise. The original lender and borrower might have agreed on the intent to sign the document, but how will third parties down the road feel? "There's some ambiguity about that," LeClair says.
Another issue is the process architecture around electronic signing. Does the electronic signature software handle just the verification of the actual signing, or does it do more than that?
"You don't want to let a particular business unit come in with its own e-signature process and have another one build their own, with different vendors and different formats for electronic evidence," LeClair says. "You want to get the legal department to sanction a particular approach and build a technology stack that can act as a shared service to multiple business units." One e-signature technology could work with mortgages, car loans, demand deposit account opening and more.
Many banks are using outside business process management providers to build the electronic signature workflow technology that can be shared across business lines. "They're not building their own content management, not building their own process orchestration," LeClair says. "Most of them have investments in five to eight systems already and are trying to pick and consolidate."
Simple Documents Yes; Mortgages No
Paperless mortgages are still a ways off, according to David Whitaker, counsel at BuckleySandler and former counsel at Wells Fargo. "Ironically one of the original drivers behind UETA was the residential mortgage industry, they said we'd like to see with statutory certainty that we can take residential mortgages electronic," Whitaker recalls. "They were the driving force behind the drafting and adoption of UETA. There is no transaction more complex than a mortgage, nor one that involves more parties."
Issues around electronic mortgages include incompatible systems, variable rules around electronic recording, and the integration of electronic closing documents into the back-room systems of lenders, Whitaker says. "The mortgage lender bang for the buck in the e-mortgage is what that allows you to do post closing, that's where the money and expense are," he says. "The up-front expense of integrating and automating the post-closing process is very significant. You find large financial institutions approaching that in small stages until they have the resources to automate all that post close."
At some banks, the mortgage loan origination and initial delivery of disclosures have been automated. But the back office will take several years.
"Large institutions' mortgage software is home grown, custom made and layered with years of adjustments, changes, and integrations with other systems in the institution," Whitaker says. "They have a million lines of spaghetti code and two guys who understand it."
What the Courts and Regulators Say
"Judges like the simplicity of e-signatures," says Whitaker, who can recall with great detail every U.S. involving electronic signatures over the past several years.
"We have not seen a court say, I'm not going to enforce this signature because it's electronic," Whitaker says. "I have not seen judicial hostility toward e-signatures. But there is an expectation that they will be fairly presented, protected after signing, that attribution and intent will be established. With that, we're seeing significant judicial support and even enthusiasm for e-signatures."
"With regulators it's more complicated, but they like a well-designed system," Whitaker says.
Regulators, mainly the FFIEC, have issued nine documents providing guidance on the use of e-signatures in banks, such as the FFIEC E-Banking Booklet.
One key regulatory requirement is for any needed disclosure or document provided, the consumer needs to consent to an electronic delivery mechanism such as email. Where email is used, the bank needs to deal with glitches such as bouncebacks.
Evidence has shown that with electronic documents, consumers are more likely to read the accompanying disclosures. "The banking industry has seen an uptick in the number of people who are reading materials online; they're getting more questions from people calling customer service saying, 'I didn't understand paragraph 23,'" Whitaker says. "There have been a few cases of gross overreaching in disclosures that have caused consumers to say maybe I should be looking at this stuff." Having the documents on their own tablet or phone helps. "They're watching Castle, it goes to commercial, they think, I might as well read this agreement. If they can sit in their jammies at 10:00 at night and read this, why not?"
Another key requirement: the consumer needs to be able to maintain the record in an accurate, printable format.
And companies need to be able to prove that they made a reasonable effort to prove that the person signing the document is who they say they are (in the online banking world, this is called authentication; in the electronic signature world, it's called attribution).
For instance, a former employer sued a company called Quicksilver for wrongful termination. In an electronic arbitration agreement, the employee's name had been typed into two blank fields, with no credentials required. The employee said she never signed it, and a California appellate court upheld her claim, saying Quicksilver had not established attribution.
The court cited these specifics: the employee did not have to use a password to access the document, there was no audit trail for the signature process, the record was not protected against undetected post-signature alteration and at least two other Quicksilver employees had accessed the signed record after it was saved and submitted by the employee.