The role of mobile devices in paperless transactions creates additional compliance concerns and precautions that must be considered beyond the existing procedures financial institutions have established for desktop-based electronic documents and signatures.
In the past, organizations could create one version of a website or electronic document and know that it would display exactly the same way on all users' desktops. The varying screen sizes and layout orientations of smartphones and tablets create different end-user experiences, Gregory Casamento, a partner at law firm Locke Lord, noted at a panel during the Electronic Signatures and Records Association Conference, ongoing this week in New York City.
The key to using valid electronic signatures on mobile devices is ensuring customers actually receive, see and understand the disclosures, he said.
Financial institutions should inform borrowers they will receive electronic disclosures as early on in the process as possible so they know to be on the lookout for them, he said. This has the dual benefit of reducing compliance risk and improving the process for consumers. "Tell them, show them and tell them again. Make it a good experience for them," Casamento said.
While few laws and regulations specifically address mobile devices, companies shouldn't be dissuaded from adopting mobile-based e-signatures, Casamento and other speakers at the conference said.
"There is just not a lot of express guidance on the use of mobile devices for e-signature," said Patrick Hatfield, another Locke Lord partner, who added "this is not the first time we've gone through this, and we'll be applying old principles to new media," given that it's common for regulations to not keep pace with the speed of new technologies.
Still, not all disclosures can or should be made to users on mobile devices. If the text on a disclosure appears too small or squished together on a tablet or smartphone, institutions should use a different process (such as paper or desktop-based e-documents) to avoid compliance exposure, he said.
When examining the business appetite for risk using mobile devices, "As long as your mobility process is as good, or better than, your paper process, then you're ahead of the game," Hatfield said.
Online and mobile transactions account for approximately 5% of the transaction volume at banks in the United States, but that rate is only expected to grow, said John Fraser, U.S. Bank's vice president of technology and operations services.
Since it first began adopting e-signature and paperless capabilities, U.S. Bank has developed thousands of documents that can be e-signed and accepts 400,000 electronic signatures every week, he added. The initial impetus of these efforts was to reduce costs associated with paper processes, but that's since evolved to focus on meeting new consumer demands and expectations, as well as reducing expenses associated with transactions that have historically happened only in bank branches.
"Through the advent of technology to take pictures of checks for deposits, we have an opportunity to serve customers without any human interaction," Fraser said.
Many financial institutions continue to have fragmented processes across branch, desktop and mobile interactions. U.S. Bank works to resolve that disparity by developing consistent processes for tasks across the organization. This approach reduces errors that could result in legal challenges and helps the bank reach customers where they are.