Digital signature legislation being finalized by both the House and the Senate will put electronic signatures on par with handwritten consentand make them just as legally binding. The impact of the Electronic Signatures in Global and National Commerce Act (E-SIGN) on financial services, says Bryan Keane, e-Finance analyst, Prudential Securities, will be enormous.
Digital signatures are the electronic equivalent of, say, a passport and driver's license. And the legalization of digital signatures will change browsers into buyers, says Keane, by enabling the consumer to not only retrieve and send information online, but also to give their legal consent. Financial firms which enable the customer to sign documents electronically will attract more revenues, says Keane, simply by making the process of giving legal assent quicker and more efficient.
At present, clients can, for instance, open a brokerage account online. They can provide personal data electronically, indicate preferences, and request information. But when it comes to the final authorizationtheir John Hancockhowever, the paperwork must be received by the broker in hard copy.Another example, says Keane, might be applying for a mortgage online. Clients are often able to provide key data, and might be able to receive a solid price quotebut they are hampered from closing the transaction online, due to laws on the books, which haven't quite caught up with the Internet.
Instead of giving their consent online and closing the deal, potential clients must wait to have paper documentation mailed to them, provide a written signature, and pack the whole bundle off to a mortgage broker. Both potential client and broker lose time, and the broker has spent money for printed materials and postage for a mortgage that might not, in the end, even be approved.
As digital signatures take on their own status as legally binding assent, says Keane, the close rate on financial transactions will skyrocket. "If a mortgage broker can make a sale on a mortgage in an hour, or in minutes, instead of through a thirty-day process, the likelihood of making the sale will increase," Keane points out. Keane sees close rates in the e-mortgage space alone rising from the current sub-10% range to over 65% in the next 10 years. Apart from the benefit of closing more sales online, financial services companies will also see a peripheral bonuspaperless automation. "Whereas just over 30% of all financial online transactions are fully end-to-end electronic today, we believe digital signature could help sharply increase financial automation to over 80% in the next five years." That means less cost for storage, and printing and paper costs.
The second part of the legislation, which, if passed, goes into effect March 2001, simplifies record keeping by allowing brokers to send e-mail and electronic confirmations to clients that opt in for the service. At present, even though electronic confirmations are widely available, the law requires that a hard copy be sent to the transacting party.
The effect of the legislation on financial services "won't be like turning on a switch," admits Keane. But the option will come up more and more, Keane says, as financial firms realize that accepting legal, digital signatures will not only streamline their sales process, but shorten it as well. E-finance companies will be able to serve transacting consumers immediately, without delayand close more business as a result. "The appeal to brokerages and other financial institutions is powerful," notes Keane. "They can go from a sales cycle of 30 to 45 days to a sales cycle of 30 to 45 minutes."