eSignature has become part of everyday business life. It has reached the point that it is almost taken for granted, which is a quite a change from 18 years ago.
This Saturday, June 30, marks the 18th anniversary of National ESIGN Day. Each year, ESIGN Day is cause for celebration at eOriginal as we view electronic signatures, or eSignatures, as a true cornerstone of the digital transformation of financial services. It’s also near and dear to our hearts as eOriginal Founder and President Stephen Bisbee played a critical role in the development of the ESIGN Act, which provides a federal, broad-based legal foundation for these transformative processes.
Additionally, the ESIGN Act set the basis for today’s digital lending ecosystems by facilitating the use of electronic signatures and records in interstate and foreign commerce and ensuring the validity and legal effect of digital contracts.
From Auto Finance to Mortgage: eSignatures are Pivotal
Take a moment to think about some of the bigger financial transactions you have made recently—have you purchased a car, house or taken out a student loan? Chances are that you signed all or some of the loan documents electronically. The ability for financial services to step away from paper and move to digital transactions is largely due to the legal enforceability of electronic signatures. However, it is worth noting that not all eSignatures are created equal.
Electronic vs. Digital: What’s the Difference?
As we noted earlier this year:
An electronic signature can be applied by almost any means, but it is just the first step in a fully secure and compliant electronic signature process. Regardless, users will want to ensure they have a digital transaction management (DTM) process that binds the signature, regardless to file type, to the agreement.
Digital signatures require the use of a digital certificate, essentially a type of key or code that utilizes cryptographic algorithms to assure the integrity and authenticity of electronic media, and the information within. Put simply, the application uses an algorithm to generate a unique code by processing the source file. That unique code – think of it as a document’s fingerprint – is then encrypted using the private key stored in the digital certificate.
The result of all this processing is a secure document that is tamper evident. If any value in the source document is corrupted or maliciously altered, it can be easily detected by verifying the original signature. This is the part that the bitcoin transactions might have an issue with, according to the latest word on the street.
Looking to the Future
There’s no question that wet ink signatures are a thing of the past. To capture the full value of digital, whether you are an auto finance leader in need of eContracting, or a mortgage company looking to initiate electronic promissory notes, also know as eNotes, you need to look beyond the signature to what is possible today and fully embrace the advantages that digital has to offer—from risk mitigation, to capital efficiency and regulatory certainty, eSignatures are just a stepping stone to a full digital transformation of lending processes.