E-signatures are still spreading in the financial industry, but not really maturing

On June 30, 2000, President Bill Clinton signed the E-SIGN ACT using his own e-signature.  The new bill gave e-signatures legal validity. 

This was the beginning of a new era. E-signatures turned heads with their promise of eliminating paperwork — no more missing forms, no more scattered papers. 

In the 2010s, banks also began integrating e-signatures to their services.

Bank of America teamed up with DocuSign in 2012 to enable e-signatures for its customers. JPMorgan Chase did the same in 2013. Wells Fargo, which had e-signature capabilities already in 2004, expanded acceptance through DocuSign in 2014.

E-signatures may not be the attention grabbers they once were, but that doesn’t mean there isn’t some excitement looming.

“What’s particularly exciting is that while e-signature has been there for some time, there is only about about 5% market penetration, meaning that 95% of the market is up for grabs,” said Borya Shakhnovich, CEO and co-founder of airSlate, a software company that automates document processing and e-signatures.

Despite their faded stardom, e-signatures have gained momentum in use as a result of the pandemic. 52% of small businesses cited e-signatures as ‘critical to survival’ last year, according to a study by Adobe. The use of Adobe Sign in the financial sector alone grew by 200%. 

“The reality is that the pandemic-forced switch from physical paperwork to digital has exposed the cumbersome and antiquated ways we used to carry out day-to-day business, and there’s no going back,” said Todd Gerber, vp of Adobe’s Document Cloud. “E-signatures are here to stay, and they have quickly become a part of the fabric of work.”

E-signatures seem to have slipped into standard procedures. According to Kendra Tolley, director of product management at nCino, a cloud-banking software company that offers e-signature capabilities among its solutions. The biggest change the company has seen is an increased use of e-signatures — not just among the larger institutions that can afford to take risks, but among the smaller companies, as well. This could point to e-signatures being reclassified to a must, rather than a plus.

“While larger institutions have been leveraging e-signature for several years, the biggest change we’ve seen is that small institutions consider this functionality table stakes in order to meet the needs of their customers,” said nCino’s Tolley. “The entire industry has shifted its focus to offering more digital capabilities due to the impacts of the pandemic”

E-signatures seem to be on their way to becoming features users automatically expect. And that could be why we’re not seeing that much talk about them anymore — they might be taken for granted.

“Electronic signatures are becoming a standard fixture with banks and financial institutions as many look to digitally transform their internal operations,” said Jerome Levadoux, vp and head of e-signature products at DocuSign. “It’s an easy way to remove traditional hard costs and provides a secure, enforceable way to complete business documents.” 

But while implementation of e-signature technology continues to grow in the financial industry, we’re not seeing deeper development of the technology. 

“I would say the digital signature hasn’t really evolved. It’s still the same thing. Maybe the user experience has been updated a little bit, but not by much,” said Mang-Git Ng, co-founder and CEO at Anvil, a software company that automates PDF-based processes and provides digital document management.

The lack of development in e-signature technology could be because of the regulations that are still in place.

The E-SIGN Act is a federal law that was passed in 2000. It grants legal recognition to electronic signatures under certain conditions. Meanwhile, the Uniform Electronic Transactions Act is a state law that also grants legal recognition of e-signatures. While these two laws are pretty similar, there are still differences. 

And because UETA is enforced in most states but not all of them, banks and credit unions need to take this into consideration depending on where they are located.

Then there’s the fact that techier and objectively more secure forms of proving you’re you still pose their own problems. Biometric signatures, for example, are hard to fake. But they can also compromise privacy.

“My concern with using biometrics is actually privacy. If I’m tying everything I ever do in a digital world to my physical fingerprint, or to my physical retinas, [then everything I do online] is tied to a physical element of me,” said Anvil’s Ng. “And then let’s say I get my hand chopped off, and I no longer have any fingers — that would be really unfortunate — I couldn’t find anything anymore.” 

It doesn’t look like e-signatures are deeply changing anytime soon. But what might be the case is a ‘devolution’. People may still be in the frame of mind that nothing is more irrefutable or official than a pen-on-paper signature. From its research, for example, Adobe found that its biggest competitor is still paper and ink signatures, with 51% of small businesses dealing with physical paperwork every day.

“While adoption of e-signatures has accelerated over the past year, there’s still a lot of work to do in driving businesses and consumers to transform how they handle paperwork,” siad Adobe’s Gerber. 

Still, with almost half of Gen Z- and Millennial-owned businesses reporting using a digitized process for collecting signatures, compared to 36% of Gen X-owned businesses and 26% of Baby Boomer owned businesses, e-signatures seem to be sticking around for the time being.

“We still see significant opportunity to innovate in this category with technologies like artificial intelligence, and a long life ahead for e-signatures,” said Gerber.