Something went wrong

Please check back later while we address the issue

How Electronic Signatures Allow Lending Institutions To Generate More Profits With Low Loan Defaults

Person Kario-Paul
Read time: 7 mins


In today's world, the lending institutions that are seen as the most relevant are those that are able to meet the needs of all its stakeholders in a particular industry. Electronic signature platforms have been actively working with lending institutions to come up with better ways for lending institutions to meet the needs of their stakeholders, and we have arrived at several solutions that are allowing them to take tangible steps towards furthering their objectives.

Fill and Sign Loan Documents

The spread of COVID-19 has put the spotlight on a key value add that electronic signature platforms bring to the table, a benefit that helps lending institutions protect their bottom line. As more customers seek to do business remotely, our platform offers a turn-key solution for lending institutions to offer greater convenience to their customers, while still doing the "fit and proper assessments" and identity verifications that are key elements in the Know Your Client (KYC) Process.

Through the use of the right electronic signature partner, the average turnaround time for the processing of loans can be slashed significantly. This is possible because electronic signature platforms such as DocEndorse offer a user-friendly way to cut the friction involved in collecting documents, filling out application forms, and keeping track of the stage of client's applications. In addition, all of this can be accomplished while maintaining the lending institution's brand presence, through the display of its logo and theme colors at the various customer touchpoints.

Consider the following workflow. A customer who desires to obtain a loan goes to a financial institution's website and submits his/her basic information, i.e. his/her first name, last name, and telephone. By asking for a limited range of information at the first point of contact with a potential loan applicant, the lender is already reducing friction, as the mental load on the customer who may be multi-tasking has been significantly reduced.

Using the right electronic signature platform, the loan officer at the lender can pre-fill the information provided in a standard loan application form, and demarcate additional areas on the form where the loan applicant may need to fill, or sign. In addition, the loan officer is also able to request (and also highlight whether required or not) that the applicant provide a copy of other documents that are important to processing the loan, documents such as:

  • Last 2 months' payslips
  • Job Letter
  • Proof of Address
  • A tax registration or social security number
  • A valid Identification card

The "cherry on top" here is that the loan officer can convert the entire workflow that has taken place thus far into a template. This would allow him/her to skip most of the steps outlined thus far when the next client submits his/her basic information to obtain a loan.

The loan officer could then send this half-completed contract to the customer by email or text. The customer would then click a link in the email where they would be transferred to our electronic signature platform. Upon reaching the platform, the customer is then able to do the following:

  • Provide a password to access the document or use any other authentication mechanism selected by the loan officer (will be discussed in another article).
  • Upload all required documents. This can be obtained from scanned copies of the originals, or photos of the originals taken by a phone or a tablet camera, or documents that have been saved to the mobile/desktop device previously.
  • Fill in the areas demarcated by the loan officer (which will be color-coded).
  • Sign and or initial the document at the appropriate spot(s) as demarcated by the loan officer.

When the applicant completes the document, a copy of the completed document will be provided to him/her and the loans offer automatically. Both parties will get all the documents merged into one (or separate if desired) along with a court-admissible audit trail of the entire process. Throughout the process, the loan officer would also get real-time updates about each action that the customer has taken, which he/she can then use to send reminders or make other necessary changes.

After such a detailed explanation of a potential workflow, let us take a step back and examine why we are doing this in the first place. As outlined before, we are providing a facility that allows loan officers to save time by removing a lot of the repetitive tasks that distract him/her from focusing on the next client. If lending institutions opt to do this at scale, they will likely see a material improvement in productivity. The growth in the loan book, for example, could accelerate without the need to compromise on loan quality.

Reduce your carbon footprint

Let us turn our attention to the rising importance of corporations becoming more socially responsible. It is pretty clear that clients of the "new age" are not only becoming more environmentally aware but are also becoming activists. These clients want to see change and they want to see it now, or else they are going to speak with wallets. Within this context, corporations nowadays should not be reacting to change but should be proactive, else they might find themselves "against the ropes hoping for the bell".

As famously outlined by Jack Welch:

Change before you have to

— Jack Welch

Partnering with the right electronic signature platform can be part of the toolkit which corporations use to reduce their environmental footprint. A lot of the workflows that lending institutions use today still revolve around having customers printing forms, filling in these forms with wet ink, and finally submitting these forms to an officer behind the corporate curtain. Furthermore, the expectation is that somehow these officers must become handwriting experts and be able to identify when someone intends to write a "t" versus an "i". Also, the data that the customer provides is usually shared with multiple departments, each of which may need to print and fill out forms using, in many cases, the same data. This issue leads to a huge multiplier effect on the usage of paper across the enterprise, and the needless duplication of information.

Cutting the usage of paper and ink, just at the front end of the workflow will have a huge multiplier effect on the amount of paper used per customer. Now imagine, many of these lending intuitions have thousands of clients, some even in the millions. So though at first, the environmental impact may appear small, the cumulative impact can be quite substantial over time.

Other Considerations

As lending institutions consider implementing electronic signatures as part of their workflows, it is critical that such institutions seek to partner with an electronic signature platform that has a reachable and flexible developer team. In using electronic signatures, there are other considerations that have to be solved as a partnership, requiring multiple communications back and forth between the platform and the financial entity. One such consideration is document management. Some lending institutions may choose to store documents for 3-5 years, some thirty years, and some institutions may never destroy old documents. Regardless of the storage time chosen, there is in many jurisdictions a regulatory stipulated minimum. In view of this fact there are a number of questions that have to be answered:

  • How documents are stored ?
  • In what form are they stored ?
  • When are they deleted ?
  • How much is stored in the cloud versus on-premise ?
  • Security protocols that must be followed ?

Another important issue is the regulatory framework that banks and other lending institutions have to comply with. Lending institutions are typically heavily regulated by multiple governments agencies including the central bank. In some jurisdictions, such as the USA lending institutions have additional regulations imposed by state and local authorities that cover a wide range of issues.

Some central banks have already given their stamp of approval for lending institutions to use electronic signatures for document submissions that pertain to prudential regulations. Regulations around documents that pertain to a customer-lender relationship is left up to the financial entity, its lawyers, and the respective government agency responsible for the administration of such laws (which can be many depending on the jurisdiction). Lending institutions should partner with electronic platforms that are willing to accommodate regulations around disclosure standards, document appearance, and other contract readability standards. Obviously, the issues to consider here are complex and can only be solved in partnership with the right electronic signature platform.

Final Remarks

While the spread of COVID-19 may have forced many decision-makers to re-think the pace of their digital strategy, it has also led to businesses considering technologies that will enhance corporate productivity. At DocEndorse, we have uniquely positioned ourselves to help companies realise even more productivity growth. At the end of the day, we are here to serve our clients.