With all the progress that has been made enabling small merchants to accept electronic payments globally, one area is sometimes overlooked – the impact of e-signatures.
In the U.S., the Electronic Signatures in Global and National Commerce (ESIGN) Act defines electronic signatures as “an electronic sound, symbol, or process, attached to or logically associated with a contract or other record and executed or adopted by a person with the intent to sign the record.”
While they can take different forms – from actual signatures to clicking a button to indicate acceptance – electronic signatures essentially replace signatures on paper, allowing parties to indicate consent or approval electronically.
A recent Forrester report, The State of E-Signature Implementation, examined trends in e-signature adoption and found that an improving customer experience was helping spur growth.
“Initial e-signature deployments had complex navigation and authentication steps. In recent years, vendors have simplified and streamlined the experience. As a result, e-signature transactions, enabled by simpler, more accessible, and cheaper smartphones, tablets, and touchscreen computers, are growing at a healthy rate,” the report said.
Forrester’s research indicated that the use of e-signatures had seen 53% average annual growth since 2011, with the potential to surpass 700 million transactions in 2017.
Companies such as DocuSign and Adobe enable the collection of electronic signatures as part of the contracting process. For payment facilitators, e-signatures are an expected way to do business in a world where onboarding tasks are often done electronically.
According to Deana Rich, CEO of Rich Consulting, the use of e-signatures among PFs in the U.S. is quite common, because during frictionless onboarding, no other tasks are completed using paper.
“Because the PF can identify businesses and their owners electronically, being able to use and accept e-signatures becomes imperative,” Rich said.
Outside the U.S., however, Rich said that the onboarding process cannot always be completed entirely through digital means. For example, in some countries, PFs must obtain a copy of the merchant’s business license. But even in those cases, using e-signatures where laws allow it is still a useful business practice.
“Even if you have to get some paper, it’s still desirable not to have to get everything the old-fashioned way,” she said.
While the use of e-signatures simplifies contracting in the sense that it eliminates the need to ship or fax paperwork back and forth, it does not negate the need for PFs to develop contracting procedures that comply with governing laws, said attorney Ellen Traupman Berge. Berge is a partner with Washington, D.C., law firm Venable LLP, where she works with merchants and payments companies.
In the U.S. that means maintaining appropriate records, among other requirements.
“While courts have allowed clickwrap agreements to be enforced with the click of a general ‘I accept’ button even when the customer did not read the terms, it is critical that the record of the contract contain all of the material terms of the agreement,” Berge said.
“After all, if you’ve gone through the trouble of setting forth the rights and responsibilities of the parties to an agreement, you’ll want to make sure all parties understand what is expected in the relationship. The terms and conditions should be communicated to your customer in advance of their electronic assent, and the customer should understand that the electronic assent is binding.”
Payment facilitators also need to devise a system to store their customer’s signature electronically, to meet the ESIGN Act requirement that the signature must create an electronic record, Berge said. The electronic signature should be attached to the records associated with the agreement.
“Maintaining this integrity in the process will be essential for ensuring the enforceability and effectiveness of the underlying agreement,” Berge said.
These records must be retained appropriately and made available to the customer, Berge said.
“Consider how you will provide a copy of the agreement to the customer, and how long you will retain a record of the agreement and a record of the electronic signature under your document retention policy. If the record is an electronic recording of a telephone call, the call will need to be retained and indexed so it can be provided to the customer upon reasonable request,” she said.
Payment facilitators should consult with their own attorneys and compliance advisers regarding all of the legal concerns around the use of e-signatures. But with appropriate policies that adhere to the laws in the country where the payment facilitator is operating, e-signatures can be a fundamental part of PFs’ ability to onboard submerchants quickly and painlessly.