The Present and Future of Electronic Signatures

On Wednesday, Aug. 31, at 9:00 a.m., attendees of the 2016 P&A Leadership Summit gathered in a ballroom at Paris Las Vegas for “eSignatures Today and in the Future,” a panel discussion dedicated to electronic signatures, including how the technology works and why more dealers, product providers and government agencies aren’t using it.

Brian Reed, president of F&I Express, served as moderator. He was joined by Dan Doman, chief legal and privacy officer for RouteOne, Tim Gill, CEO of Advent Resources, Andy Mayers, vice president of F&I solutions at Dealertrack, and Jim Maxim, president and CEO of MaximTrak Technologies.

Noting that the term “esignature” seems to mean different things to different people, Reed kicked off the discussion by defining the three basic types of signatures found in the dealership:

• Wet signature: The customer signed a paper form with an ink pen.
• Electronic signature: The customer signed their name on a digital pad or mobile device, typed their name into a form or document, or clicked “Agree” or “Disagree” to a set of terms and conditions; the term also can refer to a digital image of a handwritten signature, for example, on a dealer-facing software dashboard.
• Digital signature: Considered the most secure type, digital signatures are cryptographically based, and they typically include some measure of validation as to the source of the signature.

Reed noted that consumers frequently encounter esignature technology at their mortgage brokers, grocery store checkouts and hotel registration desks, but it is only applied to a small percentage of the documents they are likely to sign at a dealership.

“The auto industry is always slow to adopt new technology, but it has embraced electronic contracting,” Doman said, noting that RouteOne processed more than two million econtracts for Ford and Toyota dealers in 2015. “Your question is why isn’t it more prevalent in ancillary docs and service lanes? You’re right, but in the auto sale and leasing environment, it is being adopted fairly rapidly, and all the other ancillary documents are being incorporated.”

Hurdles to Adoption

Gill said the challenge is to get all the “stakeholders” on the same page, noting that, while bank documents typically can be signed electronically, many dealers and some government agencies still require a wet signature.

“There is more than one issue around that,” Gill said. “Who has the data at the end? Is there an opportunity to store it in the DMS? I think the drag has been caused by government and registration agencies that are not that innovative and haven’t stepped up to the plate. … We have to lobby them and say our processes are changing.”

Asked whether any technological hurdles remain, Mayers said that, if so, they are far less problematic than the hurdles presented by the sheer number of document types and the different sources (and requirements) for each. Maxim agreed, saying he would like to see the National Automobile Dealers Association (NADA) and state dealer associations lobby government agencies to embrace the technology.

“What we have seen is slow adoption,” Maxim said. “Among the systems that support the providers, we’ve seen slow adoption because it hasn’t been prioritized.”

Looking at the issue from an “enablement standpoint,” Reed noted that, while the captive finance companies connected with manufacturers such as Ford, Nissan and Toyota have made great strides toward a fully electronic deal jacket, most finance sources have not.

“That’s the key to success,” Mayers said. “They need all the documents to be available. We always talk in this industry about the chicken and the egg. … The captives are driving it because they have that percentage of business the dealer does that makes it part of their normal process.”

“The other finance sources get a data file and the paper follows in the mail,” Doman said.

They don’t achieve the same consistencies as the captive does. Larger independent finance companies do have that level of volume and can achieve those efficiencies.”

As the economies of scale have begun to catch up with more finance sources, Doman added, they are producing digital versions of their forms to add to a complete package that can be transmitted to them electronically.

“Right, but there’s still a big missing window here when we talk about the size of deal jackets,” Gill said, noting that a deal could include 40 documents, 37 of which are related to the dealer’s own process, including worksheets. “That stuff isn’t being dealt with at all. … At the end of the day, the dealer has to archive it.”

“A lot of lenders are 100% electronic,” Mayers said. “There are systems that translate paper contracts. So what drives the industry is efficiency and return on investment. How much do our dealers spend on storing folders when they could be storing data?”

Motivating Factors

Maxim said he believes regulatory compliance could prove to be a major catalyst for wider adoption of electronic signatures. Banks, finance companies, dealer groups and F&I product providers are all looking for ways to mitigate risk, he said, and esignatures lend themselves to more compliant business processes.

Reed agreed, then asked Gill whether there is any document that could not be signed electronically if the source adopted the technology.

“I don’t think so, aside from government registry documents,” Gill said.

Turning back to Maxim’s point about compliant business processes, Doman said the potential electronic signatures bring to dealers looking for a more consistent process is “remarkable.”

“It creates a permanent record. It propels you forward on the compliance front,” Doman said. “All those documents can be signed and stored electronically. It’s the process the electronic signature enables.”

Asked whether he prefers to capture esignatures on signature pads or tablets, Maxim said pads are generally considered to be more secure, so that would be the likely choice for an installment loan contract.

“But I do believe the technology for tablets is pretty darn good now,” Maxim added. “It’s really about validation of whom you’re doing business with. When you’re going online, and people aren’t in the showroom, it’s a validation of the person’s identity.”

Maxim said the issue was raised in a recent meeting he attended with representatives from Mercedes-Benz of Canada. The factory executives reported a wave of fraudulent vehicle purchases in that country and a growing interest in new identity-verification tools.

“In the showroom, you can validate who you’re talking to,” Maxim said. “There is good technology you can use to combine tablet signatures with the form dynamically. It’s fairly efficient.”

After the panel disbanded, P&A caught up with Reed to get his thoughts on the session. He said he hoped attendees’ main takeaway would be that dealership customers are subject to multiple “signing ceremonies” and that esignatures hold the potential to reduce the complexity of the process.

“Going into that transaction, you have all these different parts that require different signatures,” Reed said. “There can’t be all these different signing ceremonies. There’s a perception out there when we talk about esignatures. Dealers still ask, ‘Is that legal?’”

Reed said the panel reinforced his belief that there is no compliance issue associated with esignatures and no significant technological hurdle to overcome. There are solutions available to dealers, product providers and, yes, government agencies that wish to adopt the technology.

“Once you have the components together, who will drive that process to have one easy signing ceremony for all those documents?” Reed asked. “Is it an independent party or a Dealertrack or a RouteOne? My personal opinion is that, over time, a number of parties will be able to do it and dealers will have options.”