What is the legal value of electronic signature?
According to article 1367 of the French Civil Code, the electronic signature has the same legal value as a handwritten signature. It is therefore admissible as evidence in court if it meets all the conditions of the eIDAS Regulation. This European Regulation, Electronic Identification and Trust Service, aims to increase trust in digital transactions.
It defines security levels for transactions according to their importance. Indeed, there are 3 levels of digital signatures.
Security levels of eSignatures
The simple signature
First, the “simple” signature is used for small transactions since it does not require identity verification. The types of documents that require this level of signature can be invoices, membership contracts or quotations. However, this first level can in some cases be reinforced by an authentication step with an SMS OTP (One Time Password) sent to the signatory to verify his/her identity.
The Advanced Signature and the Qualified Signature
Then, to meet higher levels of security requirements, the eIDAS Regulation requires identity verification of the signatory. This is where “advanced” and “qualified” signatures come into play by integrating a KYC step into the signature process. This way, the KYC ensures that the person behind the screen is who they say they are. These higher levels of security apply to, for example, certain financial transactions or any documents of significant legal value such as life insurance, real estate sales agreements or bank account opening contracts.
KYC for electronic signature
Therefore, KYC has been included in the electronic signature to meet eIDAS Regulation requirements. The overall goal of a KYC process is to define and verify the identity of the customer during a digital transaction. It can occur at different stages in the relationship between a company and its customer: either when entering into a relationship or when signing the contract electronically. In the case of a signature, the authenticity and integrity of the signed document are guaranteed for both parties, and the identity of the signatory is secured. This identity verification step within the electronic signature can be achieved in two ways: face to face or remotely. Note that in the event of legal disputes over an advanced signature, for example, the party requesting the signature must prove its authenticity. Whereas we speak about proof inversion in the case of a qualified signature: the signatory person must prove that his identity was usurped.
As mentioned before, the eIDAS Regulation provides a framework for electronic signatures by imposing different levels of security depending on the nature of the transactions. It reinforces trust thanks to the implementation of KYC. So, in addition to meeting regulatory requirements, let’s find out more about the purpose of this process.
Counter identity theft with KYC process
Corporate fraud rates are constantly evolving and taking a toll on the global economy. According to the PWC Global Economic Crimes and Fraud Report, approximately 47% of companies worldwide have experienced fraud in the last 24 months. For example, in France, fraud was estimated at 525 million euros in the banking and insurance sectors in 2020.
How is the identity of users verified?
With the boom of digital technology, transactions are increasingly carried out remotely and the identity of individuals is more and more prone to being stolen. Almost half of companies are concerned by this issue and no sector is spared. Regulations have imposed identity verification in the face of this constantly increasing threat. Since then, KYC within the user path has become almost unavoidable, making it possible to verify that the remote person is indeed who they say they are. In the banking sector, in order to open an online bank account, the user must provide personal information by scanning their ID. Only when their identity has been validated can they open a bank account. KYC makes it possible to counter identity fraud and money laundering, but also establish a level of trust within the exchanged service.
Establishing a relationship of trust
This “risky” context means that the regulations require a KYC. Integrating a KYC step into an electronic signature process ensures the integrity of the signatory, creates a trusting environment and reinforces exchange security, depending on the required level of trust. It is beneficial both to the company and the user.
In addition to increased trust and security brought by KYC, offering the best possible customer experience in regard to digitization is equally essential. Let’s discover how the KYC process can improve your conversion rates.
Provide an optimal customer experience thanks to KYC
Considering the customer experience is essential in the light of ever increasing competition. According to a PWC study, 73% of people worldwide think that customer experience is an important factor in purchasing decisions. For example, 40% of banking customers don’t complete their application when the onboarding step takes too long or requires to fill in too much personal information. In total, not offering a more streamlined onboarding service represents about $98 billion in losses for all companies combined.
Integrating the KYC process with the electronic signature: what are the issues?
The electronic signature is nowadays one of the most used processes in the digitization of companies. Its stakes are multiple in terms of cost reduction, task automation as well as user experience improvement… This process strongly needs to be intuitive and fluid so that the customer completes their journey and doesn’t get discouraged before the end.
Therefore, offering a new secure tool which will not alter the advantages of the electronic signature mentioned above is the challenge. In order to satisfy the customer, the KYC process and the electronic signature must be combined in a fully digitized process. The goal is to offer the user an identification step without having the need to end the process. It must be as fluid, simple and fast as possible.
KYC and electronic signature: the example in Human Resources
The Pandemic has highlighted this need for digitized processes and user experiences. This was the case, for example, in the human resources sector, which had to adapt and quickly implement the employment contract remote signatures for new hires. KYC has played a major role in verifying the identity of the people that companies hire. Indeed, its integration has been a real asset to identify remote signatories while modernizing and securing the customer experience.
Anticipate your business needs
KYC within the electronic signature meets the needs of operational efficiency, security and customer experience optimization in the age of digitized processes. Even if identity remote verification in digital transactions isn’t mandatory in all sectors, it is likely to become an essential element of trust for companies in the near future.