Digital signature can make life easier

But there are a lot of Know Your Customer requirements and the validity is limited

With the Reserve Bank of India permitting payments banks and small finance banks to rely upon electronic authentication while opening accounts and for other transactions, there is an incentive for more people to get digital signatures.

It will help reduce costs and bridge the gap between the customer and service provider, says Paytm Payments Bank chief executive Shinjini Kumar.

One way of electronic authentication is through digital signatures, which can be obtained from certifying authorities. Individuals use them for electronic filing of income tax returns.

A digital signature eliminates the need for exchange of documents to complete any transaction. It is also used by heads of companies while applying for loans, among other things. But there is a cost involved. It can range from Rs 1,000 to Rs 2,000, depending on the kind of signature and the validity. It is valid for one or two years and has to be renewed after that.

The kind of signatures varies depending on the security. For instance, Class-I signature will confirm the user's name and email address. Class-II will confirm that the information provided by the subscriber does not conflict with information in consumer databases. Class-III will be issued only if the individual appears before the certifying authorities. To get a digital signature, customers need documents to show proof of identity and proof of address.

"Getting a digital signature involves a lot of KYC (know your customer) requirements. Also, to use it, the customer needs access to computers. If payments banks and small finance banks go by the classic (Class-III) digital signature, it may not be easy for all customers to get one and it may not meet the central bank's aim of financial inclusion. There are also risks involved. If you misplace the lock of the digital signature, it can be used to access your account or manipulate your tax filing. "If my financial advisor is using it to file my tax returns, I will take it back as soon as it is done,'' says Reshmi Khurana, managing director and head of South Asia for Kroll.

Hence, lenders may look at other models of digital authentication, says Kumar. One way could be mobile technology. In this case, the mobile device is the authentication. It is the same mobile device from which the customer is logging in. It has a password which the customer uses. And it can be tracked anytime to know from where the customer is logging in. "In remote areas to make people sign on paper is more liable to be misused because it is through an agent. But mobile is safer. Even if there is an agent, the agent is using the bank's app. So, better controls can be built into the app,'' Kumar says.

E-SIGNATURE

• By IT Act, digital signature is as valid and legal as physical signature
   
• It is issued to individuals and companies
   
• Seven certifying authorities issue digital signatures