Online brokers ready for digital signatures

Some electronic brokerages are celebrating this week's congressional approval of the electronic signatures bill (see story) as a way to save them time and energy in a market that is heavily digitized, but still requires signatures on paper for many transactions.

"The vote was just overwhelming," said Michael Hogan, senior vice president and general counsel of Jersey City, N.J.-based DLJdirect Inc.

He said that DLJdirect is ready to take advantage of the new law, which no longer requires brokerages -- or other companies -- to have a written signature on file if customers opt for purely electronic agreements.

In, fact, DLJdirect has been ready for years, he said.

Customers already fill out their application online and DLJdirect runs a credit check and opens their account immediately.

But then the brokerage sends a paper form for the customer to sign and return within a month -- or else the account is frozen.

"What we're going to do now is eliminate that step," Hogan said. "We'll be able to simply go forward."

In addition, there are about 40 other transactions that require a written signature.

Eliminating that step will be a significant time savings for brokers and others in regulated industries.

Greg Gable, a spokesman for Charles Schwab & Co., said that his company was also looking forward to the president's signature.

"Any way we can make interactions easier is good for our customers," he said. "We're in the process now of looking at the actual ways that this will be implemented."

According to Rob Hegarty, an analyst at the Needham, Mass.-based Tower Group, the new legislation is a revolutionary development for e-commerce in general and for online brokerages in particular, since they are on the leading edge of technological innovation.

He warned, however, that some brokerages may have to overcome customer resistance before being able to fully realize the time and money savings that the new legislation portends.

"People need to become comfortable sending electronic signatures," he said. "The legal obstacle has been eliminated, but that says nothing about acceptance by the marketplace."

It will take around five years for 30% to 40% of the U.S. population to become comfortable using the new technology, according to George Barto, an analyst at the Stamford, Conn.-based Gartner Group Inc.

"But the younger people, the kids in their 20s, that will be the world they know and they'll accept it immediately," he added.

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