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The Use of Electronic Signature in Financial Services for Secure Transactions in Southeast Asia

Published 04 February 2025
digital signature in banking
The Use of Electronic Signature in Financial Services for Secure Transactions in Southeast Asia

By 2033, it is expected that electronic signatures will reach more than 20.8% value of CAGR (Compound Annual Growth Rate). The financial services industry, especially across the Asia Pacific, is advancing fast.

The digital advancement within this industry has reshaped traditional conventions, and they are expected to deliver services with ease and convenience for the customers. The essential component of this transformation is the electronic signature.

Electronic signature, or e-signature, is a more secure type of signature that is generated electronically using a digital certificate and bounded by cryptography using public key infrastructure (PKI).

Electronic signature aligns seamlessly with the global trend of digitization and paperless delivery. It has become a powerful tool in Southeast Asia, which has diverse markets and persistent cross-border affairs.

Electronic signature secures these transactions, allowing financial services to work jointly at the worldwide level, ultimately providing stability and growth in the regional financial ecosystem.

This article will address the landscape of electronic signatures in making transactions secure and seamless in Southeast Asia.

Table of Contents

The Landscape of Electronic Signatures in Southeast Asian Banking Ecosystem

The acceptance of electronic signatures in Southeast Asia’s banking institutions is growing as they seek to reinforce regulatory compliance, operational efficiency, and customer satisfaction.

Southeast Asian countries have made significant strides in legalizing and standardizing e-signature usage, some of which include:

  • Indonesia: Differentiates between certified and uncertified e-signatures by recognizing e-signatures under UU ITE (Undang-Undang Nomor 11 Tahun 2008).
  • Malaysia: Establishes the prerequisites for valid electronic signature regulated by the Digital Signature Act 1997.
  • Singapore: Specifies legal comparability between e-signatures and wet, handwritten signatures for most transactions under the ETA (Electronic Transactions Act).
  • Philippines: Although under the E-commerce Act e-signatures are recognized, further clarity on their implementation in the banking industry is needed.
  • Thailand: The ETA (Electronic Transactions Act) acknowledges electronic signatures and is currently underway to enhance their adoption in banking.

Read More: Types of Electronic Signature (Incl. Indonesia Jurisdiction) – SES, AdES, QES

Some Innovations within Southeast Asia’s Banks

Southeast Asian financial institutions and banks are increasingly incorporating electronic signatures (e-signatures) into their operations through the implementation of innovative technologies.

Below are some key innovations with specific examples from the region:

  • Biometrics integration: Enhancing security using e-signatures combined with biometric authentication (e.g., facial recognition, fingerprints). Bank Central Asia (BCA), from Indonesia, implemented e-signatures with facial recognition for new account openings and loan applications. Customers verify their identity through facial biometrics, which is seamlessly linked to the e-signature process.
  • Blockchain-backed e-Signatures: Ensuring tamper-proof e-signature records using decentralized ledgers. UnionBank in the Philippines implemented blockchain for digital contract signing, ensuring that signed documents are tamper-proof and stored securely on a decentralized ledger.
  • Paperless onboarding: Reducing friction in the account opening process by implementing e-signatures to enable fully paperless customer onboarding. OCBC Bank from Singapore launched a paperless onboarding process for corporate accounts, allowing businesses to sign all necessary documents electronically, reducing onboarding time from days to hours.

How do Electronic Signatures Secure Online Transactions?

Topping up e-wallet credit, paying bills through bank applications, or buying anything over the internet are the most common examples of online transactions.

To be able to do all these transactions, in principle, you have to register or sign up first. During the sign-up process, verifying your identity is mandatory. This allows the service provider, such as banks or credit unions, to validate your identity, preventing fraud or identity theft.

To minimize the risk of fraud and secure online transactions, electronic signatures ensure that every signed digital document is authenticated with the verified identity of the signers.

The process usually involves biometric authentication, such as facial recognition. This step is frequently performed in the banking industry when a customer wants to open a new bank account.

Nowadays, banks permit customers to open new accounts without having to go to the bank physically, and the process can be done via smartphone as long as there is an internet connection, including the signing of contracts that are already embedded in the app.

In technical terms, electronic signatures comprise of various steps to create solid security for the users; such steps are:

1. Hashing Function

The process of creating electronic signatures commences with the use of a mathematical algorithm to generate a unique hash of the file or message. The hash is a fixed-length string of characters, no matter the size of the file.

The hashing process is irreversible, so once the document is completely hashed, it cannot be reversed to retrieve the original data. If there is one minor change in the file, it will result in an entirely different hash.

2. Cryptographic Encryption

The hash is then encrypted using cryptographic techniques with a pair of keys: a private key (kept secret) and a public key (shared).

The private key encrypts the hash, while the public key decrypts it. This ensures file integrity and authenticity, as any changes in the file produce a mismatched hash.

3. Public Key Infrastructure (PKI)

PKI holds public keys to entities (individuals or organizations) through electronic certificates issued by a trusted Certificate Authority (CA).

PKI ensures secure communication, validates identities, and is critical for activities like e-commerce and Internet banking, where passwords alone are insufficient for authentication.

Read More: What is Digital Signature Algorithm (DSA) in Cryptography?

Advantages of Using Electronic Signatures for Online Transactions

Consolidating e-signatures in the banking industry has totally altered and revolutionized the way financial institutions operate and interact with customers.

Here’s a list of some of the advantages for bankers and customers of using e-signatures:

  • Security: e-signatures enhance the level of security compared to traditional wet signatures since they involve an encryption process to ensure the signed documents are authenticated.
  • Speed: e-signatures cut down operational processing time, which benefits both customers and banks when it comes to loan applications and new account openings.
  • Convenience: e-signatures allow customers to sign documents from anywhere at any time, using their PCs or smartphones.
  • Ease: for financial institutions, e-signatures make the customer onboarding process simpler since customers don’t have to be physically present in the branch.
  • Green factor: by implementing e-signatures, financial institutions can significantly shrink their paper usage, which is instrumental in promoting environmental sustainability.

Things to Consider in Choosing Electronic Signature Providers for Banking

Aside from the apparent importance of electronic signatures in banking, there are a few key elements to consider in choosing the right electronic signature provider. Compliance is the most essential aspect to examine; such compliance is:

Compliance with regional electronic signature laws

E-signature laws are different in various jurisdictions, commanding organizations to adhere to this compliance. For example, in the USA, the E-Sign Act is a federal law that addresses the use of electronic signatures by all organizations in the US, including financial institutions. The purpose of this Act is to authenticate and standardize electronic signatures across the country.

Similarly, the ETA (Electronic Transactions Act), which is implemented in Singapore, Australia, and some other countries, is deposited to provide for the security and use of electronic transactions. It bestows a legal framework that governs nearly all digital services, such as e-commerce, electronic records, electronic contracts, signatures, etc.

Compliance with regulatory requirements

In European countries, GDPR stands for General Data Protection Regulation, which instructs how and what personal data is accessed by companies and how customer data is regulated. This regulation ensures data is protected and handled with the proper security measures, maintaining privacy and policies for e-signatures.

Another example is the globally recognized PCI-DSS, which stands for Payment Card Industry Data Security Standard. It is a comprehensive set of compliance standards that requires banks and financial institutions to establish added security measures to protect cardholder information.

Additionally, banks and financial institutions have to carry out specific requirements in the banking industry, such as AML (anti-money laundering), KYC (know your customer), record-keeping, and data retention rules. To comply with these requirements, companies must conduct comprehensive due diligence, transaction monitoring, periodic audits, and maintenance of this compliance.

Read More: How to Choose the Right Digital Signature for Your Business

Key Takeaways

  • E-signatures are crucial for secure and efficient transactions in Southeast Asia, especially within the financial services industry.
  • Advanced technologies like biometrics and blockchain strengthen e-signature security and streamline processes.
  • Indonesia, Malaysia, Singapore, and the Philippines have clear legal frameworks supporting e-signature adoption.
  • Choosing e-signature providers that comply with regional and global regulations like GDPR and KYC is essential.
  • E-signatures offer benefits like enhanced security, faster processing, improved customer experiences, and environmental sustainability.

Mekari Sign as Financial Services’ e-Signature Partner

Mekari Sign is an Indonesia-based electronic signature provider that complies with the Indonesian laws (PSrE) as well as other regional regulations.

Join leading financial services companies such as Amartha, BRI Multifinance, Dana, Xendit, Fazz Financial, and Tranglo that trust Mekari Sign to streamline their processes and ensure compliance with industry standards.

Discover how our electronic signature solution can revolutionize your financial services. Contact us today and take the first step toward a seamless digital future.

Learn more about Mekari Sign and how it can benefit your business.

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