Digital Transaction Management: A New Standard in the Works
There are few topics more complex than digital transaction management and the potential to create templates or standards for them. ESRA is at the forefront of exploring these concepts, and gathered several industry experts to discuss just what it means – including the potentially controversial ‘xDTM’.
The participants were:
Jim Lundy, CEO and Lead Analyst, Aragon Research Inc.
Stephen Bisbee, President and CEO, eOriginal
Heather Petersen, Executive Director, xDTM Standard Association
Bisbee introduced the discussion by talking about xDTM, a new standards organization whose values are security, privacy, availability, compliance, universality, scalability, interoperability, and enforceability.
xDTM is only one part of the digital transformation of business processes, Bisbee noted. The focus has been on the e-signature side, but the tools exist to create electronic documents. For successful digital transactions, he explained, you have to go beyond that and enabling digital processes.
“The pivot to success is moving to fully electronic and enabling that,” he said. “How do you manage transactions successfully? What are the next steps?”
In addition, Bisbee referenced Judge Paul W. Grimm’s discussion of the adoption of digital documents. Judge Grimm said that three things can assist adoption, and Bisbee noted that Petersen would elaborate on them. Those three things are:
- Statutory: You have to have a statutory framework.
- Rules: You need federal rules of evidence and judicial decisions that provide guidelines.
- Industry standards: Those lead to consistency and assurance for companies, as well as validity.
The Trend Toward Digital
Lundy then spoke about work becoming digital.
“We’ve all talked about the paperless office, which isn’t quite here yet, but it’s the goal as far as speeding up business,” he said. “Mobile is a big thing.”
Lundy saw these trends causing it all to happen:
- Cloud technology: “It’s a driving force even though 90% of all information is stored on-premise. You have heard of things like Salesforce’s app exchange, which allows over 2,000 apps to plug into each other.”
- Mobile is shifting: “When you have powerful phones, you can do a lot with them. We think it’s all about apps. We expect 30 million apps by end of 2020, as opposed to a couple million right now. In five years, we’ll do most of our business transactions on mobile apps with less than eight screens. That’s the new race.”
- Machine learning: “Software that gets smarter, like predictive business applications. For example, you book travel and a message says ‘People like you book this hotel.’ In the future, an application could ask you if you want all your content for your day’s meetings. People on the buy side of technology should be asking software providers when they will have predictive capabilities. I expect half of software providers to have that by mid-2016. Machine learning is a hot topic.”
“The bottom line is humans and computers will work even closer together in the future. Anyone with a fully digital process will move faster than everyone else,” he said.
Lundy moved on to other transformational things, like Uber and Lyft, which have disrupted taxi industry with apps. An app can disrupt an analog business process. In addition, tablets have helped increase digital transactions, he said.
“What is DTM, digital transaction management?” he asked. “It’s a business category, as opposed to a technology category, that will be a $30 billion market by 2020. If you look at the amount of spending in enterprise, like a bank, on paper, toner, ink, and so forth, it’s about 1.5-2% of your total corporate revenue. It was 1-3% 10 years ago.”
“Speeding up business processes is a main goal,” he continued. “IT often doesn’t want to talk about paper, which is a huge black hole of cost. Many transactions aren’t fully digital because you still have to rely on paper for many things due to regulations and so forth. The opportunity is to get out of the analog part of it. When companies pitch a digital transformation, they don’t talk about the last mile of getting rid of paper. The entrenched process is an issue with that.”
Lundy then covered what he called “the technology arc for the workplace.” His main points:
- There isn’t a trough of disillusionment. Managers will move to digital, especially if it’s cloud-based.
- They’re moving faster than IT departments to do it.Mobile content management and enterprise content management are important.
- Technology is a weapon. People hear about new solutions and immediately want to buy them.
“It’s a race to leverage technology,” he said. “Younger business leaders understand it and want to adopt it. The speed of adoption is something to watch. Executives want paper to go digital as fast as possible, especially since their competitors are doing it. You might have 10-20 content management repositories with workflows attached to them, which is a hassle to deal with when trying to go digital.
“In many cases, there are lightweight processes, like adding signatures to a CRM system. But there are complicated processes too. Ease of use is key, regardless, because users will reject it otherwise. An application with APIs is key, so you can connect it to other things. Vendors need to support API integration.”
Lundy finished by noting: “Ecommerce and B2B need to be able to go outside the firewall.”
Asset Management is Important
Bisbee then discussed the asset management portion of DTM.
“When the association was formed, people wondered if it should just be e-signature association,” he said. “People are now talking about the fully electronic process. We’ve seen a number of forces which are forcing people to talk about this, including compliance in financial services. People are looking at this from a dynamic, real-time asset management analytics perspective, for auditing too.
“There wasn’t a lot of securitization before, but now there is. They’re happening because of programmatic securitization. You have to be able to manage risk now. Things like data breaches are causing the need for proper management and monitoring. And people are discriminating against non-digital people. Companies won’t work with other companies that aren’t digital.”
Bisbee noted that people want to execute agreements and modify them digitally, and marketplace lenders are a disruptive force behind that. They’re focused from the technology side. They’re focused on customer experience and want to manage documents fully electronically.
He pointed out: “In China, part of it is cultural and part is their institutions, but it’s growing and they’re quickly becoming all-digital.”
Bisbee said the trend is also about healthcare records, government filings, and so forth. Different types of participants can join a transaction over its life cycle, especially ones who were unknown when it first happened, such as investors. Or maybe someone gets remarried and needs to add a new spouse to a document. And so forth.
“How do you ensure you have the authoritative copy when the document is executed and how do you ensure it’s maintained?,” be asked. “A registry? How will you get reports with granular information? To have predictive analytics you need to have proper analytics.
“If you want to go all digital, apps need to mesh. If you’re a vendor, you have to know how you’ll work with document management systems. It needs to work with CRM, content management systems, etc. How do you ensure the document being moved can be trusted? CFPB can’t audit every transaction. They need to have fully digital access to assets and analytics.”
“Where does the asset fit? Some things are non-transactional, like office documents, emails, and so forth,” he continued. “But they become the beginning of an engagement, and we’re finding that regulators need to know what a web site looked like 10 years ago, or what was the data presented originally? Even if it’s not part of the transaction, regulators want that included too.
“Now you have assets and they’re maintained somewhere, like a customer database. What if you as the owner, like a bank, want to pool all assets and move them? How do you move them from one location to another and know there’s only one of each? A number of years ago, American Financial Services Association created a standard for that. It helps ensure there’s a legally compliant authority for transfer of assets.”
Lundy then wanted to hear an example of benefits of digital transaction management.
“An audit trail is a main one,” Bisbee said. “You have a record, like a promissory record for example, and you have a record of how it was created, who created it, and so forth. That data, along with data from the origination side, can be managed. You can have an image of the document and the original – Do you need only one? Then if so, you need DTM.”
The xDTM Standard Association
Petersen then spoke. Transactions happen more quickly if they can happen digitally, she noted. Net promoter scores increase when a company can do a transaction digitally. But people want to know what’s happening behind the scenes with digital transactions. Consumers and businesses have questions because of data breaches, privacy leaks, and so forth. People want to know if it’s safe. What are the policies around use of their data?
Will it work when there’s a heavy load on the system, like end of quarter or holiday season or overnight? People want to transact when they want and where they want.
That led to the xDTM standard. It’s an independent non-profit comprised of several organizations, including Intel, Visa, Microsoft, and so forth. They’re talking to more companies domestically and abroad.
“Today, things are very dynamic and always changing,” Petersen said. “We’re in step with best practices. We’re modeling a lot after the PCI standard for the payment card industry, which Visa pioneered. We want to get in front of government standards too.
“xDTM’s benefits extend across an ecosystem. It provides trust and transparency for solution providers. It grows the entire market that way. It’s a big market opportunity. Standards can help speed us to place where adoption is widespread.”
She also noted that differentiation of offerings is necessary. Consultants benefit by supporting the industry with credibility and new lines of service. Third party certification will come online too.
Enterprises benefit because they can identify, compare, and onboard solutions more easily. They can more readily understand the attributes of a DTM solution and explain it.
Consumers get peace of mind because care is being provided for their documents, and they know that they’ll be able to leverage them later, as needed.
Lundy asked a question for plans going forward.
“First is around releasing a formal standard,” Petersen said. “We have had meetings about that. They’ve been very collaborative. We’re moving toward drafting a standard and continuing to get input from various subject matter experts. We want to see standard released next year, along with a compliance program.”
“Other things have come up too, such as the Internet of Things, like machine to person transactions,” she continued. “The SaaS realm too. We want to include more organizations in our effort. We need broad industry support, here and abroad. It’s stronger if it’s a global effort.”
A number of individuals that were observing the discussion had questions for the speakers. The first questioner asked if actively electronically signing is different from accessing a document later. Is the stamp of approval multi-party? Or is it a standard that everyone would need to commit to?
Petersen said there may be different levels of compliance, based on transaction volume or other things. They want the industry to help define that so there’s a clear line of quality. Maybe there are different ways of implementing that.
The next person noted that xDTM has only one e-signature vendor and no BPM vendor. He wondered how they plan on addressing that?
Petersen said it can be addressed different ways. “Standards and associations start somewhere,” she said. “We’re continuing to take steps because the standard has to be more independent. We’ve involved companies with experience creating standards and would like to include more companies.”
That person had a follow-up regarding the certification scheme with third parties. What will the cost be? Could the standard become a burden?
Petersen said the first year will have a self-assessment program. People can fill out a form and have an officer of the company sign and send it in. A year later, a qualified assessors program will happen. From there, it will be similar to a lot of compliance programs where a third party would be involved, but it hasn’t been defined yet. There will be a cost to that, but they want to make it accessible too.
Another questioner asked: “How do I view DTM in mortgage industry? Does it involve data standards like an appraisal order, for example?”
Petersen said they’re not recreating standards. They point to already existing standards. They’re looking at solutions more broadly. As xDTM evolves, they may have some vertical-specific tracks for it, like other industries do. They may look more closely at that for healthcare, insurance, and so forth. Looking at it as a standard across the board.
Lundy added that someone will say they’re a cloud vendor, but they’re only in one data center. There are standards there too, such as replication across cloud data centers. The provider has to certify what they do, and that applies to xDTM too.
Petersen also used the example of needing to protect data, but the company can use any ISO or NIST standard to do that.
The last questioner asked: There are various concepts for the xDTM standard framework. Concepts are in other standards too. How will xDTM be differnrt from that?
Petersen responded: “It has trusted and connected components. It has a broader standard that hits on many areas important to the market. It goes beyond e-signature.”
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