Pick an industry. Next, try to pick an industry that hasn’t been disrupted by technology. Can’t? Well if you’d have said ‘notaries’ a few years ago, you might have won a point. An entire industry comprising the witnessing and authenticating of deeds, documents and contracts may seem an obvious candidate for digital disruption. But the journey has been long, and oftentimes slow.
The office of notary public has existed since the Roman Republic, when it was often referred to as a scribe. In fact the role hasn’t changed much since Shakespearean times. And while the 21st century tech revolution shook up everything from taxes to taxis, notarization remained stubbornly analog. Even when the fist American standards for e-notarization were adopted in 2006, little changed overnight.
The reasons are familiar. First and foremost is security. For notaries a handshake and rubber stamp are eternal, sacrosanct benchmarks of a Deal Made Good. But that is holding back technology, which could help eradicate countless opportunities for fraud.
“Those who are usually most concerned are those that can’t seem to help themselves by comparing the current paper based workflows with that of the electronic ones, or they simply don’t understand technology because of something they may have read or seen on the news,” says Darcy Mayer, CTO of DocVerify, which has been working in the space for a decade.
“When you go to a notary, the notary simply takes your ID, looks at it, and then maybe enters the data into a journal,” she adds. “They’re not forensic experts, so it would be very easy for someone to provide fake credentials to them because if someone really wants to commit fraud nothing is going to stop them.”
Digitizing the industry allows notaries to use cutting-edge cybersecurity techniques to shut out fraudsters. Notarize, for example, a Boston-based firm which completed the first paper-free, online remote mortgage closing this August, relies on three-step ID verification requiring knowledge-based authentication.
“Also, the entire event is captured on video,” says Pem Guerry, executive vic president of SIGNiX.. “Someone creating fraud is providing clear evidence of their crime that can be simply reviewed on video.”
Over 1.25 billion documents are notarized in the US each year. The average mortgage package is 280 pages long, and the industry uses 2.2bn sheets of paper annually. The fuel and inefficiency costs incurred by mandating individuals to close in-person are huge.
Yet eNotary services have been met with a great deal of mistrust from existing notaries. It’s one of two major factors preventing the widespread adoption of electronic notarization across the United States, and abroad. “Notaries are very threatened by the advance of technology as many of them see it as a means of taking work away from them, when in reality it will actually create more work for them,” says Mayer. Notaries are, slowly, waking up to the opportunities that doing business online can give them, she adds.
The other component holding back eNotaries is legislation. But, as with industry pushback, that, too, is gathering serious momentum. Virginia became the first US state to allow some form of electronic notary in 2012. It has now been followed by 17 other states, and state courtrooms have been abuzz with activity as more territories look to update their notary laws.
Last year Fannie Mae, Freddie Mac and Quicken Loans endorsed remote notarization for mortgage closings. Soon after the Uniform Law Commission (ULC) updated the Revised Uniform Law on Notarial Acts (RULONA), an update on legislation from 1982. Accommodating “societal and technological changes that have occurred in the past 30 years”, the update allows remote notarizations for signees located outside the US.
Some states, such as California and Montana, still lag behind the pack, according to the experts Red Herring contacted for this story. And some issues of interstate recognition have been left unanswered. But things are changing. And as many insiders suggest, 2018 is set to be a benchmark year for those in the eNotary space.
The mortgage closing process has been affected most by eNotary in recent years. “Recently we have seen many more relying parties beginning to research and understand eNotary with the intentions of implementing a solution,” says SIGNiX’s Guerry. “The consensus is that it’s coming and can’t be ignored. It is now becoming accepted as the future of the notary industry.”
“For years we may have been looking at the notary role from a cost or revenue perspective,” says Rick Hill, vice president of standards body MISMO and VP of industry technology at the Mortgage Bankers Association. “It seems that some really smart people finally looked at it from a consumer perspective and found ways to change the experience, first with electronic notary and now with online notary.”
Blockchain is helping notaries fight land registry corruption in countries as far flung as Ukraine, Georgia and Ghana. Many have touted it as a major tool for e-notarization. Mayer disagrees: “We are very familiar with blockchain as we have utilized it within our platform, but currently it’s just another buzzword…and we don’t see it improving or hindering anything in the near future.
“At this point, all it can do is provide document integrity, where someone could use it to determine if the document is the same,” she adds. “We don’t see how it could improve profitability at the moment.”
“Electronic and online notary can happen without blockchain, and in fact both do today,” says Ahmad. “Blockchain has potential in mortgage, just like in so many other industries. But we are really in the exploratory stage for the use of blockchain, and I see that continuing for the next couple of years.”
The European Union supports the interconnection of the registration of wills via the European Network of Registers of Wills Association (ENRWA), which enables legal professionals to search a foreign register through their own national register. Fifteen of 22 national registers have now been integrated.
Guillaume Casanova, of the Council of the Notaries of the European Union, can imagine the creation of a ‘private blockchain network’ for European notaries. However he is cautious of the widespread adoption of the technology in current notary verticals.
“We believe that blockchain can become an ‘ally’ and bring a new generation of smart contracts,” he says. “However, even in cases where automated contracts are possible, a human element will still be needed to oversee the whole process and build trust between the parties.”
So, eNotary services are finally experiencing a renaissance. Does that mean there is serious money to be made for its key players? Venture capitalists are beginning to look at the market for big layouts. But it will soon become a very difficult space in which to play.
It is difficult for startups to win big, for example, as trust and longevity are what legislators and investors are looking for. “New companies entering the marketplace will be very challenged in those areas because most startups also have their own self-interests or agendas with little or no consideration for the legislative process, the law, or what has been done up to now to gain trust,” says DocVerify’s Mayer.
That said, with the industry’s all-important adoption gaining pace there is plenty of profit to be made–both for innovative disruptors and those who can onboard technology to enhance their longstanding notary reputations. That will be good for everyone–except the fraudsters.