As businesses evolve from using paper documents, to electronic documents, the traditional notion of a signed document is changing.
Pen and ink, or ‘wet’, signatures are being fast replaced by digital signatures in the context of modern business documents.
But what are digital signatures? In essence, a digital signature is a type of electronic signature, or symbol in an electronic document to validate the sender’s authenticity. Digital signatures go beyond the inclusion of a symbol, by way of attaching a secure electronic certificate to verify the identity of the signer.
The certificate used manifests as code within the document, using public key infrastructure to permanently embed the legal evidence of the signature within the signed document. The public key infrastructure includes a certification authority (CA) who issues the certificate and verifies that this was issues for use by a particular business when a recipient check the validity of this.
Are digital signatures legally valid?
People will look back on ‘wet signatures’ in a few years and laugh about how archaic and insecure they were. It’s a trivial challenge to forge a written signature (and how often do businesses check?), but digital signatures make the validation process seamless, automatic and very hard to deceive.
Initially, electronic signatures were legally permitted in commercial affairs from 2000 – as per the Electronic Signatures in Global and National Commerce (ESIGN) Act. However, this did not explicitly include usage in the courts of law.
One of the earliest public proponents of signing documents digitally was Bill Clinton, when he signed the first US bill into law electronically, back in 2000.
More recently, eIDAS (EU Regulation 910/2014) was passed and has meant that the various types of electronic signature (especially digital signatures) are legally valid, and the distinctions between these in a court of law.
However, it wasn’t until July 2016 that the European Union effected new guidelines for electronic signatures, giving them the same legal power as hand-written signatures.
What problems do electronic and digital signatures resolve?
Since the passing of eIDAS in 2014, businesses have been able to address the following challenges by way of electronic signatures.
- Signatures need to be verified, and verified across borders.
- Security and trustworthiness of a legal entity’s signature needs to be clearly understood, and verifiable.
- The signing process needs to handle large batches of documents. Where large volumes of documents need to be signed, automated signing is required.
Perceptions of digital signatures
To quote a recent article on the topic of digital signatures:
“The benefits of employing digital business processes far outweigh the paper-reliant processes of days gone by and it’s only a matter of time before digital signatures take over from their expiring ink-on-paper counterparts,” says Van der Merwe.
Not only are digital signatures undeniably more secure and unable to be forged, he concludes, they are legally sound. “Importantly, they also create a digital audit trail and they don’t rely on filing, printing, scanning or back-and-forth emailing – paper-based processes that cost companies profoundly, in terms of both time and money.”
Moving from paper, to digital signatures, is important from a customer experience perspective too. A recent Forrester report* quotes a well-known 5-star hotel on their motivations to change. More than the costs for generating shipping documents, overnight delivery, and staff hours, the move was driven by “being embarrassed that a five-star hotel would have such crappy old processes,” according to an operations executive within the company.
Should your business be considering digital signatures?
As more and more business moves online, particularly mobile, businesses are wising up to the growth in digital signatures to ensure they stay ahead of the competition. Forrester research shows that there has been a 53% average annual growth in the use of e-signatures since 2011, with the number of transactions settled via e-signatures topping 210 million in 2014 and likely to exceed 700 million in 2017.
With the combination of cost-savings, performance benefits and improvement in customer experience, it’s not a question of whether to consider digital signatures, it’s a question of how. To better understand the value and options available to your business, take a look at our free white paper on the topic of “Digital Signatures: What, How and Why?”.