The term “e-signature” has become quite familiar. Today, most everyone has heard of an electronic signature and has experienced the convenience it provides.
So, are e-signatures really that simple?
For most of the population — yes, they are.
Efficient, Convenient … Unregulated
Electronic signatures are exploding in popularity because they’re efficient and easy to use. (Forrester Research expects more than 700 million transactions to be settled using e-signatures by 2017.) Users can sign documents with a click of a mouse or the tap of a finger anywhere, anytime on any device.
But in the United States — beyond their basic legal outlines in the federal ESIGN Act and state UETA laws — electronic signatures are not generally regulated, nor do they provide the user with reliable legal evidence of the signature.
This shortcoming requires the user to trust the electronic signature provider has a secure workflow and to rely on the provider for validating the signed document.
The 80/20 Rule
For about 80 percent of transactions, frankly, this really isn’t a big deal.
Electronic signatures are being used for simple transactions that carry negligible legal and financial significance or risk. Think permission forms or basic consent documents.
There’s not really a need to dig deep into security or compelling legal evidence because all you need is an e-signature that will take the place of a wet ink signature. So electronic signatures can be bought as an off-the-shelf commodity. Find the best price, and your due diligence is pretty much done.
But as for the other 20 percent of businesses? Purchasing e-signatures as a commodity could be a mistake that puts those businesses at serious risk for legal, financial, data privacy and security issues.
E-Signatures vs. Digital Signatures
These businesses — ones that have confidential, regulated and/or high-value transactions — require digital signatures because the sophisticated technology ensures compliance, legal defensibility and security.
For example, if you’re a financial institution issuing a car loan to a consumer, you and your client need to have 100 percent certainty that the loan — and the provided signature — is protected and legally binding once the transaction is complete.
Here’s a quick breakdown of the elements that differentiate digital signatures from electronic signatures:
Longevity and Compliance
Digital signatures use public key infrastructure to permanently embed the legal evidence of the signature into the signed document itself. This gives you complete ownership of the document and eliminates the need to be dependent on an e-signature vendor to prove the signature’s authenticity.
This independence from the e-signature vendor is significant. Many industries, such as financial services, healthcare or real estate, must be able to prove the legality of a signature years after a document has been signed. With digital signatures, organizations can be confident that their signed documents are legally sound and defensible if the signature is ever questioned in court.
In addition, digital signatures adhere to published, international standards, making the signed document valid forever. And because of this significant advantage, digital signatures are also more widely accepted across the globe than e-signatures.
Security and Data Privacy
From social security numbers to private business data, documents can contain very sensitive information, so it’s essential that those documents and credentials are secure.
Digital signatures use comprehensive, independent audit trails to track and record every part of the signing process. They also use tamper-evident technology to immediately detect any changes that are made to a document after each signature has occurred – reducing the risk of fraud. Further, identity authentication tools, such as knowledge-based authentication, make sure only authorized individuals have access to documents.
For highly regulated industries, this level of security is a must to protect all parties involved in the transaction.
Evaluate Security Issues
Digital signatures and electronic signatures provide the same conveniences and other benefits, such as mobility, cost savings and speed, but the two options cannot be compared in terms of security or independence.
So be sure to ask yourself:
- Does legal evidence matter?
- Is it necessary to protect data and documents?
If the answer to either question is no, as it is for some companies, then you can price-check away.
But when the answer is yes, your documents, your company and your job could potentially be on the line. Look carefully at an e-signature’s underlying technology. Ask questions. Understand industry compliance.
Then make your decision.
Title image by MJ S