Business

What’s the difference between Digital Signatures and Electronic Signatures?

Apr 09, 2020

If you most recently started dabbling into online signatures, it’s easy to be confused about the wide variety of options that companies have, as electronic and digital signatures get interchanged more often than not. Electronic signatures have been around a lot longer than people would think and digital signatures have been built on new technology to aid in today’s global economy. Nowadays, both electronic signatures and digital signatures have been used by many of the world’s largest enterprises. They help to implement security, make document access easier, and reduce operating costs. Here’s a quick guide to help you learn the difference between electronic signatures and digital signatures. 

Electronic Signatures: What are they? 

According to Adobe, electronic signatures are the electronic process that indicates the acceptance of an agreement. These signatures have a wide variety of methods to help verify the signer’s identity, including pins, passwords, emails, and corporate IDs. As the simplest form of signature, electronic signatures can be built with unique links to the signer to help track any changes that happen to the data attached to the document. E-signatures can also be qualified off a record certified by a signature software or trusted authority to ensure data protection. 

E-Signatures have been around for over 100 years, beginning with Morse code. During the late 1800s, businesses would use Morse code and the telegram to sign contracts. These contracts required laws that protected the validity of those documents. The first federal law was Howley v. Whipple case, where the New Hampshire Supreme Court declared that as long as the message is attached to the penholder, it has validity and protection, even if used by a telegraph. (48 N.H. 487 (1869)). Throughout time, modern businesses accommodated the changes in signature practices. By the time the internet came, the demand for the efficiency of electronic signatures started to arise. By the early 2000s, two laws were passed in the United States for better protections (LTISolutions).

The Electronic Signatures in Global and National Commerce Act (E-Sign Act) establishes the legal definition for electronic signatures as well as their legal standing in business agreements and court orders. By defining electronic signatures, the E-Sign Act also established the protocols that make an agreement valid, such as

  • the intent to sign,
  • consent to do business electronically,
  • the ability to capture the transaction in the process to determine the validity of its signature, and
  • must be capable of retention (Adobe).

The Uniform Electronic Transactions Act (UETA), published by the Uniform Law Commission in 1999, gives electronic signatures the same legal effect as traditional handwritten signatures under the statute of frauds, applying to only certain types of transactions and applying only when both parties agree to the transaction (WestLaw).

Both of these laws satisfy signature requirements to have consensual transactions electronically and aid in the electronic proof of the person’s identity when authenticating documents. 

What about Digital Signatures? 

Electronic signatures seem to cover all the basics, so what about digital signatures? How are they any different from electronic signatures?

Digital signatures, a type of electronic signature, focus on a different method of identification and security than electronic signatures.

Digital signatures use a Personal Key Infrastructure (PKI) to help identify the signer.

Through this process, both the signer and signee must both have a certificate under a Certificate Authority to complete the process. Through the PKI, the PKI gives the signer both a public key and private key to identify them. Once signed, the document is bound with encryption to ensure the proof of the signature and help the document be seen as verified and safe (FDA). 

Digital Signatures haven’t been around as long as e-signatures have, but have still some routes in U.S history as a huge milestone in the way signatures have gained protection in legal matters. The idea of digital signatures came from Whitfield Diffie and Martin Hellman, who originally designed the digital signature scheme but never acted on it.  Soon after the RS algorithm was developed, Lotus Notes became the first software to offer digital signatures. Then the development of digital signatures skyrocketed, being transcribed into PDF format and became officially a legal form of signature through the E-Sign Act. From there on digital signatures became a legal, effective format for signing contracts between businesses. 

E-Signature or Digital Signature: Which one is better? 

The global e-signature market has been growing consistently over the past few years. E-signatures are expected to grow even further, driven by factors such as online shopping, documentation and the increased acceptance of e-signatures in the Banking, Financial Services, and Insurance sector (BusinessWire). Alongside that, digital signatures have been steadily increasing in popularity due to cloud-based technology (GlobeNewswire). Both e-signatures and digital signatures help speed up the approval process, allowing companies to offer transaction services that enhance the customer experience. 

Both e-signatures and digital signatures can: 

  • Promote efficiency, allowing documents to be signed and returned online in minutes.
  • Ensure compliance, allowing methods such as encryption to ensure that sensitive information is kept secure throughout the signing process
  • Improve traceability, allowing software and cloud-based solutions to track time, location, and identifier tags associated with the signer

However, e-signatures and digital signatures have disadvantages to their methods as well. For instance, while digital signatures can provide extra security using encryption and key infrastructures, both the signer and holder of the documents must be verified by a certificate authority in order to complete a digital signature, which can cost money and time. E-signature, while relatively easier to process, don’t have the extra security measures to protect vital information if needed. Because of how recent developments have been over the past decade, those faced with legal matters may have a harder time verifying the validity of e-signatures. 

However, one of the main disadvantages that may occur is the recognition of electronic signatures and digital signatures in legal cases. When it comes to e-signatures, loopholes can be found as to what constitutes a legal document, especially if a judge were to identify the document as invalid and requiring a “wet signature” to ensure its authenticity. With digital signatures, Personal Key infrastructures can leave those throughout the process unclear of its meaning, leading to false identities having access to the signatures. If those documents were corrupted, courts would determine the signatures to be invalid (Digital Evidence and Electronic Signature Law Review). While both the E-Sign Act and UETA help define the process in which documents can be considered valid, advanced forms of authentication can leave those in need of official and clear identification that can leave many confused (Cryptomatic). 

Nevertheless, both e-signatures and digital signatures have great benefits in terms of access, mobility, and security. Companies such as Adobe, DocuSign, and Signix can offer prices for their software to make transactions easier between consumers and businesses. For those interested in digital signatures, certified authorities such as Certisign, Microsoft Root, and Wells Fargo can help make certificates easier to access at affordable prices (IBM). When considering electronic signatures and digital signatures, it’s essential to pay attention to the quality of the company’s cybersecurity so that way your information is captured and verified safely.

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