Why businesses should trust e-signatures
Doug Luftman explores the efficacy and safety benefits of e-signatures
Today, business leaders seal high profile deals with e-signatures, not handshakes. Electronic signatures are a legally-recognised method of signing contracts from nearly anywhere in the world. Individuals can use them to complete transactions, from identity verification to signing business contracts to confirming invoices.
Having been in existence for over two decades, e-signatures became extremely common during the pandemic as organisations realised they needed a better way of signing. Two years ago, leaders faced an entirely unpredictable business environment and had to make hard choices to keep operations running. The most innovative ones took the plunge to digitize operations and have reaped the benefits ever since.
Greater efficacy, reduced risk
There are many reasons why an increasing number of organisations have become more comfortable trusting electronic signatures to complete a variety of modern business transactions.
Beyond their value in remote working environments, e-signatures are much faster, more secure and more sustainable than their pen-and-paper alternatives. Surprisingly, there are still instances where traditional ‘wet’ signatures are requested over electronic ones for physical documents. The main reservations to e-signature involve unfamiliarity with its security, legality and court admissibility.
In particular, many enterprises don’t appreciate the risk of sending confidential and highly sensitive information in a traditional manner. For example, once a paper document is physically sent for signature, even if personally couriered, there often is no longer predictable control for the sender as to how their document is handled. These security and control risks are present even if the document is electronically sent and then printed out at the recipient’s location.
By contrast, e-signature provides a secure digital workflow that helps ensure a clear and predictable process with controlled access rights throughout the entire workflow. Senders can maintain security standards from the moment a digital document is sent through the final signature and even eventual return of the completed agreement.
It's critical for businesses to know they can sign documents securely and safely in the new digital business environment. Whether it's new hire paperwork, an invoice or a sales contract, electronic signatures allow critical papers to be encrypted and eliminates the need for the postal service, an outdated fax system or a courier. E-signatures keep documents confidential while increasing convenience and security for businesses.
Just like handwritten signatures, e-signatures are unique to each signatory. Wet signatures have one major flaw: with enough time and practice, someone can learn how to mimic another person’s signature. It can be very difficult to effectively determine whether a wet signature was indeed signed by the expected signatory. E-signatures, on the other hand, have multiple layers of protection and authentication built in. Unlike wet signatures, e-signature providers can offer a robust digital record that acts as an audit trail if proof of the transaction is ever needed. This gives all parties peace of mind that their documents are enforceable even if a dispute occurs later.
If teams need an electronic signature with additional identity protections (otherwise known as a digital signature), there are opportunities to make electronic signature even more robust. This can be useful for certain types of important documents and/or documents used in heavily regulated industries. An advanced electronic signature (AES) or qualified electronic signature (QES) can be used where the signatory's identity is authenticated and a separate ‘digital certificate’ is specifically issued to allow that signatory to electronically sign the document with an AES or QES. These digital signatures substantiate that the signatories have gone above and beyond a traditional e-signature to further verify the authenticity of their identity.
Layered proof of authenticity
In addition to a more secure transaction, e-signature signatories receive a digital audit trail (often called a certificate of completion) that captures crucial transaction information such as date, timestamp, identity authentication technique used and IP address, providing further proof of the details of the signature. This audit trail provides a mechanism to counter a signatory disputing their signature. It can be used as admissible evidence in court to resolve a dispute over the authenticity and/or legitimacy of a signed document. In the UK and EU (as in many other areas of the world), should QES be used as the type of electronic signature, courts treat that signature as having the equivalent evidentiary presumption as a handwritten signature.
When using e-signatures, an additional level of protection is provided to the signed document based upon the standard use of a digital certificate to digitally seal the document using public key infrastructure (PKI), an industry-standard technology. This type of digital seal is used to provide a mechanism to demonstrate when a document has been modified after it has been signed. Such a fraud-evident protection mechanism in combination with the e-signature itself provides a means of substantiating both who signed the document and which document has been electronically signed.
The legality of e-signatures
Since the 17th century, certain types of contracts have been judged so fundamental and integral to a well-ordered society that the law required them to be written and signed. As technology has evolved, businesses no longer share physical documents as the first port of call, but rather digital ones. Although signatures remain an integral part of public life, e-signatures have become increasingly prominent. Following trends of globalisation and technological advancements, the law has adapted accordingly to maintain order in society, both online and offline.
A recent UK report by the expert Industry Working Group on Electronic Execution of Documents found e-signatures are superior and more secure than wet signatures in several aspects. Lord Justice Birss advised individuals and corporations to use e-signatures to sign and secure their contracts because: “there is no need for an old-fashioned pen and ink.”
E-signatures have the same legal validity as traditional signatures, if not more. The Electronic Communications Act 2000 and the Electronic Signatures Regulation 2002 have made electronic signatures legal in England, Northern Ireland and Wales. In the EU, e-signatures have also been reaffirmed as an efficient and legitimate mechanism of signing documents based on Electronic Identification and Trust Services (eIDAS) regulations, which were implemented in 2016. As of today, it is no wonder DocuSign eSignature is used in over 180 countries by over a billion users.
The adoption of e-signatures
Gone are the days of default face-to-face negotiations and contract approvals. The changes that accompanied the pandemic have accelerated and irrevocably reshaped business thinking. Today, businesses have the confidence to conduct business dealings remotely and entirely digitally. Though the experiment is ongoing, these practices have already proven to be more efficient, sustainable and cost-effective.
Trust is at the heart of all business and commercial activity and can be enhanced by the use of e-signatures. E-signatures are not only valuable in remote working environments, but they are faster, more secure and longer lasting than ink-and-paper signatures. E-signatures authenticate the origin of a contract, revealing whether the contract has been altered and helping further ensure strong privacy protections.
Businesses need to trust that the law has accounted for digital transformations and currently provides adequate protection for signatories to a digital contract. The Electronic Communications Act 2000, the Electronic Signatures Regulation 2002 and eIDAS ensure e-signatures throughout Europe provide additional legal protection compared to the alternative. Both the legal framework and the safety mechanisms already exist, so there’s no reason to wait. It’s time for businesses to adopt e-signatures.
Doug Luftman, Vice President & Deputy General Counsel, Product, Innovation Services and Government Affairs at DocuSign