What is an Electronic Signature (E-Signature)?

It has been more than 20 years when electronic signatures been legal in the United States. Initially, when many countries started using electronic signature as a type of virtual signature, electronic signature (e-signature) was considered as a business luxury.

It took many years, and now, in 2019, electronic signature is well-recognized in the modern marketplace. Electronic signatures not only make the business transactions secure and convenient but reduces the cost.

Even after so much impact of electronic signatures on businesses, there are a number of people and business who are not familiar with the term ‘electronic signature’ as well the importance of electronic signature in the digital era. In this article, we’ll cover each and everything about the electronic signature, but let’s begin with ‘what is an electronic signature?’

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What is an Electronic Signature?

Electronic signature, commonly known as ‘e-signature’ and ‘e-sign’ is a legal concept, that is different from digital signature which is a cryptographic method used to implement electronic signatures. An electronic signature provides a precise and secure identification method to the signatory to provide a seamless transaction.

An electronic signature have equal legal value as that of a handwritten signature as long as it satisfies the requirements of the regulation under which it has been created. It is very simple to create an electronic signature, and once created, it can be added to any document, even along with other annotations like freeform text and check marks.

Definition of Electronic Signature:

In layman’s terms, an electronic signature, commonly known as e-signature, is an electronic expression of the agreement of a person to accept the terms mentioned in a particular document.

According to the US Federal ESIGN Act, that was passed in 2000, electronic signature can be defined as an electronic symbol, sound or process that is associated with a record or a contract logically. An electronic signature is created or adopted by a person in order to sign the record.

Now, you may be thinking if an electronic signature can really be symbol, sound or process!

Or you may be confused about what this symbol, sound or process is!

It basically means whenever a document is signed with an electronic signature, it is 100% legal standing whether it’s associated with a keystroke, a recorded verbal message, a selected checkbox or even a proposal.

To make it simple, let’s consider an example of an electronic signature.

Example of Electronic Signature:

With the technological advancement in this digital era, the documents are written and signed electronically. You may find electronic signature everywhere, even when you may not even be aware that you are using an electronic signature. Here are a few examples of the electronic signature:

All of you would be using Facebook. Whenever you click on the “Sign Up” you are agreed with and accept the Facebook’s privacy policy and terms of use. It means you sign those terms of use and privacy policy documents electronically with the e-signature. Such a click on the signup button is just like a keystroke, a process, that is an electronic signature example. Many other social sites and other web pages use this feature such as Twitter, MySpace, foursquare etc.

Another electronic signature example is signing the electronic pad. Many of you who have done online shopping would be familiar with this. When you do online shopping and purchase something by using your debit card or credit card at Walmart, you will have to put electronic signature while accepting the order. Many other store chains also use electronic signature like this such as Best Buy, Game Stop etc.

Is Electronic Signature Legal?

Of course! The electronic signatures are legalized and acts as a legal binding. In the United States, the electronic signatures are legal and recognized as the handwritten signatures after the approval of the following acts:

Combined together, these two acts – UETA and ESIGN ACT allow the usage of electronic signatures to replace the handwritten signatures. It is required that an electronic signature meets the four legal hallmarks of the e-signature. In simple terms, here are four requirements for an electronic signature to be recognized and validated by the US law, these are:

  1. The signer is who he/she claims to be. An electronic signature is the identity of the signer. If required, the identity of the signer could be authenticated or verified using a number of digital markers such as an IP address.
  2. The intention of the signer to sign is clear. The terms of the document/ contract/ transaction should have been communicated well with the signer. The signer should be intentionally agreed to undergo the e-signing procedure.
  3. It could be verified that the signature is associated with the signed document. This parameter basically involves the signing process such as how the document was signed, which process the signer completed, and which documentation supports the electronic transaction involving e-signature.
  4. The record should be retained by the creator or sender. The electronic signature records and documents should be created to retain and reproduce accurately for further reference by all the parties and individuals who are responsible to retain the record or contract.

Also Read: Ways to Future Proof Your E-Signature Investment

Types of Electronic Signature

If you are new to the term electronic signature, you may be confused about what forms the electronic signature and what’s the difference between different types of electronic signatures on the basis of legality and evidential power. Before getting into the different types of electronic signatures, it is important to understand the basics about the electronic signature.

E-signature is a mark that can be used on an electronic document to show the intention of the signer to submit his/her approval on the contents of the document. It is not important how the eSign is created but important is the person with whom the sign belongs to and the document that shouldn’t be changed subsequently.

As per eIDAS regulation, e-signatures can be categorised into different types on the basis of the level of security they provide. There are four types of electronic signatures:

  • Click-to-Sign Signatures
  • Basic Electronic Signatures
  • Advanced Electronic Signatures
  • Qualified Electronic Signatures

Let’s understand these signature one by one.

1. Click-to-Sign Signatures

Click-to-Sign category includes signatures in the form of scanned images, tick boxed, typed names, and e-squiggles. In this type, the document is not provided with any cryptographic protection. Due to which, this type of signatures neither verify the signatory nor protect the document to be changed. It is possible to cut and paste this type of signatures from one document to another easily. Using this type of signatures by own is not at all recommended.

2. Basic Electronic Signatures

Basic electronic signatures involve the process of applying a handwritten signature mark on the document by the signer which is then protected with a cryptographic digital signature. So, the basic electronic signatures allow the signer to create a crypto digital signature by using a server-held signing key so-referred to as a witness digital signature.

Whenever the user applies e-signature on any document, this witness digital signature is applied every time which binds the e-signature to the document cryptographically from any subsequent changes, thus ensures data integrity. Whenever the user apply e-signature on any document, this witness digital signature is applied every time which binds the e-signature to the document cryptographically.

3. Advanced Electronic Signatures

As the name suggests, being the advanced ones, advanced electronic signatures have a higher level of security. An electronic signature that meets the requirements mentioned under the EU regulation No 910/2014 (eIDAS-regulation) regarding electronic identification and electronic transactions in the internet market, is known as the advanced electronic signature.

eIDAS has created some standards regarding the use of electronic signatures with the intent to use them in a secure manner while conducting online business or official business over the globe.

An electronic signature must meet the following requirements to become an advanced electronic signature:

  • The signatory could be identified uniquely and linked to the signature
  • The signatory must have all the control of the data that was used to create the electronic signature
  • In the event that the accompanying data has been damaged or tampered after the document was signed, the signature must be identified
  • In the event that the accompanying data has been modified or changed after the document was signed, the signature must be invalidated

4. Qualified Electronic Signatures

A qualified electronic signature is actually an advanced electronic signature with some additional features. The qualified signatures are created with the help of a qualified signature creation device. Also, these signatures are based on a qualified certificate for electronic signatures.

The examples of the qualified electronic signatures are the electronic signatures created by using electronic National Identity documents and the electronic signature certificates stored on encrypted cards.

As mentioned in the national ‘trusted lists’ of the EU member state, the public or private providers those have gained the qualified status by a national authority can provide the qualified certificates for electronic signatures. The qualified certificate providers may provide a private key corresponding to a qualified signature creation device.

The Qualified electronic signatures are the more trusted and secure versions of the advanced electronic signatures as they have the highest levels of security in order to protect the user signing key. The advantage of qualified signatures is that they can exactly verify who has signed the document just as advanced electronic signatures.

So, these are the different types of electronic signatures as per different levels of security. You can choose one as per the level of security required for the document to be signed. For instance, to sign school forms, rental agreements, etc one can choose to use click-to-sign electronic signatures or basic electronic signatures. While dealing with invoices, business contracts, legal agreements, and other confidential documents, it is recommended to choose advanced or qualified electronic signatures.

It is important to look into the security factors while choosing an electronic signature solution for your business. Here are the top points you should consider while choosing an e-signature vendor.

Why Electronic Signature?

An electronic signature is a secure and legal form of signature and many businesses and enterprises opt e-signatures for their versatility, convenience, and cost-effectiveness. Electronic signatures have laid a great impact on businesses. Here’s what businesses can do with e-signature, and why should they opt e-signatures:

  • Verification of the Signatory’s Identity – An electronic signature uniquely identifies the signatory and verify that the signatory is linked to that particular signature. An e-signature is one of the most secure types of virtual signature that is accepted legally.
  • Associate the essential identifiers with the signing process – In business transactions, it is possible that one or more identifiers i.e. individuals are associated with it. In that case, electronic signatures help to associate all the essential identifiers with the signing process.
  • Easily store and retain the signed documents – Electronic signatures can be imparted on the online or offline documents which can be stored and retained easily. It is possible to keep a soft as well as hard copy of the e-signed documents, as per convenience and requirements.
  • Safely capture a binding and legal signature – Electronic signature is a legal signature that is as valuable as a handwritten signature. An electronic signature is a safely taken capture of the legal and binding signature that can be used whenever and wherever required.
  • Makes business transactions convenient and versatile – No doubt, with the legal acceptance and usage of electronic signature, the business transactions have become highly convenient and versatile. Even when the signatories are across borders, they can easily sign the documents with the electronic signatures.
  • Reduces the cost of business transactions – Business transactions were not so cost-effective before the legal acceptance and usage of the electronic signatures. While using there is no requirement of the digital certificates, also these are legally accepted, which reduces the cost eventually.

From the above points, it is clear that electronic signatures provide an easy, secure and legal means of signing that saves time, effort as well as money. It is not wrong to say, if you are the one who is looking for an effective, convenient, versatile, and cost-effective business transactions, you should adopt the electronic signatures.

Thinking to adopt the electronic signature for your business? Here are the points you need to consider while choosing an e-signature vendor.

What is the Electronic Signature Used for?

In the above sections, we have understood what is an electronic signature, examples of electronic signature, and why to use it. But you may be wondering about where an electronic signature can be used. So, in this section, let’s check out where you can use an electronic signature. There are various kind of documents that can be signed with an electronic signature such as,

  • Invoices, sales contracts, and NDAs
  • Employee paperwork, timesheets, and approve proposals
  • School forms, permission slips, and release forms
  • Leases, property, and other housing and rental agreements
  • Bank forms, tax documents, and insurance forms

An electronic signature can be used in different forms of documents in different areas that are being mentioned as follows –

  • In-state and self-government institutions communication – An electronic signature can be used in all types of documents that are to be submitted in the state or self-government institutions.
  • For legal transactions – To sign invoices, contracts, NDAs, submissions or any other type of documents separately or through accounting or recoding systems, electronic signatures can be used. E-signature has the equal value as that of the handwritten signature.
  • Empowerment of individuals – The documents issued by notary after the issuance of a power may be in the form of an electronic document, containing an e-signature. These e-signed electronic documents then can be shared with the authority that has requested the document and also can be used in the future.
  • Identification of Signatory – Whether online or offline, when you submit a document with an electronic signature, it acts as a proof of the identification of the signatory. For example, the e-signed leases, property documents, and other housing and rental agreements verify the identity of the signatory.
  • To ensure official communication with the customers – In businesses, entrepreneurs who require the receipt of services for their applications as a sample form, they can ensure and provide public access to the relevant forms. They can make those forms available in an editable form and allow customers to download them in order to fill them in the electronic form and signed with the electronic signature.

Above are the documents and forms where e-signature can be used. E-signature can be used at a number of places but not everywhere. Yes, you must be familiar with the exceptions where electronic signatures are still not valid. You can not use e-signatures while dealing with:

  • Marriage registration
  • Family law, and
  • Inheritance rights

So, it is clear now where it is legal to electronic signature and where not, which is very important to understand before using electronic signatures. Now, you can decide whether you should use electronic signature to verify a document or not. Also, you can choose the type of electronic signature on the basis of the level of security required for your document.

Also Read: Uses of Electronic Signature for Small Businesses

How does Electronic Signature Work?

In this digital world where e-signature has become a need of the hour, it is important for individuals as well as businesses to understand electronic signatures. E-signatures help to reduce time, hassle, and money in terms of signing the most important documents and they are easier to use even more than you think. If you want to learn how electronic signature works, you should know that there are many online available electronic signature software. So, let’s understand how does an electronic signature software work.

Nowadays, technology advancement has made everything easier. So, the modern eSignature software are designed as simple to use as possible. If you are an e-signature software user, you need to follow the below steps to collect one or more e-signatures:

Step 1: Upload an existing document or create a new document using the in-built tools of the software

Step 2: Define the fields properly that are required to be filled out by the responsible person such as date, address, signature, etc.

Step 3: Locate the fields wherever you want to place them in your document

Step 4: Make the final settings for the adjustment such as draft the message in the email, set up a signing order, and so on

Step 5: Share the document via email to the signatory to sign.

At the receiver’s (signatory’s) side, the signing process with the use of e-signature software is even simpler. When the sender signs an email, the signatory will receive an email or any other notification from the e-signature service such as create an account or sign in, upload a photo of your signature, create your signature using a stock font or other available method to sign the document.

The signatory can just open the document by clicking on the link given in the email and create/upload his or her electronic signature. Then he can just confirm and submit the signed document.

Also Read: Electronic Signature Workflow

Benefits of Using Electronic Signature

Electronic signatures are meant for individuals as well as businesses. When we talk about individual usage of e-signature such as using on invoices, timesheet, school forms, sales contracts, housing, and rental agreements, it brings benefits like a significant reduction in time, effort, money and hassle.

But when we consider the business usage of electronic signature, along with these benefits, e-signatures bring a number of other benefits for the businesses. So, let’s discuss the business benefits of electronic signature in detail.

  • Get documents signed fast – With an electronic signature, the document is signed very fast i.e. within few minutes. Signing a document with a handwritten signature would not also take time, but it takes time when the signatory is at distance. By using an electronic signature software, you can create and send any document to be signed over the boundaries in less than minute. The document is then received by the signatory and signed in no time.
  • Sign documents from anywhere – For the handwritten signature, the sender had to wait for days to weeks depending on the location of the signatory. Sometimes, it might not be possible to send confidential documents via post. Or when sent through email, the signatory would have to get the hard copy to sign, and again shared the scanned copy after signature. It might also take a few hours. But e-signature and e-signature software has made the signing process very simple. Now, wherever be the signatory, the documents are sent in email via e-signature software, and get signed within minutes.
  • Save money with e-signature software packages – There is no doubt that e-signature software has made the signing process simpler. Now, you don’t need to spend on getting hard copy of the documents and sending them via post to the signatory. Also, one can make big savings on the monthly and yearly packages offered by the electronic signature vendors. So, it brings business benefits of electronic signature in terms of investment.
  • Collect secure and legally binding signatures – As mentioned earlier, sharing confidential and signed documents via post or over internet might not be much secure. But e-signature software are secure enough to be used in order to share the confidential information and signatures. Besides, electronic signatures are secure and legally approved signatures, so you can create once and use them whenever and wherever required.
  • Effort and time saving to handle technical hassles – When you decide to use electronic signature for your business, organization or individual usage, you opt to use an electronic signature software. By using an e-signature software, businesses save their time as these software are not only easy to use, but comes with a support team of technical experts that is always ready to resolve all your queries.
  • Increased service and efficiency – Now, with the electronic signature, business and legal departments need not to cut down the business expenses by avoiding the services. But they should opt to use e-signatures like modern technologies to reduce their costs. An e-signature vendor helps the businesses to digitize all the important and confidential legal documents. Also, it helps to share and sign the documents in an easy, fast, and secure manner, independent of the number of parties involved.

So, if you are the one who has not yet used electronic signature or were just thinking about its benefits, it’s the time to take the action. It is important to get ahead with the advancement in modern technology, it always brings a number of benefits. So, to get the benefits of e-signature, use it now.

Read Now: Cost Saving Benefits of E-Signature

Electronic Signature vs Digital Signature

Typically, the electronic signature and digital signature, both are used interchangeably without any difference between the two, but both are the different terms. The main difference between digital signature and electronic signature is that digital signature is used to secure documents, mainly by the certification authorities, while electronic signature is used to verify documents, with an intention of the signatory to do so.

Let’s have a look at Electronic signature vs digital signature table below to understand the difference between the electronic signature and digital signature in a better way:

Electronic Signature Vs Digital Signature
Factor of Difference Electronic Signature Digital Signature
Purpose An electronic signature is used with a purpose of verifying a document. A digital signature is used with a purpose of securing a document.
Regulation An electronic signature is usually not verified by any authority. A digital signature is authorized as well as regulated by the certification authorities.
Types of Signatures An electronic signature is basically used to identify the signatory who signed the document/ contract for the verification purpose. It can be in the form of a symbol, sound, process, scanned image etc. The common types of electronic signature are – click-to-sign signature, basic electronic signatures, advanced electronic signatures, and qualified signatures. A digital signature is generally used to secure the document. There are commonly two types of digital signatures on the basis of document processing platform such as Microsoft and Adobe PDF.
Security An electronic signature is comparatively less secure as it is comprised of less security features, just to secure it not to be used by other people without permission. A digital signature is more secure than the electronic signature as it is comprised of more security features.
Intention The main intention behind using an electronic signature is to sign a document or contract in order to verify that. Generally, two or people involved in a contract, they sign a document to show their commitment, and that document becomes a legally binding between them. The main intention behind using a digital signature is to secure a document to keep it safe from the unauthorized people. It is authenticated by the owner of the document and also act as a legal binding.
Verification It is difficult to check and verify the owner of the document as an electronic signature is not certified. An electronic signature compromises integrity as well as the authenticity of the document. A digital signature can be verified to know the original author i.e. the owner of the document. It can be verified if the original document has not been tempered with, by any unauthorized access.

As electronic signature and digital signature are mostly considered same, as synonyms, it is significant to know the difference between the two.

It is important to understand that Electronic Signature and Digital Signature are similar-looking terms but different from each other. Here is the detailed difference between the two i.e. Digital Signature vs Electronic Signature.

Final Words

An electronic signature is basically equivalent to the handwritten signature. It is used to verify a document in order to confirm the terms of that document. It is not wrong to say that an electronic signature is a digitized form of a handwritten signature. An electronic signature acts as a legal binding between the participants, independent of their number.

It is absolutely secure and legal to use electronic signatures by individuals and businesses. The use of electronic signature has brought numerous benefits for businesses as well as individuals. If you want to save your time and money, and want to get rid of the hassle involved in signing business documents, choose an e-signature software and start using electronic signature from now.

Posted by Brian Felix

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