Forrester Research recently noted that the commoditization of e-signatures is a $1 billion sub-market. Thanks to digital technology and the acceleration of online lending practices, the signing ceremony can be done anytime, anywhere and on most electronic devices. Even though this practice has become a widely-accepted method for conducting business, I am frequently asked: What is the difference between an Electronic and a Digital Signature?
The lack of understanding between the two is concerning, as most users think the terms are synonymous, when in fact they are not. In this post, I clarify the differences and take a deeper dive into the importance of the differentiation as it relates to identity verification to maintain compliance and enforceability.
Electronic Signing: The 80/20 Rule
I recently read an article that outlined an 80/20 rule for transactions, with 80 percent of transactions requiring an electronic signature carrying minimal legal and financial risk and the other 20 percent having confidential, regulated, or high-value transactions that require digital signatures as they include the technology that ensures compliance, legal defensibility and security. Web magazine CMSWire.com offers the perspective that, “Purchasing eSignatures as a commodity could be a mistake that puts those businesses at serious risk for legal, financial, data privacy and security issues.”
Think of an electronic signature as a “synthetic” version of a wet ink signature and an indicator of intent to agree to or approve the contents of a contract or document. Electronic signatures have grown in prominence, but as a standalone lack verifiable proof. This is where digital comes into play.
Digital Signatures: The Details
As my colleague John Jacobs, eOriginal’s FinTech Director, mentioned in a previous blog, digital signatures require the use of a digital certificate, essentially a type of security key or code that utilizes cryptographic algorithms to ensure the integrity and authenticity of electronic media, and the information within. In layman’s terms, the application uses an algorithm to generate a unique code by processing the source file. That unique code, think of it as a document’s fingerprint, is then encrypted using the private key stored in the digital certificate. The result is a secure document that is tamper-proof.
If any value in the source document is corrupted or maliciously altered, it can be easily detected by verifying the original signature. These are the types of security and compliance measures that need to be in place for high-value documents with downstream value. Examples include auto, consumer, student loans, equipment leases, timeshare or vacation ownership contracts and even mortgage eNotes. This ensures the authenticity and preservation of the original digitally signed contract and the owner of the secure key.
Electronic and Digital Signatures Work Together to Maintain Compliance and Enforceability
When your organization depends on value-based assets, the entire process needs to be more secure from end-to-end. To ensure the security surrounding the verification of participant’s identities, eOriginal offers proven technology that includes methods such as basic user-created Personal Identification Numbers (PIN) to advanced third-party managed PIN generation. It is even possible to check the signer’s information against national security checklists and verify the participant’s identity with personal information that only the signer would know.
We understand the complex nature of the signing ceremony and the importance in identity verification to maintain the compliance and enforceability of assets. In addition, our services are signing-tool agnostic, so whether you are using a third-party eSignature solution or eOriginal’s SmartSign, we can enable the advanced capabilities of digital signature authentication.