Digital or electronic signatures enable individuals and businesses to authenticate documents on screen without having to go to the hassle of printing, scanning and signing documents but there is still a lot of concern surrounding their safety.
In actual fact, the most secure digital signatures are vastly superior to the wet-ink signatures which we have used for hundreds of years for a number of reasons. In this blog post we look into exactly what a digital signature is and outline the main advantages to businesses of using one.
What is a digital signature?
A digital signature is the electronic version of a handwritten signature. It can be as simple as a scanned signature created on a computer in a couple of clicks but clearly this kind of basic signature offers little security and can be easily falsified or used fraudulently.
For maximum security companies should favour a computer-generated signature which uses a public key infrastructure (PKI) to encrypt and validate the information being transferred. A mathematical algorithm generates two keys – one public and one private. Thanks to cryptography, the document or message is unreadable during transmission and is accessed for signing using the private key, which is as unique to the individual user as a fingerprint. Each time a document is signed, a third-party certification authority (CA) verifies and authenticates the signature with the public key. The biggest CAs/electronic signature providers include Docusign and Adobesign. Companies who have a large number of documents requiring signature can sign up and pay a monthly fee for unlimited use of their services.
Different CA systems exist in different parts of the world and are linked to local laws, regulations and accreditation schemes introduced by the relevant standardising body. These bodies adhere to set strict rules with regard to digital signatures. In the EU, for example, the eIDAS Regulation sets out the guidelines for electronic identification and trust services. Under this Regulation the most secure digital signature is a Qualified Electronic Signature (QES) which is created by a Qualified Electronic Signature Creation Device (QSCD). Many South East Asian countries also use eIDAS to formalise their digital signatures.
What are the advantages of a secure digital signature?
- Improved security
Verifying the authenticity of a handwritten signature is extremely difficult and anyone can have a stab at copying a signature, as generations of schoolchildren have proved! An electronic signature on the other hand is tamper-proof because each time the document is viewed or signed the time and IP address are recorded creating a clear and verifiable audit trail. This offers a high degree of protection against fraud and malicious attacks.
- Confidentiality
Confidentiality is assured because there is a strict log in process to access the encrypted document and access is granted using the private key unique to each signatory. A document cannot be tampered with once it is signed and changing the content of a file after signature will invalidate it.
- A streamlined business process
Digital signatures can be integrated into a document management system (DMS) which facilitates the virtual signing of documents by multiple stakeholders to prove that they have seen and approved the content. This can apply to a wide range of documents including non-disclosure agreements, partnership agreements, sales quotes and invoices etc.
The DMS enables the signing process to be streamlined further with automated email notifications to signatories to inform them that action is required and confirmation to the document owner once everyone has signed. It is clear that this is a much less arduous process than gaining hard copy signatures from stakeholders across many different locations often slashing the time taken to complete approval processes, not to mention the costs involved.
- Facilitates regulatory compliance
The audit trail created by using a PKI system verified by a reliable Certificate Authority ensures integrity, transparency and traceability making it easy to prove that necessary compliance procedures have been followed and therefore reducing the risk of fines from regulatory bodies.
Businesses who work in highly regulated sectors are finding digital signatures an extremely valuable tool to manage approval and sign off processes while at the same time improving traceability, facilitating compliance and becoming more competitive, efficient and productive.
Chartered FCSI
I have over 20 years of experience in the financial services industry and hold a Chartered FCSI qualification. I ensure that our operations are fully compliant with the rules of our most stringent regulators.
