How do electronic signatures work? A comprehensive guide

The way we sign documents has changed dramatically in this digital age. Gone are the days of printing, signing, scanning, and sending back documents. Enter the era of electronic signatures, revolutionizing how we handle paperwork. But how do electronic signatures work, and why are they so important in the modern world? 

This blog will explore the technology behind e-signatures, their benefits, and their legal standing.

What are e-signatures?

An electronic signature, commonly known as an e-signature, is a digital form of a handwritten signature that is used to sign electronic documents. 

Many nations consider e-signatures to be legally binding and accept them as a reliable and efficient process for obtaining permission to use electronic documents.

The technology behind e-signatures

The process of creating and verifying e-signatures involves several key technologies, including public key infrastructure (PKI), encryption, and digital certificates. 

Here’s a breakdown of how these technologies work together:

1. Public key infrastructure (PKI)

PKI is a framework that manages digital keys and certificates. Two cryptographic keys—a public key and a private key—are used in it. The public key is shared with everyone, but the owner retains the private key confidential. 

PKI ensures that a document signed with a private and matching public key can be validated.

2. Encryption

Data is transformed into a code by encryption to stop unwanted access. When an e-signature is created, the signer’s private key encrypts the signature. 

This encrypted signature can then be decrypted by the recipient’s public key, ensuring the authenticity of the signature.

3. Digital certificates

Digital certificates are electronic certificates issued by Certificate Authorities (CAs) and reliable third parties. These certificates bind a public key to an individual or organization, confirming their identity. 

Digital certificates are necessary to confirm the signature’s validity and the signer’s identity.

Electronic signatures process: Step-by-step

To understand how do electronic signatures work, let’s walk through the process step-by-step:

1. Document preparation

The sender uploads the document to an e-signature platform and specifies the recipients who need to sign the document. 

The platform then prepares the document for signing, adding signature fields where required.

2. Signer authentication

Before signing, the platform may authenticate the signer’s identity using various methods such as email verification, SMS codes, or biometric data. 

This step ensures that the signer is who they claim to be.

3. Applying the e-signature

Once authenticated, the signer can apply their e-signature to the document. This can be done in several ways:

• Drawing: Using a mouse, stylus, or touchscreen to draw their signature.
• Typing: Typing their name and selecting a signature style.
• Uploading: Uploading an image of their handwritten signature.

The platform then uses PKI technology to encrypt the signature with the signer’s private key.

4. Signature verification

After the document is signed, the platform uses the signer’s public key to verify the signature. 

To be sure the signature is genuine and the document has not been altered, this procedure entails decrypting the signature and verifying the digital certificate.

5. Document storage and sharing

Once all parties have signed the document, it is stored securely on the e-signature platform. 

The signed document can then be downloaded, shared, or integrated with other business applications.

Benefits of e-signatures

E-signatures offer numerous benefits that make them an attractive option for businesses and individuals alike:

1. Convenience

With e-signatures, a person can sign papers electronically from any location using any internet-connected device. This eliminates the need for a physical presence.

2. Speed

The traditional process of printing, signing, scanning, and sending back documents is time-consuming. E-signatures streamline this process, significantly reducing the time it takes to complete transactions.

3. Cost savings

By reducing the need for paper, ink, postage, and storage, e-signatures help businesses save on costs associated with physical documentation.

4. Security

Traditional signatures are less secure than e-signature technology. Digital certificates and encryption guarantee that the document has not been altered and the signer’s identity has been confirmed.

5. Environmental impact

Using e-signatures may lessen the amount of paper you use and the carbon imprint you leave behind when handling physical documents.

6. Legal compliance

E-signatures are legally recognized in many countries, including the United States, the European Union, and other regions, making them a viable option for legally binding agreements.

Legal standing of e-signatures

The legal acceptance of e-signatures varies by country, but many regions have enacted laws that recognize their validity. Here are some essential regulations:

1. Electronic signatures in global and national commerce act (E-SIGN Act)

In the United States, the E-SIGN Act was enacted in 2000, giving e-signatures the same legal standing as traditional handwritten signatures. 

The E-SIGN Act guarantees that the mere fact that a contract or signature is electronic does not take away its legal validity or enforceability.

2. Uniform electronic transactions act (UETA)

The UETA, adopted by most US states, provides a legal framework for using electronic records and signatures in business and government transactions. 

It guarantees that online transactions are as legally binding as paper transactions.

3. eIDAS regulation

A unified framework for electronic identification and trust services is provided by the eIDAS (Electronic Identification, Authentication, and Trust Services) Regulation in the European Union, guaranteeing that e-signatures are accepted legally in all EU member states. 

eIDAS distinguishes between three types of e-signatures: electronic signatures, advanced electronic signatures, and qualified electronic signatures, with varying levels of security and legal recognition.

4. Other international regulations

Many other countries have implemented similar laws to recognize and regulate the use of e-signatures, ensuring their global acceptance. 

For instance, nations can develop and enforce e-signature regulations using the framework provided by the United Nations Commission on International Trade Law (UNCITRAL) Model Law on Electronic Commerce.

Types of e-signatures

E-signatures come in various forms, each with different levels of security and legal recognition:

1. Simple electronic signatures (SES)

SES is the most basic form of e-signature, such as typing a name or clicking an “I Agree” button. While convenient, they offer minimal security and are suitable for low-risk transactions. 

They are often used for online purchases, where the risk associated with the transaction is relatively low.

2. Advanced electronic signatures (AES)

AES provide a higher level of security and are uniquely linked to the signer. They require a higher level of authentication and can detect any subsequent changes to the signed document. 

AES (Advanced Encryption Standard) is commonly used in business transactions where a higher level of security is needed, such as in contract agreements.

3. Qualified electronic signatures (QES)

QES are the most secure and legally binding e-signatures. A qualified digital certificate issued by a trusted Certification Authority (CA) creates them, and they necessitate a secure signature creation device.

Many jurisdictions recognize QES (Qualified Electronic Signatures) as equivalent to handwritten signatures. They find application in high-stakes real estate deals and financial agreements.

Implementing e-signatures in your organization

Adopting e-signatures can significantly enhance your organization’s efficiency and security. Here are some steps to get started:

1. Choose a reliable e-signature provider

Select a reputable e-signature platform that meets your business needs and complies with legal requirements. Popular providers include DocuSign, Adobe Sign, and HelloSign. 

Ensure the platform offers robust security features and integrates well with your existing systems.

2. Train your team

Ensure your staff members know the e-signature platform’s usage and its legal ramifications. 

Give them thorough instruction and materials so they can learn how to use the technology.

3. Integrate with existing systems

Integrate the e-signature solution with your existing business applications, such as CRM, ERP, or document management systems, to streamline your workflow. 

This integration will ensure a seamless transition and enhance overall efficiency.

4. Establish policies and procedures

Develop internal policies and procedures for using e-signatures, including guidelines for document preparation, signer authentication, and record-keeping. 

Ensure these policies comply with relevant laws and regulations to avoid legal issues.

5. Monitor and audit

By doing regular audits, you can ensure that your e-signature processes comply with all relevant rules and regulations. 

Conduct periodic reviews to identify any potential issues and address them promptly. You can keep your e-signature system secure with this proactive strategy.

6. Customer and partner communication

Communicate the adoption of e-signatures to your customers and partners. Explain the benefits and security measures to build trust and encourage acceptance of this new method of signing documents. 

Providing educational resources and support can facilitate a smoother transition.

7. Continuous improvement

Keep abreast of the most recent developments in e-signature technology, and always look for methods to streamline your operations. 

Engage with your e-signature provider for updates and new features to enhance your system’s capabilities.

Real-world applications of e-signatures

Various industries use e-signatures to streamline processes and enhance security. Here are some examples:

1. Real estate

In real estate, professionals use e-signatures to sign contracts, lease agreements, and other legal documents, speeding up transactions and reducing the need for physical meetings.

2. Finance

Banks and financial institutions use e-signatures for loan agreements, account openings, and other financial transactions. This lowers the possibility of fraud while increasing efficiency.

3. Healthcare

In healthcare, professionals use e-signatures for patient consent forms, medical records, and insurance documents, enhancing data security and streamlining administrative processes.

4. Legal

Law firms use e-signatures for contracts, court filings, and other legal documents. This reduces the time and cost associated with handling physical documents.

5. Human resources

HR departments use e-signatures for employment contracts, onboarding documents, and other HR-related paperwork. This improves the onboarding process and ensures compliance with labor laws.

Conclusion

E-signatures are revolutionizing document handling by providing a safe, practical, and green substitute for traditional signatures. 

By understanding the technology behind e-signatures, their benefits, and their legal standing, you can confidently adopt this modern solution to streamline your business processes. 

The electronic signature process ensures the authenticity and integrity of digital documents, making it a reliable choice for businesses.

Future document management will depend heavily on e-signatures as the globe embraces digital transformation.

Implementing e-signatures in your organization enhances efficiency and security and demonstrates a commitment to innovation and sustainability. 

Adopt this technology to give your partners and consumers a smooth, contemporary experience while staying ahead of the competition.

Our FreeSign tool is a powerful e-signature solution that simplifies the signing process for your organization.

Additionally, with FreeSign, you can easily collect legally binding e-signatures, streamline document management, and enhance overall productivity.