With the advent of the internet and rapid advancement in technology, new tools emerge every day to make online transactions safer and smoother. Digital signatures are one of such tools. While digital signature have existed for many years and been embraced by several companies worldwide, they are still evolving.
Digital signatures are one of the best ways to secure a document or any information. They have transformed the way businesses are done across the world. According to a global report titled ‘Digital Signature Market: Global Industry Analysis, Size Share, Growth, Trends and Forecast 2017-2025’, the global digital signature software market was valued at USD 587.6 million in 2016 and is projected to cross USD 3,400 million 2025. If we consider these statistics, the adaption of digital signatures is growing at an exponential speed.
If you are planning to incorporate digital signatures in your business, here is your handy guide to understanding it.
What is Digital Signature?
A digital signature guarantees the authenticity of an electronic document or message in digital communication and uses encryption techniques to provide proof of original and unmodified documentation.
You can say that a digital signature is the electronic version of a handwritten signature, albeit in the coded message and with layers of security and authentication to prevent tampering. So, you can safely electronically sign any document without worrying about any kind of fraud. Digital signatures are also unique to each signer.
How Does Digital Signature Work?
Digital signatures deploy a commonly accepted technology known as Public Key Infrastructure (PKI). It enables users to create each digital transaction with a set of two keys:
- Private Key: It is exclusively available to the signer of documents. It is not shared by anyone else. It ensures that singer’s signature cannot be replicated by a person other than the signer himself. It is like a closely guarded secret. It is used to ‘decrypt’ the message.
- Public Key: It is accessible to anyone and everyone to authenticate the signer’s electronic signature. It allows users to send a secure message to the receiver. It is a published key. It is used to ‘encrypt’ the message.
If both keys match, then it is a secure transaction ensuring the validation of the document and signature. If they don’t match, then it is a warning signal that the identity of the signer has been forged.
The digital signature process relies on three algorithms:
- Key Generation: This algorithm generates a private key from a random set of private keys along with its corresponding public key mathematically linked to each other.
- Signing: This algorithm generates a signature upon receiving a private key and the message that is to be signed.
- Verification: This algorithm verifies the authenticity of the message through the signature and public key. If they don’t match, the message is rejected. If they match, the message is accepted.
Digital signatures use a certificate-based digital ID. This unique certificate/ID is issued by accredited agencies such as Certificate Authority (CA) or Trust Service Provider (TSP). usually, the certificate/ID contains information on the public key, expiry date and any other information that can establish the identity of the owner. When the users electronically sign the document with their digital signature with this unique ID, the signature gets encrypted in the document.
Are Digital Signatures Different from Electronic Signatures?
While digital signatures and electronic signatures are used interchangeably, they are quite different from each other.
An electronic signature is something like a typed/scanned signature. You can sign the online documents using mouse or fingers. A good example of an electronic signature is the sign that you provide you to courier delivery boys on the digital scanner with a stylus. Electronic signatures do not have secure coding or encryption technology that digital signatures have.
So, digital signatures are safe while electronic signatures may be not.
What are Benefits of Digital Signatures
Apart from the core benefit of securing the documents and transactions, digital signatures offer other following advantages:
- Low Cost:
Physical signatures require paper, pen, ink, printing and/or courier which add to the cost of doing business. Then, there are also costs associated with filing and storage. Digital signatures are paperless and save all these expenses.
- Audit Tracking:
Since digital signatures leave an electronic trail, there is no scope for loopholes or missing documents at the time of company audits.
Imagine if a person has to sign hundreds of documents in a day or a week! Do you really the top guns of the company have so much time and patience? Digital signatures make it easy for organizations to handle the documents and transactions, especially during large volumes.
The digital signature process hardly takes a few minutes. All you need to do is open the document online, sign it and send it to the receiver!
- International Acceptance:
Since digital signatures use globally certified technology, it is considered an accepted form of doing business. If you are using digital signatures, it establishes your creditworthiness in the market.
Are Digital Signatures Legal?
The legality of digital signatures is subject to the country of business. Also, certain transactions such as the power of attorneys or real estate agreements are exempted from digital signatures validity in some countries. So, while digital signatures may be legally acceptable in your country, they may not be in the country where you want to do business. It is advisable to check the laws and acts pertaining to digital signatures of a country. If you go ahead without understanding the legal status of digital signatures, it might be possible that you may not be able to hold in the court.
Currently, digital signatures are legally acceptable in the United States, European Union, Canada, Australia, Russia, India, China and many other countries. Check out Adobe’s ‘Global Guide to Electronic Signature Law’ in every country (please ensure to cross-verify the information because the laws may have been amended after the date of publication).
Types of Digital Signature Programs
There are several types of software that can generate secure digital signatures. A few of the prominent digital signature options are:
- MS Word
How Secure is a Digital Signature?
Digital signatures are definitely recommended over physical and electronic (as differentiated in above) signatures. It is backed by international technology that gives a three-dimensional aspect to the digital signature. Any attempt to tamper the information will render that document or transaction invalid. So, digital signatures are highly secure. However, its security needs to be backed by the legal acceptance to make it completely fail-proof.
Digital signatures are the way forward in businesses, especially those functioning in the online sphere. If you are running an online business, digital signatures are the need of the hour.