In the digital age, e-signatures are becoming more and more commonplace because they allow people to sign documents and contracts electronically, saving time and expediting work processes.
There are different types of e-signatures, but they share the same goal: to provide a secure and legally binding way to sign documents online.
This article explains the similarities and differences between a digital signature and an e-signature so that you’ll know when to use one over the other and apply them within your business processes and activities.
What is a Digital Signature?
A digital signature is a security feature attached to an electronic document to verify the sender’s identity and ensure that the message has not been altered or tampered with. The use of digital signatures helps to certify that the integrity of documents is not compromised.
Through its encryption and authentication process, a digital signature can confirm if the document was actually created by the person who claims to have authored it.
The encryption process allows the document’s author to sign it with a private key, ensuring its authenticity. When the document is opened, the recipient can verify the signature using the author’s public key.
Many countries now allow digital signatures for legal documents and transactions. For instance, Malaysia has adopted legislation through the Digital Signature Act 1997 to legally bind electronic and digital signatures.
Sales and lease agreements, procurement contracts, HR policies, employment contracts, and cryptocurrencies are just some of the use cases where digital signatures can be legally affixed and authenticated.
Although Malaysia allows commercial documents to be signed electronically, they draw the line regarding documents like Power of Attorney, trusts, negotiable instruments, wills and codicils, actual property transfers, and statutory declarations. These documents cannot be signed digitally.
What is an E-Signature?
An electronic signature (e-signature) is a legally binding way to sign documents and other transactions over the internet. An e-signature is created when a person uses technology to sign a document. The signature can be anything from a typed name to a scanned image of your handwritten signature.
Essentially, an e-signature on electronic documents is equivalent to your “wet” signature affixed to a hard copy of a document. It allows you to sign contracts online without printing them or using a pen. As this is all done electronically, you can sign documents remotely from anywhere in the world and get all the e-paperwork done instantly.
What makes e-signatures superior to their ink-based counterparts is that they have a system that allows for quick authentication. It speeds up approvals, transactions, and agreements. They are a convenient and fool-proof way to sign documents.
By using e-signatures, you’re cutting down on the clerical process because you don’t have to print, scan, fax, or re-submit documents. Moreover, there’s little chance of you missing a signature field because most documents using electronic signatures will not let you submit an incomplete document.
When people started working from home, the use of e-signatures became necessary. This is particularly true in countries with extended lockdowns. In Malaysia, e-signatures are used in HR and employment-related documents, user manuals, invoices, corporate agreements, shipment details, and service agreements.
Some examples of documents that you can use e-signatures are sales contracts, purchase orders, non-disclosure agreements, employee onboarding, parental consent, and pretty much any legally binding transactions that require signatures.
Similarities between Digital Signatures and E-Signatures
It’s not uncommon for people to interchange digital signatures and e-signatures because they do share some similarities. However, it’s essential to know that, in practice, they are not the same.
To better understand what makes them different, you must first know their similarities. You’ll see how some of their functions and usability diverge as you learn more.
Digital and Electronic Signatures are Electronically Generated
When you need to sign a document, there are a few different ways to do it. You can print out the document, sign it with a pen, scan it, then email or fax it to the intended recipient. You can also use an online form to type your signature in. Or you can use a digital or electronic signature.
Digital signatures and electronic signatures are created using technology, like software, encryption, or a particular device. They’re used to sign digital documents, like email messages, contacts, online forms, and applications.
Both digital and electronic signatures are secure and reliable ways to sign documents. They both use cryptography to protect the signature from being copied or changed. And they both provide evidence that the person who signed the document is who they say they are.
Digital and Electronic Signatures are Both Used to Sign Digital Documents
Digital and electronic signatures are used instead of your handwritten signature on contracts, emails, agreements, or other digital documents you sign electronically. Many types of digital documents can be used for electronic signatures.
Although it’s widely used in the United States, documents are still not allowed for electronic signatures in other countries. So, always check the validity of electronic signatures in documents when transacting businesses.
Digital Signature and Electronic Signature are Legally Binding
When you sign a document electronically, it has the same legal value as if you had signed a physical document with a pen.
In order to be legally binding, an electronic signature must meet specific requirements. For example, the signature must be unique to the person signing, and it must be attached to the document in a way that cannot be easily changed.
Digital and Electronic Signatures are Friendly to the Environment
In an age where digital communication and storage is ubiquitous, it seems wasteful to rely on paper-based processes for things like signing contracts and sending invoices. And when you consider the environmental impact of all that paper, it becomes evident that electronic signatures are not just more efficient. They’re also eco-friendly.
Paper production is responsible for deforestation, water pollution and greenhouse gas emissions. In fact, the pulp and paper industry is one of the world’s largest producers of carbon dioxide, and it contributes to total global emissions. By moving to electronic signatures, businesses can reduce their environmental footprint while saving time and money.
Electronic signatures and digital signatures are a great way to reduce your carbon footprint. When you use an electronic or digital signature, you don’t have to print out documents and sign them with a pen. This saves paper and ink, both of which require energy to produce.
Digital and Electronic Signatures are Accepted Locally and Internationally
More companies and organizations around the world are adopting digital and electronic signatures. Digital and electronic signatures are legally binding in the United States and many other countries, including the UK, Japan, and Malaysia.
This means that e-signatures are not limited by location because they can also be used internationally as long as the country recognizes digital signatures and has some form of law to safeguard the users.
For example, suppose you are in the United States and sign a document for a company in Malaysia. In that case, you can use an e-signature to sign the document electronically. This is more efficient than getting the document notarized and then sending it through the mail, which requires more time and resources.
Differences between Digital Signatures and E-Signatures
Both digital and electronic signatures are considered more secure than traditional handwritten signatures. They provide an added layer of security by confirming the sender’s identity and verifying the content of a message or document.
Although they generally have the same goals, there are some key differences between digital signatures and e-signatures.
How They’re Created
Digital signatures are created and developed through crypto algorithms that use public and private encryption. The sender uses a private key to sign the message digest, which represents the content of the document. It’s then encrypted using a mathematical process to transform data into an unreadable format. It essentially pairs cryptographic private and public keys for authenticating signatures.
The recipient can then authenticate the signed document using the public key. This process allows the recipient to know the original sender and whether the document was altered since it was digitally signed. The Digital Signature Certificate (DSC) is issued to verify the holder’s identity.
On the other hand, electronic signatures are created in a variety of ways. You can create an e-signature using a touchscreen, cursor, mouse, keyboard, electronic pen, or stylus. You can also use an image of your signature. Your signature is stored in a cloud protected by strict certification and security standards. You can create either digital or e-signature using a universal signing platform like SigningCloud.
Primary Purpose Served
Digital signatures are used primarily in documents that must be authorized and certified. It provides a high level of security and authentication, which is important for protecting sensitive information.
On the other hand, an electronic signature can be used pretty much on any digital document that needs your signature. This is particularly useful for authorized signatories who need to sign multiple documents each day. It’s also beneficial to sales representatives who need to get clients’ signatures to close deals faster.
Use Based on Intention
Electronic signatures are often used for low-security transactions, such as emails, newsletters, online purchases, and non-classified documents. On the other hand, digital signatures are typically used for more substantial transactions, such as signing contracts or submitting tax returns.
If your intention is to make your documents more secure and tamper-proof while in transmission, you must opt for a digital signature. But if you want a convenient, safe, and fast way to sign documents, an electronic signature will suffice. Whatever the reason, digital and e-signatures can be convenient tools to have in your electronic toolbox.
With a digital signature, the signature is attached to the document to make it tamper-evident. This means that if the document is changed after the signature is applied, the signature will no longer be valid. E-signatures, on the other hand, are not as secure as digital signatures. They can be easily faked, and they do not prove to tamper.
Ability to Verify and Authenticate
An electronic signature is simply a name or initials placed next to an email or other document to indicate that it has been approved. As such, it can be easily forged, which makes it less secure than a digital signature. It cannot verify and authenticate the signature or if the document’s content is altered.
In a world where technology is constantly advancing, our methods of communication and verification must keep up. As we rely on the internet for many of our activities, we need to safeguard the documents that we share online. With the use of digital and electronic signatures, we can have more confidence in the security of our transactions.
Digital and e-signatures provide several advantages over traditional written signatures. They are faster, more secure, and less likely to be forged or altered. They can also prove the authenticity of a document or message.
Between a digital signature and an electronic signature, the former provides a higher level of security because it uses cryptographic algorithms. They can’t be forged or modified, and they provide an audit trail that can be used to track down the source of any security breaches.