Business and large volumes of paper documents are synonymous.
Or at least, it was before the digital transformation.
Office staff working remotely due to the COVID-19 pandemic meant traditional printer usage saw a 40% hit in the first half of 2020. That’s huge!
But, how do you ensure the integrity of your contracts and agreements?
Here, we'll explain what digital signatures are, how they work, and how you can use them for online transactions.
- What are digital signatures?
- How do digital signatures work?
- Are digital signatures legally binding?
- The benefits of digital vs. manual signatures
- How to use digital signatures
- The best electronic signature software
What are digital signatures?
A digital signature is an electronic representation of a handwritten signature. It allows users to sign documents securely without physically writing on paper. The process also prevents fraud, since all information is stored electronically.
How do digital signatures work?
Like a handwritten signature, digital signatures are unique to the signer. But instead of using a visual representation to determine authenticity, electronic signatures use keys to determine the signer's identity.
It assigns each signer with a unique "fingerprint" known as private keys.
For additional security, all digital signatures use a certificate authority called a Public Key Infrastructure (PKI). It generates two strings of numbers (keys) using a mathematical algorithm.
The first is private; the second is public.
There are three algorithms of any digital signature scheme:
- Key generation algorithm
- Signing algorithm
- Verification algorithm
The user's private key is only theirs. They use it to sign an electronic document and create a digital signature. The sender's public key can verify whether the digital message is accurate and who signed it.
When users digitally sign something using a private key, the computer creates a unique hash value from the signed data. To validate whether a particular private key owner created the digital message, another party needs to compare the two hashes' contents.
If the hashes match exactly, then the user is responsible for creating the content. Otherwise, the recipient knows the content wasn't appropriately verified.
What makes digital signing secure is using PKIs generated by a Certificate Authority (CA). This is a trusted third-party provider that adheres to government regulations involving digital signature technology.
The CA is also responsible for giving a digital certificate for each document a user creates to collect electronic signatures.
Digital certificates are only issued by trusted certificate authorities and are only valid for a designated time.
Are digital signatures legally binding?
In general, yes they are, and especially if you create it using an e-signature platform using security protocols to identify the signer and prevent unauthorized augmentation of the document. This will give you high level of data & evidence which enables you to prove that an agreement has been made. In many cases, a digital signature will give you an increased business security compared to verbal agreements, simple form transformations or even a traditional written signature.
Each state in the US has its own regulations regarding what's considered a legally binding digital signature.
For example, California's digital signature requirements are legally binding only if it's created using acceptable technology. To be an acceptable technology, it must create signatures that are:
- Unique to each person using it
- Capable of verification
- Under the sole control of the person using it
- Linked to data so that if it's changed, the digital signature is invalidated
- Have asymmetric cryptosystem using an algorithm that creates two unique keys (one for signing the document and the other to verify the document), and it must be computationally infeasible to discover one key using the other key
There's also the ESIGN act (Electronic Signatures in Global and National Commerce Act) established in 2000, deeming electronic signatures legal in America.
A similar regulation in the UK called UK eIDAS (electronic identification and trust services) makes digital signatures legal in the United Kingdom. This is a localized version of the European Union eIDAS.
To explain eIDAS in more detail, we spoke to Anders Holmberg, Chief Sales Officer (CSO) here at GetAccept.
Here’s what Anders had to say:
“In order to simplify and guide business across the EU, eIDAS has defined three different levels for eSignatures - Standard Electronic Signature, Advance Electronic Signature and Qualified Electronic Signature"
- Standard Electronic Signature (SES)
The standard electronic signature is by far the most widely used today as it can be anything from adding an image of a signature on top of a document to a simple "click-to-sign" acceptans. eSigning platforms providing SES often adds added evidence package such as biometric signature, two-factor integrations, IP-adress and Geolocation data to enhance the legal security of the agreement. With this added information, and the seamless experience, the SES is often the choice for proposals, commercial agreements in various B2B industries.
- Advanced Electronic Signature (AES)
An advanced signature is more complex and also adds another layer of steps for the signatory to perform before signing, in order to increase the identification of the individuals signing the document. The most common way of reaching an advanced signature is by adding a two-factor authentication (2FA) to the document, this enables the user to receive a 6-digit code to a mobile device before signing. This code is then entered into the document or agreement prior to signing, where information regarding the advanced signature is presented to the signer.
- Qualified Electronic Signature (QES)
The qualified signature needs to be created using a certificate that can be found on the “trusted list ' of eIDAS combined with a QES identification process. Although this is the strongest way of signing documents, and the only level which actually puts the burden of proof on the person claiming the signature is invalid, it is rarely used today. The reason for this is that the user experience is far from seamless, and the additional costs and complexity dosen't justify the risk mitigation that the qualified signature gives you in most cases. In some countries, and for some specific use-cases, a QES signature is needed in order to be able to use digital signature.
Ultimately, digital signatures are built to improve the user experience, not detract from it and the more complex the signature process is, the less likely you are to sign the document.
Digital signature use cases
Plus, we use it to complete day-to-day business transactions.
For example, in real estate, sellers, buyers, agents, and loan officers must sign documents relating to the purchase and sale of properties. In the past, it took weeks to gather signatures from all parties because you physically mailed the same document to multiple recipients. Today, you can do it all electronically.
It's the same if you're looking to open a new bank account or apply for a personal loan. You no longer have to be physically present at the bank to complete these tasks. Everything is virtual, allowing you to sign documents anywhere and anytime (even after banking hours).
We also see digital signatures used in the recruitment process. Human resource professionals send electronic documents for applicants to sign. Since they're sent virtually, candidates can create an electronic signature. Digital signing is commonplace for NDAs (non-disclosure agreements), background checks, and even credit checks.
In many companies, sales reps send contracts to get an electronic signature from new customers. In some cases, multiple documents must require signatures and initials. It ensures all parties involved receive the exact same version of the contract and contains a valid signature from everyone.
The benefits of digital vs. manual signatures
Although digital signatures are legal, 34% of US and 52% of UK sales teams have never used them in their sales process.
But there’s a lot to gain from using digital signatures.
Let’s take a look at some of the benefits your company can enjoy by using digital signature.
1. Reduce errors
Signatures need to be watertight during contract negotiations and signing processes. Just one mistake and the entire agreement could be void.
Luckily, digital signatures are easy to add to any document. The recipient has a box clearly marked for signature to make sure everything gets signed and initialized correctly. Certain software also has comment boxes to change inaccurate or incorrect clauses.
It’s why companies see a 80% reduction in errors when ditching pen and paper documents in favor of digital signatures.
2. Save money
To say printing is a big cost is an understatement.
It’s the third-highest business expense, beaten only by payroll and rent. Combine that with the fact you’ll need to pay for stamps or first-class shipping, and you’ll quickly see how outdated pen and paper signatures quickly become expensive.
Digital signatures, on the other hand, don’t come with those other costs.
The average business saves $20 on each electronically-signed document.
So, if a sales team of 6 closes more than 4 new deals each per month. That’s a $6,000 cost saving per year. The more you sell, the more you save.
3. Save time
Find the address of the person you want to sign the document. Take it to the nearest postal service office. Wait for it to come back—and pray you don’t need to repeat the same tedious process if the recipient signs the wrong thing. (Or worse, it gets lost in the post.)
Electronic signatures ditch that time-consuming process by automating it. Upload your document, highlight where the recipient needs to sign, and click send. Everyone who must sign or approve the document receives it via email.
The best part? Research shows that staff waste more than 20 minutes looking for specific documents. Electronic signatures simplify file-sharing between departments within a company.
If one sales rep signs off on a deal, for example, everyone associated receives a notification instantly. They can also open the file and see who already signed (or which signatures are still pending), no manual searching necessary.
No wonder it takes less than an hour to sign an electronic document versus the standard five days for traditional signatures.
Digital signatures can be a game-changer for customer onboarding and customer experience. The traditional onboarding process involves printing out a large number of documents and mailing them back and forth, which can be time-consuming and inconvenient for the customer. With digital signatures, the entire process can be done online, making it faster and more convenient for the customer.
4. Keep a document’s integrity
Take a look at a physical signature. Do you know the person who signed the document is the person you intended? It’s hard to know without getting a professional signature verifier involved.
Electronic signatures, on the other hand, ensure the integrity of documents. You can see the IP address of the person who added their signature, the full signing history (including who viewed and signed, when), and identify any alterations.
5. Reduce waste
Did you know the average office worker prints 34 pages each day?
Some 17% of those pages are unused and go to waste. Another 65% are thrown away or recycled the same day they’re printed.
Electronically signing a document ditches the need to print a physical copy. Neither the signer or the recipient needs to handle a piece of paper (which will eventually be trashed). Because of this, digital signature software can save as much as 2.5 billion trees in less than 20 years.
Use digital signature, help save the planet. Simple, right?
4 practical tips for using digital signatures
With digital signatures, recruiting, banking, and other business processes can be faster and more secure. We may witness more industries adopting it in the future as more businesses buy electronic signature technologies.
To use digital signatures securely, follow these four best practices.
1. Create a company policy
Chances are, you have processes for most things. While they might feel time-consuming to create, build a policy on how your company uses digital signatures—with input from your legal counsel.
Your electronic signature policy should cover:
- When and where employees should use digital signatures. Do all sales deals, new hire contracts, and partnership agreements need electronic signatures? Or does the traditional pen and paper method work better for some situations?
- Approved signers or signing authorities. Also cover the signing process and whether certain people (like stakeholders) need to sign the document before others.
- How digital signatures are stored and retained. If you store them electronically, ensure there's enough space available. Also consider keeping them offline to prevent loss due to system crashes.
But alongside your “here’s how to do this” document, give each team member proper training before creating and transmitting digital signatures.
Teach them how to upload a new document, mark areas for signature, and share the agreement with a recipient. Show them how to use their own signature on a document, and verify whether the document has a valid signing certificate with an IP address and timestamp.
2. Check confidentiality clauses
Anything your business does online needs to be secure. That’s especially true with contracts and legally-binding agreements—especially if confidentiality clauses are embedded in the documents themselves.
Double check every employee understands the importance of maintaining confidentiality during the creation and transmission of signed documents. Can they share a document with anyone not listed on the electronic recipient list? How do they mark a document as sensitive?
Cover all of these elements in your training to prevent staff from accidentally leaking sensitive information.
3. Protect your devices
Speaking of security, put measures in place to protect against cyber attacks, tampering, and documents falling into the wrong hands.
These include installing firewalls, antivirus programs, anti-spam filters, and encryption protocols on each device you’re using to open or sign electronic documents.
It’s also worth enabling two-factor authentication (2FA) in your chosen software. Almost 45% of organizations all over the world implement this authentication method for verifying e-signatures because it forces anyone involved with the document to verify their identity twice—usually through fingerprint ID, SMS codes, or a 2FA authentication app alongside their email and password login.
2FA makes it harder for intruders to hack the account associated with e-signature software. You can be more confident that the person signing the document is who they say they are if they’ve signed in using 2FA.
4. Standardize your electronic documents
We’ve briefly touched on the fact that electronically signing a document saves businesses time.
Save even more time by building a catalog of document templates to classify and organize those you use frequently, such as:
- Service contracts
- Non-disclosure agreements
- Statements of work
- New hire contracts
- Sales deals
Use collaboration tools to visualize the document flow lifecycle for the creation, sharing, changes, signing, storage, and archiving of documents. Not only does it prevent you from leaving out essential details, but you don’t need to waste time duplicating the same document each time it needs to be signed.
The best electronic signature software
The software you use for electronic signatures is the foundation of maintaining a secure digital signature setup. Find a reliable digital signature technology that follows US and UK e-signature regulations.
So, who’s the most reliable?
Let’s take a look at each platform and see how they compare.
GetAccept is a digital sales room (DSR) that provides a secure, shared space for both buyers and sellers to communicate, interact and negotiate the entire sales process – from the first discovery meeting to a closed sale via digital signature.
With a high focus on security, GetAccept makes it possible to lawfully process personal data according to GDPR, and is fully compliant with the EU’s eIDAS regulation, and other important laws like ESIGN and UETA.
You can get started for free. GetAccept’s Free plan includes digital signature, tracking and reminders (among other features). You can also upgrade to bigger plans, ranging from $15 per month (Essential) to $49 per month (Professional).
There’s also an enterprise plan, which includes advanced features and API access.
Customers in more than 50 countries use GetAccept digital signature safely and securely on a regular basis to improve the buyer experience.
Pandadoc is a document builder that makes managing workflows seamless.
It's cloud-based and comes with a mobile app, allowing you access from anywhere with an internet connection. However, it doesn't come with a download for desktop or mobile devices.
Pandadoc uses 256 BIT SSL to encrypt documents and is SOC 2 Type 2 compliant.
There's a free option with unlimited document uploads and legally binding e-signatures. You can also use it to accept payments via PayPal, credit cards, or ACH.
If you want access to templates and the rich media drag and drop feature to make document creation faster, you'll have to upgrade to the Essential paid plan for $29 per month. There’s also a business plan, which starts at $59 per month – if you need to integrate with Gmail, Freshbooks or Slack.
DocuSign is another cloud-based e-signature software that makes tracking and monitoring digital documents easier. It's user-friendly and has automated reminders to ensure records don't get lost in the workflow.
In the online dashboard, you can create and save custom fields to make templates your own. It also allows in-person eSignatures using its mobile app.
There's no free option, but there's a free 30-day trial. The Standard plan is $25 per month and allows up to five users, and comes with features like real-time audit trail, reusable templates, and comments.
If you want more advanced features, you'll have to upgrade to the Business Pro plan for $40 per month. This plan also allows you to collect payments and SMS authentication. Its integrations include tools like Salesforce, NetSuite, and Dropbox. You can check out how GetAccept's Professional plan stacks up as an alternative to DocuSign's Business Pro Plan.
Digital signature isn’t going away. It’s here to stay!
As you can see, ditching traditional signatures in return for electronic signatures is an excellent way to speed up processes that require multiple signatures. You’ll also save time and money and reduce paper waste.
Of course, the added security and convenience is an added bonus, especially for remote teams and international companies – which, let’s face it, is the majority of businesses these days.
With digital signature, you can click, sign, and send a document within seconds—even if the recipient is on the other side of the world!
It makes doing business easy. The easier it is to buy, the easier it is to close.
Want to learn more about how digital signatures can improve your sales process?