Digital Signatures vs Electronic Signatures — Distinguishing Between the Two
The digital transformation has increasingly necessitated methods to sign digital documents online, typically involving an electronic or digital signature. And, over the past decade, the amount of organizations and individuals making use of an online signature has grown exponentially. This trend has only been accelerated by the pandemic and the explosion of remote work opportunities.
In fact, the global digital signature market size was valued at $4.4 billion in 2021, and it’s set to reach $42 billion by 2030, according to Straits Research.
While the terms ‘digital signature’ and ‘electronic signature’ are often used interchangeably, they’re not one and the same. With the growing use of online signatures in mind, we’re taking a closer look at the difference between digital and electronic signatures so you can identify the solution that can adequately support your growing business.
Electronic and Digital Signatures
Understanding Wet Signatures
Before diving into what differentiates an electronic from a digital signature, it’s essential to understand what a wet signature is: Essentially, a wet signature — also referred to as a physical signature or handwritten signature — describes signing a physical paper document, form, or contract with pen and ink.
In the past, a wet signature was the only way to represent a binding contract and prevent fraud. However, the emergence of digital signature technology has changed what’s considered a traditional signature today. As organizations make the switch to digital signing, they can see a host of valuable benefits which include:
- Streamlining day-to-day workflows.
- Saving the company time (in terms of document management).
- Reducing signing errors.
- Improving productivity and performance by alleviating the burden of administrative tasks.
- Promoting customer satisfaction and loyalty as a result of a more efficient, simplified process.
As an added bonus, implementing digital signature technology or an electronic signature platform can do wonders for an organization’s sustainability efforts. Such signatures effectively reduce the use of paper and eliminate the need for signers to travel to sign documents — mitigating a business’ carbon and greenhouse gas emissions.
But, with the widening availability of electronic and digital signatures today, what’s the difference between the two? And, which one does your team need? Let’s take a closer look so you can find out.
What is an Electronic Signature?
An electronic signature is a digital version of a handwritten signature used for verifying and authorizing digital documents and transactions. The U.S. E-Sign Act defines an electronic signature as, “An electronic sound, symbol, or process, attached to or logically associated with a contract or other record and executed or adopted by a person with the intent to sign the record.” Put simply, an e-signature is a signature that’s applied to a digital document electronically, as opposed to a wet ink signature on physical paper. This broad term is generally used to confirm or verify content within a document. Some common examples include:
- A typed name on an electronic form or document.
- A typed name at the end of an email.
- Clicking “agree” or “disagree” on an electronic “terms and agreements” contract.
- A personal identification number (PIN).
- A scanned image of a handwritten signature.
- A digital signature is generated by an e-signature solution like DottedSign.
It’s critical to note that not all e-signatures’ assurance levels hold the same legal weight. Because of this, highly regulated industries dealing with sensitive information often need a more secure signature — which is where digital signatures come into play.
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What is a Digital Signature?
A digital signature is a type of electronic signature, where both are used to sign and certify a digital document, but they aren’t indistinguishable. The Cybersecurity and Infrastructure Security Agency defines a digital signature as “a mathematical algorithm routinely used to validate the authenticity and integrity of a message.” This means digital signatures are considerably more secure than other types of e-signatures.
How Digital Signatures Work
Digital signatures use cryptography to create unique digital fingerprints for document verification and secure online transactions. In the context of digital signatures, a signer’s identity is verified by a trusted third party, known as a Certificate Authority (CA), where the CA cryptographically binds the signature to a public key infrastructure-based (PKI) digital certificate. With a digital signature certificate, signers can create digital signatures, which can be significantly simplified by leveraging a cloud-based signing platform.
Ultimately, a digital signature acts as a virtual fingerprint of a signer, safeguarding a document against tampering and forgery. A comprehensive, secure cryptographic process allows digital signatures to assure:
- The authentication of a document.
- The verification of a signer’s identity by a trust service provider (also known as a qualified Certificate Authority).
- No tampering or forgery occurred after a document was digitally signed (where a signature will be displayed as invalid if alterations are detected).
When distinguishing between the two, remember that a digital signature can be an electronic signature but an electronic signature isn’t always a digital signature. And, while they’re often used interchangeably, most types of electronic signatures don’t have the security features of true digital signatures.
What’s the Difference Between Electronic and Digital Signatures?
- Main purpose: While frequently confused for one another, electronic and digital signatures serve different purposes. An electronic signature is a broader term that indicates a signer is actively and knowingly entering an agreement. Digital signatures, on the other hand, provide assurance and verify a signed document hasn’t been altered or forged.
- Security: Depending on the level of stringency of an organization’s industry standards, e-signatures, and digital signatures serve different purposes. In general, an e-signature is secured in the business common standards, providing the basics that assure the signed document and accompanying signatures are protected well — via identity verification, OTP, and an audit trail. To access a particular level of security — usually referring to ‘identify authentication’ — digital certificate technology is adopted on top of the e-signature. This officially makes it a secure, digital signature.
- Standard uses: Variations in purpose and security have inevitably led to electronic and digital signatures being used in unique ways and contexts. For instance, an e-signature is sufficient for documents like business contracts, where terms have been laid out and signing parties have indicated an intent to sign the electronic form. In this case, the electronic signature creates a legally binding agreement. Conversely, digital signatures provide an added layer of identity authentication through a digital certificate issued by a CA. This ensures that both the signature and the digital form can be validated and verified.
- Regulation: Some national acts and regulations are often applied to an e-signature to validate it. Today, however, many regulations and states require digital signatures instead. This is because the authenticity and integrity associated with a digital signature and CA can undoubtedly be held up in a court system.
Are Electronic and Digital Signatures Legally Binding?
Yes, with the widespread adoption and use of digital signing today, organizations using them need to know that these signatures are valid. They can rest assured that a signature on an electronic document is granted the same legal status as a traditional signature. Electronic signatures are not only trusted but also both legal and enforceable in many countries around the world today.
For an electronic signature to qualify as enforceable, the most important aspect is typically evidence that the signer has the intent to execute or accept the agreement. This is considered accomplished when a signer takes affirmative action by applying their signature to a digital document. However, despite slight nuances around the world, the basic, overarching characteristics of a legally binding e-signature require:
- Recording retention.
The E-Sign Act and UETA
In the United States, the two main pieces of legislation governing e-signatures include the U.S. Electronic Signatures in Global and National Commerce Act (E-Sign Act) and the Uniform Electronic Transactions Act (UETA). These regulations confirmed that an electronic signature and record carry the same legal weight as a paper document and traditional physical signature — solidifying the use of e-signatures and records in electronic commerce.
E-signatures in the EU are primarily governed by Regulation (EU) No 910/2014, also known as eIDAS. Designed to verify the identity of a signer and the authenticity of an electronic document, the eIDAS established a framework to ensure that electronic interactions are faster, more efficient, and more secure, regardless of the European country where key parties are signing from.
With more than 60 countries have established unique laws and standards regarding e-signatures and digital transactions, here are other major pieces of legislation impacting e-signatures across the globe:
- United Kingdom: Electronic Communications Act of 2000 (ECA).
- Canada: Personal Information Protection and Electronic Documents Act (PIPEDA).
- Australia: Electronic Transactions Act of 1999 (ETA) and the Electronic Transactions Regulations 2000 (ETR).
- India: Information Technology Act, 2000 (IT Act).
While regulations guarantee a legally binding result, e-signature compliance can quickly become overwhelming to manage. As a result, businesses that necessitate frequent document signing are increasingly adopting powerful e-signature solutions to streamline the process.
Considering an E-Signature Solution for a Simplified Process
At the end of the day, the most crucial difference between electronic and digital signatures is the level of security they can offer. As the more safeguarded option, digital signatures are often the best choice for organizations across industries. For those pursuing a streamlined document signing process, comprehensive e-signature and workflow solutions like DottedSign can enable their teams to apply digitally certified e-signatures with ease.
Designed for teams of all sizes, this smart, easy-to-adopt solution can help businesses:
- Capture electronic signatures quickly and easily.
- Track documents in real-time.
- Automate document delivery.
- Manage signature tasks.
- Customize organizational branding.
- Improve productivity and business workflows.
- Guarantee a legally binding and secure document signing process.
With valuable integrations, an encrypted process, a detailed audit trail and advanced security that works across devices, individual users and businesses can ensure a simplified, highly-protected process. Learn more about our robust e-signature solution, and sign up for free to get started today.
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