Is electronic signature only reserved for financial institutions
Business nowadays has seen many changes in document signing. An increasing number of individuals, businesses and institutions use digital documents instead of paper documents to perform their daily transactions. For some time, digitally created documents were printed to be physically signed, however, many businesses found flaws in this process. The idea is to have the entire process, including, creation, sending, signing and archiving of a document, remain in digital format, which makes such digital document the original version rather than a copy. The need for electronic signature also appeared as a result of changes during the pandemic, when more and more business activities were transferred to the remote work mode.
Financial institutions were among the first ones to enter the electronic signature era
Financial institutions were the first to make a major shift in the market, by allowing their customers to arrange services from their homes. They have for many years now realized the benefits of innovative ICT solutions and the implementation of electronic signature was only one of the steps in a series of upgrades. Before signature digitalization, only part of the contract negotiation process could be performed online and the customer eventually needed to appear at a branch to sign the contract. This digital transformation represents a new digital age of providing services where customers are allowed to arrange any service from any location at any time and no longer need to appear at a branch to sign documents.
What is an electronic signature?
Electronic signature means data in digital form which is attached to or logically associated with other data in digital form and which is used to identify the signatory and authenticate the digital document signed.
The main piece of underlying legislation regulating electronic signatures is the eIDAS Regulation. This is a regulatory framework that each EU Member State must fully define by its own implementing regulations. Its purpose is to ensure legally secure electronic cooperation.
The eIDAS Regulation defines three levels of electronic signature: simple, advanced and qualified.
- A simple electronic signature is any signature in digital form. This type of signature requires the simplest procedures and a minimum of technical requirements and has no legal effect.
- An advanced electronic signature is a signature that is capable of identifying the signatory, subject to the following requirements:
- it is uniquely linked to the signatory;
- it is capable of identifying the signatory;
- it is created using electronic signature creation data that the signatory can, with a high level of confidence, use under his sole control;
- it is linked to the data signed therewith in such a way that any subsequent change in the data is detectable.
It is considered to be a means of authentication equivalent to a handwritten signature and is recognized across the European Union.
- A qualified electronic signature means an advanced electronic signature that is created by a qualified electronic signature creation device, and which is based on a qualified certificate for electronic signatures. Its legal effect is equivalent to that of a handwritten signature on paper. It enhances the security of what enables the advanced electronic signature.
To implement an electronic signature in a document and to properly create it, a signature creation device needs to be available, which must comply with the applicable standards, whereas some types of signatures require a digital certificate as well.
- Signature creation devices may be developed by app vendors and readymade solutions are also available, easily implemented in apps and systems. Such devices normally support advanced and qualified signatures. It is important that these solutions be compliant with the legal standards of the EU and the ISO Directive.
- A digital certificate is an electronic attestation which links electronic signature validation data (public key) to a natural person and confirms that person’s identity. Digital certificates are issued by Certification Authorities (CAs), depending on the type of certificate required by businesses. In case of an advanced signature, a certificate must be provided by the organization and used for the electronic seal, ensuring integrity and authenticity of the relevant document.
Why should firms implement electronic signature in their business?
The signing process is not reserved for financial institutions – it is an integral part of any business and any industry. The implementation of electronic signature solutions brings about a digital transformation which accelerates numerous processes, saves time and resources and enhances business transparency.
While the signature is only visible on paper in case of a handwritten signature, a document bearing an electronic signature may display all relevant particulars of the electronic signature, such as:
- time generated;
- underlying certificate;
- issuer of certificate;
- name of the person to whom it is issued; and
- if necessary, GPS (Global Positioning System) location and other relevant details.
An electronic signature may not appear on a printed version at all. For a signature on a document to be valid, the signature must be visible and verifiable in the electronic version of the document.
The benefits of implementing a signature creation device:
- It ensures unambiguous and non-repudiable identification of the user and authentication of the electronic document signed.
- It protects the integrity of the document and the originality and completeness of content signed.
- It contains a number of options for digitally displayed data.
- It enhances security and allows switching from traditional to digital business, subject to the applicable legislation and EU standards (eIDAS).
- It supports multiple signing, where it is possible to define the order of signatories or enable parallel signing.
- It supports tracking the sequence of signing and allows identifying the process step a document is currently completing at all times.
- A standard PDF browser shows all changes to the document and its appearance at the time of applying each signature.
- Bulk signing is allowed, where several documents are signed in a single step.
- By reducing the volumes of new paper documents, we protect the environment and save planetary resources.
Electronic signature is the key to security and confidence in modern business. Each natural person or business entity that aims to conduct their business securely, reliably and authentically needs an electronic signature. The electronic signing concept is no longer considered to be something revolutionary – it has become a reality in business today. This provides businesses with a wide range of options for marketing new services and makes way for new forms of business.
Author: Marina Meštrović, Business Solutions Consultant, TIS