Digital signatures replacing traditional signatures

Digital Signatures, and Why They’re the Future

Digital signatures are slowly replacing traditional signatures due to ease of use, security and verification by banks, governments and other regulatory authorities

A signature is nothing but a handwritten representation of an individual’s name, or any other depiction that a person uses on documents as proof of their identity.

The history of signatures dates back to 3100 B.C. The signatures of a scribe named Gar Ama on a clay tablet and Spanish warrior El Cid are considered some of the first hand-written signatures in the history of mankind. The State of Frauds Act, passed by the English Parliament, made signing compulsory in contracts in the sixteenth century. From there, we started to sign everything—government documents, school permission slips, banking forms, job applications—to prove our identity and use services.

In this digital era, though, traditional signatures are being replaced with digital signatures, chips, pins, biometrics, and more. A recent survey by a UK cybersecurity firm shows that traditional signatures are in danger of extinction:

  • 55% of UK adults rarely write their signature
  • One out of five UK adults don’t have a consistent signature
  • 40% of all signatures are now made on digital devices using e-pens or just a finger
  • 15% of adults under 24 don’t even remember when they last signed a piece of paper

Apart from this digital transformation, traditional signatures are also hard for government and regulatory authorities to verify.

In 2018, an arrest story went viral on Twitter when police booked an individual on charges of gun possession and posted official documents online that had a peculiar signature. Juan Carlos VarillasBazan, the 31-year old Peruvian man, had drawn a doodle of a kitten in the place of his signature on official police documents. Police later posted Juan’s original identity card for the public to see and ensure that they weren’t being trolled.

The childish doodle actually has a real story behind its existence—when Juan was 16, he had a kitten that he loved very much. To show his affection and honor its memory, Juan signed his name with the kitten’s doodle when he got his first ID card. The rest is history. The national identity board has advised him to choose a more common way of signing to avoid situations like this in the future.

Moving beyond traditional signatures

Traditional signatures started being replaced with digital methods in the 1990s, due to their ease of use, security, and verification by governments, banks, and regulatory authorities. With digital signing, the sender of a document could just type the name, draw the signature, or upload a physical copy, and the receiver could then easily verify its authenticity using cryptographic techniques.

Individuals and businesses started to adopt this method widely in the late 2000s when digital signing was announced as a legal and legitimate method of signing in the EU, U.S., China, and many other countries.

How do digital signatures work?

Digital signatures attach a digital fingerprint to documents and check for alterations throughout the document’s life-cycle. Any unauthorized changes made to the documents are quickly detected, and both parties are notified.

Digital signatures function something like this:

  • The sender uploads a document and sends it out for signatures.
  • A cryptographic hash is generated with the sender’s private key and then appended to the document.
  • The encrypted document is sent to recipients with the sender’s public key certificate.
  • The recipients decrypt the hash using the sender’s public key and generate a cryptographic hash for the same document.
  • Both hash values should match to ensure authenticity.

Adoption of digital signatures across industries

The worldwide adoption of digital signatures continues to rise due to its ease of use, quick return on investment, and time saved that would normally be spent on manual processing.

Here are some examples of how various industries are applying digital signatures:

  • Financial services: Insurance policies, credit card applications, account openings, expense reporting, invoice processing
  • Healthcare: New patient forms, consent and claims processing, insurance benefits processing
  • Real estate: Sales contracts, lease agreements, documents for residential and commercial use
  • Government: Regulatory filings, tax returns, MOUs, agreements, administration documents

The Digital Signature market landscape

Gartner Inc says that companies across the globe are going digital to support digital transformation initiatives by government regulatory bodies. Moreover, 85% of Gartner clients prefer electronic signature delivery using the SaaS model.

Jason M. Lemkin, CEO of EchoSign, a popular web-based e-signature solution, said on his personal blog that the Saas-based e-signature market alone has grown from $1M in 2006 to $1B in 2008.

MarketsandMarkets, another popular market research company, predicts that the global digital signature market would grow from $1.2B in 2018 to $5.5B in 2023, at a compounded annual growth rate of 36.7%. With the fast-growing BFSI sector and various government initiatives to eliminate the use of paper, countries like India and China are expected to register a CAGR of 31% during the same period.

The Role of Government Initiatives in the rise of the Digital Signature

Governments around the globe are coming up with their own digital initiative program, such as Digital India. The main purpose of initiatives like this is to encourage individuals and companies to access all the government services online, including signing government documents. India allows digital signatures, though in some cases you might need a piece of extra evidence to support them in court.

The challenges of transitioning to Digital Signatures

We have already seen a lot about the benefits of digital signatures. Here are some of the challenges that companies might face while implementing a digital signature solution:

  • No single legal regulation that stands valid across countries
  • Document security and signer verification
  • Change of business operations and workforce training
  • Digital signatures aren’t valid for documents that require notarization, such as wills, power of attorneys, and trust deeds

Use digital signature software

We can’t just rely on the traditional method of signing documents anymore. It consumes time and paperwork and remains highly unreliable. The future is here—it’s time individuals and companies start using digital signature software to get their documents signed instantly, without compromising security. Digital signing apps help you collaborate, get documents signed easily from anywhere, and say goodbye to document woes.

By Chandramouli Dorai, Senior Product Marketing Manager, Zoho Corporation

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