Clarifying The Differences Between Digital Signature and Electronic Signature

As businesses embrace the paperless trend and shift towards virtual documents, the need for an effective electronic signature process continues to rise. The two most common types of signatures are electronic signatures and digital signatures.

Although both types of signatures help verify the signing parties, there are some noteworthy distinctions found in the characteristics and security of each.

 

Characteristics of Electronic Signatures

Electronic signatures, or e-signatures, are a quick and cost-effective way to sign documents remotely.

An electronic signature can be as simple as a person’s typed name, an electronic image of their handwritten signature, or even a fingerprint or voiceprint in some cases.

Some electronic signature software will trace user interaction and create a signing log of the signature process including e.g. the email address, name, date and signature, IP address during signing, time and date of the signature as well as the hash code of the signed document to improve traceability and security.

E-signatures are legally binding in many jurisdictions around the world, including under laws like the U.S. Electronic Signatures in Global and National Commerce Act (ESIGN) and the European Union’s eIDAS regulation.

E-signatures streamline the process of finalizing administrative changes, authorizing invoices, and accepting deliveries. They are commonly used in less formal agreements, everyday business transactions, and any situation where a traditional handwritten signature was previously used. This ease of use and broad legal acceptance make electronic signatures a key tool in modern digital transactions, streamlining processes and eliminating the need for physical paperwork.

Characteristics of Digital Signatures

Digital signatures are a more advanced form of electronic signatures, designed with a higher level of security through the use of cryptography. They are a type of signature built through an RSA algorithm that creates unique components, Public Key Infrastructure (PKI) which is a system that issues, validates, and revokes digital certificates and a Certificate Authority (CA) to verify the signer.

The PKI requires the provider to use a mathematical algorithm to create two long numbers, called keys. One key is public, and one key is private. The private key is unique and is distributed only to the signer. The public key can be given to anyone and is used to verify that the signature was created using the corresponding private key.

A hash algorithm is another main component of a digital signature, as it produces a unique code or fingerprint, called a digest, that corresponds to the digital document. After creation, the digest is encrypted with the private key to create the digital signature.

Once encrypted, the digital signature is then appended to the document and can be verified using the public key. The detailed verification process and multiple components ensure that the original document has not been tampered with and that the signature belongs to the signer.

Digital signatures are particularly important for important transactions or sensitive documents, where it is essential to verify the authenticity of the document and maintain its integrity. Their cryptographic underpinnings make them highly secure, but also more complex than basic e-signatures.

 

Differences Between an E-signature and a Digital Signature

Overall, both signature types have the same purpose: to provide a secure and legal way to sign documents remotely. However, the key differences between electronic and digital signatures lie in their security features, legal standing, and application contexts.

Use Cases

Electronic signatures, while incredibly versatile and user-friendly, do not inherently include mechanisms to detect alterations to a document after signing. They are best suited for low-risk transactions and everyday business operations.

Digital signatures, conversely, offer robust security through encryption and are linked to the identity of the signer via a digital certificate. This makes them ideal for high-value transactions and documents requiring a high level of integrity and non-repudiation. The legal acceptance of digital signatures is typically broader and more stringent, complying with high-level regulatory standards.

Compliance

Both electronic and digital signatures operate within specific legal frameworks that vary across countries and regions. The legal perspective on these technologies focuses on their validity, enforceability, and the conditions under which they are recognized. In the United States, for example, both electronic and digital signatures are legally binding under the ESIGN Act and UETA, provided certain criteria are met. In Europe, the eIDAS regulation sets a more detailed standard, especially for digital signatures, and categorizes them into simple, advanced and qualified signatures, each with varying levels of security and legal implications.

The compliance aspect is crucial, especially for highly regulated industries such as finance, healthcare and government. Digital signatures often meet higher compliance standards because they are secure and can verify the identity of the signer and the integrity of the document.

 

Which is More Secure – an E-signature or a Digital Signature?

Both e-signatures and digital signatures are secure methods of validating electronic documents, but they differ in their underlying processes. Digital signatures use public key cryptography, also known as asymmetric cryptography. This provides a higher level of security than e-signatures, as it would be challenging for someone to forge a digital signature without access to the signer’s private key.

While both e-signatures and digital signatures provide a level of security, digital signatures offer a higher standard by employing encryption and certification processes, making them more resistant to tampering. Ultimately, the choice depends on the specific security requirements of the document and the level of security you need.

 

Benefits of Digital Signatures

Digital signatures offer several great benefits, including:

Data Integrity

Digital signatures verify a signer’s identity and origin. Verifying data integrity makes digital signatures much more secure than electronic signatures, as they are linked to an authorized digital certificate.

Authentication

Digital signatures use authentication protocols to verify the identity of the signer. Each digital signature contains keys distributed by PKI and CA’s that authorize the signer and creates the digital signature.

Non-Repudiation

Non-repudiation is another benefit of digital signatures. With non-repudiation, signers cannot later deny having signed the document. Non-repudiation acts as proof because the private key used to generate the signature is traceable back to the signer.

 

Drawbacks of Digital Signatures

The primary drawback of digital signatures is that they are limited to a single digital document. Each digital signature binds to a unique online document, hash algorithm, private key, and public key.

Another drawback of digital signatures is that they are significantly more complex and can take longer to create than electronic signatures. There are multiple steps in creating a digital signature and waiting on a Certificate Authority to verify the signature can be a slow process.

 

Benefits of E-signatures

Electronic signatures offer several great benefits, including:

Convenience

Electronic signatures are very convenient, making them a suitable choice for busy individuals. They require no extra steps on the singer’s part, and the signer can complete the document using any device they choose.

Legally Binding

All electronic signatures are legally binding, making them ideal when you are drawing up a contract and need a quick and legally binding way to sign the document.

Better Work Experience

Electronic signatures make it easy to sign documents and track the status of signings, which can save a lot of time and hassle for businesses that do a lot of electronic filing.

 

What are the Biggest Problems with Electronic Signatures?

While electronic signatures are convenient and legally binding, they have some drawbacks.

Hard to Verify

Verifying the signer’s identity can be challenging when using an electronic signature. Electronic signatures do not always contain hash algorithms, public & private keys, and other authentication methods, which makes electronic signatures harder to verify.

Risk of Unauthorized Signing

Not only are electronic signatures harder to verify, but they are also susceptible to unauthorized signing. Fraudsters can use a photo of your signature or even forge it by hand to sign documents without your permission.

 

Final Thoughts

Businesses continue to leverage online applications to streamline administrative workflow and improve customer experience. As the prevalence of e-commerce grows, the importance of electronic signatures and digital signatures will also continue to increase.

Be mindful of the differences. In short, digital signatures offer a higher level of security than electronic signatures. With the Public Key Infrastructure and a Certificate Authority, digital signatures bind the signer’s identity to the document.

Electronic signatures do not typically provide this level of assurance, but they are a far more convenient solution that is still secure and legally binding. We suggest using electronic signatures and digital signatures, with the optimal choice depending on the document. If it requires a quick signature, use electronic. If it is a high-value transaction where identity verification is essential, use a digital signature.