May 30, 2022
What is a digital signature and why should you use it?
It is undeniable that our society is increasingly dependent on communications and its technology. As technology advances and becomes more ingrained into our way of life, the use of electronic signatures, particularly digital signatures, will only become more prevalent.
A vast majority of people use their smartphones to check mail, perform transactions, surf the internet, and handle files. All these contain sensitive information and even make up our society's most valuable information.
Digital signatures play a huge role in ensuring that the data being transferred in these media is encrypted and can't be tampered with. Like the handwritten and basic electronic signatures, digital signatures show an agreement but with a higher level of security.
What is a digital signature?
A digital signature is basically a way to guarantee that an electronic document (email, text file, spreadsheet) is genuine. Unlike a handwritten signature or a stamped seal, it uses digital impressions generated through mathematical techniques.
Digital signatures offer more security, integrity, and authenticity. They increase the transparency of online interactions and improve trust between customers, business partners, and vendors.
There are three types of digital signatures- Simple electronic signatures (SES), Advanced electronic signatures (AED), and Qualified electronic signatures (QED). The SES is the most basic and does any require any identity verification from the signer. On the other hand, certification authorities (CAs) issue AED prompting it to require identity verification from the signer. Lastly, the QED, like AED, requires a more critical identification from the document signer. This signature is ideal for high-risk environments where the consequences of a security failure could be devastating.
How do digital signatures work?
Digital signatures work using asymmetric or public-key cryptography. It uses a public key algorithm to generate a pair of public and private linked keys. These two linked keys work together to maintain the authenticity of the signature. The private key lets the signer encrypt relevant data, while the public key is the only one capable of decrypting the signature data.
When a person digitally signs a contract, a digital document or text, a cryptographic hash automatically forms for that document. The generated hash is unique to the document, and changing any part will completely change the hash. The cryptographic hash, then, becomes encrypted using the sender’s private key.
Once completed, the signer may send the digital document to the recipient. To view an encrypted message, the recipient must have access to the sender’s public key certificate. The entire process relies on keeping the private key confidential. Otherwise, it could be used to generate illegal digital signatures that the holder would be held responsible for.
What are the benefits of digital signatures?
Through its robust signature infrastructure, digital signatures can help your business preserve and maintain the legitimacy of documents. Below are the security features employed with digital signatures.
- Public key cryptography: Also referred to as asymmetric cryptography, consists of keys: the public key (which may be known to the authorized signer) and a private key (which may not be known by anyone besides the user).
- Certificate authority (CA) validation: This is the authority responsible for issuing digital signatures. They issue millions of digital certificates each year, and these certificates are excellent in protecting information, encrypting billions of transactions, and enabling secure communication.
- Checksum: A checksum is what you get from running an algorithm, called a cryptographic hash function. It could take the form of alphabets and numbers. Comparing the checksum you get from a signed document ensures that your file copy is genuine and error-free.
- Trust service provider (TSP) validation: A TSP is responsible for validating digital signatures on behalf of an organization. They also provide results of signature validation processes.
- Cyclic redundancy check (CRC): This is a code for detecting errors, verifying digital signatures, and detecting data changes.
2. Cost and time-saving
With digital signatures, organizations can cut down on a lot of expenses. Digital signatures eliminate the need for a notary or physical contact. Hence, there’s no need to allocate to print and transport documents to signers. In the same vein, you don’t have to waste precious time in moving documents because signers can access uploaded documents on a centralized database.
3. Time-stamping and traceability
Using digital signature timestamps the document easing the process of record-keeping. This is crucial in clarifying the order of events and is an invaluable asset for legal proceedings.
4. Global business acceptability
Digital signatures are accepted internationally, making it possible to perform business transactions with global partners.
As you can see, there are many uses for digital signatures and it's up to your imagination how you'll be using them in your organization or in your personal life. You can electronically sign on your sensitive PDF documents or explore it to create a more secure and efficient workflow. Discover more benefits of digital signatures for your business.
Who uses digital signatures?
Departments and sectors that use digital signatures include:
1. Human resources
The advent of digital signature is inarguably a blessing to human resources. HR departments need to collect signatures on various documents including applications, offer letters, non-disclosure agreements and more. With digital signatures, HR can streamline its day-to-day operations.
2. Legal services
Signatures are an important part of legal proceedings. Paper works can slow down the process of signing contracts, government forms, land documents, family laws, notices, compliances, etc. Using digital signature platforms will eliminate all the hassle of paperwork. Also, it makes the transfer of legal documents safer and more secure.
In an effort to enable secure and authentic communication between the government, citizens, and businesses, many governments are turning to digital signatures. Digital signature helps to reduce fraud and make transactions seamless, especially in the case of land records and public procurement.
Traditionally, insurance is a human-to-human business. An agent meets you, explains the insurance benefits, and makes you sign a contract upon agreement, and then the process is done. But now agents can speed up completion of person lines application and policies by using digital signatures. This will significantly improve the business process as clients can now have insurance purchases with just a swipe on their laptops.
In the manufacturing sector, the International Organization for Standardization (ISO), the National Institute of Standards and Technology (NIST), and the Digital Manufacturing Certificate (DMC) regulate the use of digital signatures. Manufacturing companies use digital signatures to speed up manufacturing processes such as product design, quality assurance (QA), manufacturing enhancements, marketing, sales, etc.
6. Financial institutions
Banks use digital signatures to open accounts, send money, disburse money, provide customer services, sign off accounts, etc. Digital signatures now save thousands of hours on banking processes. For example, before making any transaction you are asked to enter your unique PIN code to secure your transaction.
Healthcare organizations can use digital signature solutions for paperless workflow. Primarily, hospitals need consent to admit and carry out emergency procedures such as surgeries. With digital signature, a patient, caretaker, or medical personnel can quickly sign on an iPad or a tablet. It also strengthens data security, e-prescription of drugs, and injections. Nevertheless, the use of digital signatures in healthcare must comply with the Health Insurance Portability and Accountability Act (HIPAA) of 1996 in the United States.
What is the difference between a digital signature and an electronic signature?
Digital signatures and electronic signatures are quite easy to mix up. In fact, many people often get confused and give them the same definition. Even official bodies make the same mistake or use the two terms interchangeably.
However, there are certain differences between both. An electronic signature is a symbol that is used to verify an electronic document. A digital signature, on the other hand, is a way of guaranteeing the authenticity of an electronic signature.
Another way to differentiate between a digital signature and an electronic one is in terms of regulation and third parties’ participation. While a digital signature is authorized and regulated by certification authorities, an electronic signature is not.
A digital signature can be verified. To obtain a digital signature, one has to bring forth proof of identity. An electronic signature, on the other hand, cannot be verified.
Although digital signatures and electronic signatures are widely used and even legally binding, most firms prefer the digital signature over the electronic signature because of its high level of authenticity.
How to create a digital signature using Contractbook
1. Create an account on Contractbook
Firstly, you need to have an account with Contractbook. You can easily achieve this by signing up with the required details. After creating an account, there’s no need to use third-party tools to create a digital signature in the future.
2. Add people to sign the documents
Select “who will sign the contract?” to add the signees. You'll see three options here: “Me and others,” “Only others,” and “Only me.” After selecting, proceed to add your information and the counterparty's information to the designated fields if you haven't imported it from your profile settings.
3. Attach the document
Select “Document” at the top menu to sign pre-existing documents. Otherwise, click on create new and select “Sign a PDF with Contractbook” at the bottom of the box. The platform will automatically create a new draft where you can now edit the document as you wish. You can also choose to create a digital signature in word with Contractbook.
4. Sign and send
If it's a document you share with other signees, you'll have to send it to them to capture their input. Contractbook's default settings order the signing activity so that the sender signs first before it disperses to the other parties. But you can change this setting in the signature order too. And before sending out the contract to capture the external party's signature, you can attach a message to it in a comment box on the page.
You will agree that the process is seamless and time managing. Contractbook is an excellent contracting platform that enables companies to digitally manage and sign their business contracts. With Contractbook’s digital signature feature, you can create flawless contracts.
Additionally, you can easily find and access all your signed contracts, add tasks and perform other contract bulk actions. This helps you save hours of work and cut the average contract costs.
Frequently asked questions about digital signatures
Are digital signatures legally valid?
According to the Electronic Communications Act (2000), the legal status of e-signatures (electronic signature and digital signature) is valid. While electronic signatures have been used across developing countries since 2000, digital signatures started gaining more ground in 2020 when the pandemic hit and everyone had to work from home.
So, yes, digital signatures are legally valid. Big industries like law firms, banks, hospitals, etc., use digital signatures to seal contracts.
What is a digital certificate?
A digital certificate is a digital file or electronic password that shows the validity of a device, server, or user with the use of cryptographic keys or the public key infrastructure. Certification authorities usually issue digital certificates and they are valid for a specified period.
What is a certificate authority?
A certificate authority or certification authority, is a company or organization that acts to authenticate the identities of entities. These entities include websites, email addresses, companies, or individual persons. They bind them into cryptographic keys through the insurance of electronic documents known as digital certificates.