As the world shifts from manual methods to digital systems, the traditional ways of operating businesses are becoming more electronic device-reliant and automated. Companies from diverse sectors implement digital solutions to accommodate their fast-growing tech-savvy clientele. Such a shift is evident in the creation of innovations that allow individuals, no matter their background, to complete tasks with less effort. In addition, businesses can sell their products and provide their services using cost-efficient methods, resulting in increased productivity and output.

The use of papers in many processes is becoming old-fashioned. In fact, electronic mail has replaced postal mail and telefax as the most used methods of sending documents. As businesses replace paper-based processes with digital solutions, electronic signature solutions became one of the earliest innovations to improve workflows.

Today, electronic and digital signatures are two digital solutions that improve the way businesses operate. While often used interchangeably, they function differently.

Electronic signatures

According to the U.S. Electronic Signatures in Global and National Commerce Act (E-SIGN Act) of 2000, an electronic signature is “an electronic sound, symbol, or process attached to, or associated with, a contract or other record and adopted by a person with the intent to sign a record.”

The implementation of the E-SIGN Act granted electronic signatures the same legal status as handwritten signatures. The bill has set the legal landscape for the use of electronic signatures and established the enforceability of electronic signatures in the United States. The E-SIGN Act is a federal act affecting all 50 states.

Another act that secures the legality of electronic contracts and the validity of electronic signatures is the Uniform Electronic Transactions Act (UETA). Passed into law in 1999, a year earlier than the E-SIGN Act, it determines the legality of electronic signatures in both commercial and government transactions. Adopted on a state-by-state basis, only 47 states, as well as the District of Columbia, Puerto Rico, and the U.S. Virgin Islands. The states of Illinois, New York, and Washington do not adhere to the UETA Act and have their own regulations on electronic signatures.

The method of signing electronically includes the use of a tablet or smartphone to capture an image of a handwritten signature. Electronic signature programs also allow users to simply type their name into a signature box. 

While providers of electronic signature solutions adhere to the highest level of security standards, electronic signatures do not have secure coding and are vulnerable to tampering.

Digital signatures

A digital signature is a type of electronic signature. It offers more security than handwritten and electronic signatures, as it uses Public Key Infrastructure (PKI) technology to verify the identity of a signer.

When an individual signs a document, the signature links a unique digital fingerprint, also known as “hash,” of the document to him or her. The hash secures the authenticity of the document and protects it from even the slightest modification. In addition, digital signatures utilize cryptographic algorithms, turning a signature into data that restricts unauthorized access. Using cryptography, the sender can generate a private key that the recipient can use to access a document.

Electronic signatures vs digital signatures

While electronic and digital signatures are both digital solutions used to sign documents, they differ in terms of security and purpose.

An electronic signature, while abiding by the highest levels of security and data protection standards, is unable to secure a document from tampering without permission completely. On the other hand, a digital signature uses more advanced security features to protect a document effectively.

The main purpose of an electronic signature is to make the signing of documents faster and easier; individuals use it to validate a document, allowing the identification of the signatories. A digital signature is used to secure a document so unauthorized people won’t be able to tamper it.

Though both electronic and digital signatures are legally binding, the option to use either of them depends on the needs of users.