Electronic Signatures vs Digital Signatures

When describing business processes, many people tend to use the words “electronic” and “digital” interchangeably. But what’s the big difference between digital signatures vs. electronic signatures? Aren't they the same? The short answer is “No,” but the longer answer is a bit more nuanced.

As businesses increasingly transform their enterprise software solutions to adapt to the modern workforce and virtual environments, it’s crucial to understand how electronic and digital signatures differ. Understanding the definitions of electronic signatures and digital signatures will allow your business technology team to evaluate document management software options and determine which is right for your organization.

 

By design, both types of signatures give your business a better return on investment. Save time chasing down signatures from employees and customers. Keep tabs on digital paperwork to ensure smoother processes, better compliance, and reduced errors. Use digital or eSignatures to cut down on paper costs and printing supplies.

And while digital signatures are a subset of eSignatures, they do include some key differences:

 

• Can be a signature image, fingerprint, click, process, symbol or process
• Main goal of an eSignature is to verify a document
• Does not include digital certificate 
• Legally binding if all parties consent to signing electronically
• Document not necessarily secure
• Not all electronic signatures are digitally signed 

 

• Signature is essentially an electronic fingerprint backed by digital certification for encryption
• Main goal of a digital signature is to verify a signer’s identity. 
• Digital signature authenticates the document 
• Legally binding 

Contact Nitro to learn more about how our productivity tools with digital and eSignature capabilities can transform your organization’s workflow processes.

 

Simply put, electronic signatures — or eSignatures — are any signature image, symbol, fingerprint, click, verbal sound, or process that verifies a document in place of a wet ink, or handwritten, signature. An electronic signature may be as simple as clicking a box or typing your name into a fillable form while agreeing or accepting that you’ve signed the document. When signed by all parties, an eSigned agreement is legally binding. Unlike a digital signature, eSignatures are generally not authorized by digital certification. While this makes eSignatures easier to use, it can also mean they’re less secure than a digital signature.

 

Many companies use electronic signatures in contracts and agreements. For instance, your business may have clients electronically sign loan applications and other financial contracts. Your sales team can sign prospective clients using eSignatures, and your HR department may allow new employees to fill out paperwork with eSignatures.

 

A digital signature does fall under the electronic signature umbrella, but with some key differences. Digital signatures rely on algorithms and encryption to both sign and verify the authenticity of a document.

Whereas the purpose of an eSignature is to simply verify a document, a digital signature also effectively secures the document with more security features that protect the document. Like an eSignature, a digital signature is also legally binding and more easily traceable given its digital verification certificate.

 

Since a digital signature employs a digital certificate that authenticates the signer’s identity, this type of signature is a good, secure tool for sensitive data, such as financial records, HIPAA-regulated documents, and other confidential paperwork or contracts.

 

In the case of eSignature vs. digital signatures, however, the big question becomes: What's the safest, most effective, reliable, and easiest-to-use method when facilitating big contracts or creating more flexible workflows for your employees and your customers? Here’s what you need to know about security concerns of each signing method:

 

While eSignatures can be safe, you’ll want to verify that any software platform you use keeps security at the forefront. Nitro’s eSign capabilities come backed by rigorous security controls and secure infrastructure with cutting-edge data security. Not only do we maintain the latest compliance standards, we also annually employ independent third-party auditors to test our controls. In fact, Nitro maintains AICPA SOC2 Type 2 Report on Controls Relevant to Security, Availability, Confidentiality and Privacy, and a HIPAA Security Compliance Assessment of internal controls to offer your enterprise safe and secure signing options.

 

Digital signatures fall under the electronic signature umbrella, and the advanced encryption and decryption methods make this type of signature exceptionally secure. Digital signatures rely on public and private keys that help ensure authenticity and content origin — i.e., that both signers of a document are who they say they are. A digital certificate helps validate the document’s signature.

 

While eSignatures and digital signatures are widely used today, the current standards on how to implement all electronic signatures are surprisingly dated. The thinking in regard to legality and regulations largely comes from federal and state guidance, both of which came out more than two decades ago.

For instance, in 2000, the United States Electronic Signatures in Global and National Commerce (ESIGN) Act passed with the following stipulations for electronic signatures:

• Signing intent: eSignatures are only valid if both parties plan to sign the document. 
• Electronic consent: Both parties must agree to conduct business using electronic signatures. Note that when dealing with consumers, you’ll also need to provide them with consumer consent disclosures and make sure they agree to use electronic records throughout the transaction. 
• Verification: Your business will need to confirm that you’re tying the eSignature to a specific document. 
• Record retention: There must be a way to store and reproduce the eSigned document or contract so all parties have access to a copy. 

While much has changed since 2000, the tenets of the ESIGN Act still hold. More recently, the U.S. Senate introduced the ESIGN Modernization Act of 2020 in December 2020. The newer legislation aims to repeal certain eSign requirements, such as consumers demonstrating their ability to access information electronically in order to provide electronic record consent.

 

Under the federal ESIGN Act, both electronic and digital signatures are legally binding where U.S. federal law applies. In instances where ESIGN doesn’t hold, UETA often applies. Introduced in 1999, the Uniform Electronic Transaction Act, or UETA, essentially provides the same language as ESIGN.

Both acts state that electronic signatures are equivalent to a handwritten signature when both parties consent to proceeding with an electronic document. Washington, D.C., the U.S. Virgin Islands and 47 states adopted UETA regulations.

 

While electronic signatures are becoming the de facto standard of doing business — particularly due to the ongoing COVID-19 crisis — there are some situations where digital or eSignatures are still not permitted. In those cases, a wet signature is necessary. A wet, or wet ink, signature constitutes anytime you sign a document physically by hand via pen or stamp.

Documents dealing with trusts and wills, insurance benefits, product recalls, divorce and court proceedings, custody and adoption scenarios, and transport of hazardous materials still generally require in-person wet signatures.

 

Nitro Sign allows for you and your employees to unlock efficient eSignature workflows anywhere, from any device. The unlimited person-to-person signing and sending solution comes packed with powerful, connected, and user-friendly features such as audit trails, bulk signing, and custom templates that integrate seamlessly with existing tools like Microsoft Word, SharePoint, and Google Drive.