As the ESIGN Act Turns 20, Social Distancing Makes E‑Signatures More Essential than Ever

Michael Magrath, June 30, 2020

June 30, 2020 marks the 20th anniversary of the Electronic Signatures in Global and National Commerce Act (ESIGN Act) becoming law, making it legal to use electronic signatures to sign and store digital documents.

This move opened the door to a new era of digital business. As well as providing the convenience of being able to sign legally binding contracts from anywhere, it enabled businesses to significantly increase productivity, improve the customer experience, ensure security, and lower transaction costs.

This has been demonstrated in the United States, where the ESIGN Act and the Uniform Electronic Transactions Act (UETA) give legal recognition for electronic signatures and records to satisfy the “in writing” legal requirements for transactions. These Acts enable organizations to adopt a uniform e-signature process across nearly every state, future proofing the way they interact with customers.

Although a lack of education over the legality of electronic signatures has historically caused some hesitation around the adoption of the technology, the COVID-19 pandemic moved e-signatures to the top of business agendas this year – propelling further digital transformation among financial institutions and their customers.

E-Signatures have proven essential at a time when people have been largely unable to leave their homes. The technology has played a key role in maintaining business continuity while reducing exposure to the virus and adhering to the social distancing guidance put in place by public health officials.

In short: the importance of e-signatures as a foundational technology can’t be underestimated. Digital transformation efforts, the race to deliver the ultimate customer experience, and more recently the global pandemic have all accelerated the technology’s adoption. Almost overnight, COVID-19 changed the way government agencies and businesses interact with people, meaning the widespread use of the traditional handwritten signature could finally be at an end.

Going Global

Questions regarding the legal requirements and implications of e-signing have long accompanied discussions around electronic signatures. This is quickly changing as laws catch up with the technology’s growing adoption. In many countries, electronic records and signatures in electronic form are now treated as any other type of electronic data and are as admissible as if they were paper-based records. This has laid the foundation for the future of digital business around the world.

In Canada for example, provincial e-signature laws give electronic signatures the same legal effect and status as handwritten signatures. Also, similar to the provincial laws, part 2 of the Personal Information Protection and Electronic Documents Act (PIPEDA) federal law provides a regime that establishes electronic equivalents to paper-based documents and signatures. The country’s COVID-19 Economic Response Plan has recently taken this one step further, with electronic signatures now meeting the signature requirements of the Income Tax Act.

In Europe, e-signature adoption took a significant step forward in 2016 thanks to the Electronic ID and Trust Services (eIDAS) regulation. eIDAS applies equally to all EU member states and has served to accelerate digital transformation in countries across Europe by establishing legal recognition of all types of e-signatures for cross-border commerce. At this time, the EU is in the early stages of refreshing eIDAS – eIDAS 2.0 if you will. It is unknown at this time what that will entail.

Latin America has also seen much legislative activity around the acceptance and enforceability of e-signatures, as countries such as Brazil, Mexico, Ecuador, Peru, Colombia, Chile, and others lay the groundwork for increased digital transformation of business and government.

As recently as two weeks ago, Brazil, which has recognized the Qualified Electronic Signature for 19 years, published a new Provisional Measure (Medida Provisória nº 983) relating to Simple and Advanced E-Signatures. A partner with leading law firm Opice Blum in Brazil, Nuria Lopez Cabaleiro Suarez explains:

“As early as 2001, Brazil developed its public key infrastructure (PKI-Brazil) and built a network of Certified Bodies to ensure the authenticity and integrity of electronic documents. Over the years, we have seen ever-increasing adoption and acceptance of digital. Recently, Law No. 13,874/2019, known as the Law of Economic Freedom, established as an essential right for the development and economic growth of the country, that the use of electronic records and digital documents have the same legal status as physical documents. This regulation came into effect on March 19, 2020.

“Since then, social distancing measures in the fight against COVID-19 has led to another step forward for digital business. Provisional Measure No. 983 of June 16, 2020, establishes rules for the use of electronic signature between government entities and citizens. We expect this to drive additional digital transformation in Brazil.”

Similarly, Erick Rincón Cárdenas, a partner at Rincon Cardenas & Moreno in Colombia, is seeing the different electronic signature laws issued in Latin America extend the use of e-commerce and digital business practices in that region. Citing three examples, he says:

“For example, Mexico has identified electronic signatures as a key part of digital business. Advanced and Qualified Electronic Signatures provide the security that local and federal governments require for use in electronic commerce.

“In Peru, Law 27269 regulates the use of electronic signature, granting it the same legal validity and effectiveness as the handwritten signature or any other similar manifestation of will.

“And in Colombia, Law 527 recognizes electronic signatures as well as digital signatures implemented by a certified third party, which have legal effectiveness provided they meet requirements such as authenticity and integrity.”

Enabling Digital Transformation

So, why should businesses embrace electronic signatures? The simple answer is that they enable fully digital processes and eliminate the need for costly and time-consuming manual activities, while improving convenience for signers.

E-signatures are also safer and more secure than traditional paper documents and ink signatures. E-signing platforms are designed to reduce the risk of fraud and ensure compliance by capturing comprehensive audit trails, providing visibility into exactly who has signed the document – as well as when and where. This can be supplemented by digital encryption technology to prevent tampering, along with identity verification tools such as biometric authentication or ID document capture.

From a customer perspective, one of the key benefits of e-signatures is that they enhance the customer experience. Customers are increasingly expecting to have access to sophisticated digital services when interacting with businesses, which includes being able to sign documents from anywhere, at any time, and on any device. Providing e-signature capabilities helps businesses both retain customers and attract new ones to increase the bottom line.

Ultimately, what has become clear during the COVID-19 pandemic is that e-signature technology is no longer a nice to have. It has become a must-have component of digital transformation initiatives for organizations around the world, providing a level of transparency, security and efficiency simply not possible with traditional ink signatures.

The importance of e-signatures will only grow over the coming years as global legislation continues to develop and more businesses realize the benefits of using electronic means. It might have taken slightly longer than expected, but e-signatures have undoubtedly come of age. Here’s to the next 20 years!

eSignature & ID Verification Solutions: Digitizing Business Processes in Times of Crisis

eSignature & ID Verification Solutions: Digitizing Business Processes in Times of Crisis

Watch this OneSpan webinar, and hear our experts discuss how financial institutions and other organizations can now quickly digitize their internal and external processes using e-signature and digital ID verification.

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Michael Magrath is responsible for aligning OneSpan’s solution roadmap with standards and regulatory requirements globally. He is Co-Chair of the FIDO Alliance’s Government Deployment Working Group and is on the Board of Directors of the Electronic Signature and Records Association (ESRA).