What is an Electronic Signature?

What is the function of an electronic signature?

The function of an electronic signature is to capture the intent of the signer to be bound by the terms and conditions in a contract. Electronic signature software is designed to capture legally-enforceable signatures online.

Generally, it is about having a lasting record of an individual’s intent. Digital signature is a related concept, but it is a distinct technology. Digital signature refers to the encryption technology used in a number of e-business and e-commerce applications, including electronic signature.

There are generally three types of electronic signatures recognized around the world: Basic, Advanced, and Qualified.
 

What are the benefits of electronic signature?

• Legally Enforceable
  Thanks to the ESIGN Act in the United States,  the eIDAS regulation in the European Union, and similar legislation around the world, the legality of electronic signatures is indisputable in many countries.
• Great User Experience
  Ensure high user adoption and satisfaction with the most seamless, white-labeled e-signing experience.
• Advanced Security 
  Protect your users and electronic documents against fraud with military-grade digital signature technology and create a high level of security in your digital transactions.
• Audit Trails 
  Strengthen your compliance and deter legal disputes with the most comprehensive audit trails in the market.
• Efficient and Scalable 
  Scale electronic signatures functionality across your organization and channels – quickly and cost-effectively.
• Cost Effective 
  Get predictable pricing and a cost-effective e-signature solution regardless of your volumes – no nickel and diming.
• Versions 
  Available as a web or mobile app, developer SDK, third-party connector, and specialty solutions for financial services.
   

What is electronic signature used for?

Processes like sales contracts,  HR, invoicing, and more are achieving rapid gains in efficiency and drastic reductions in cost thanks to widespread acceptance of electronic signature in the market. Here are just some of the top use cases for electronic signature.

• Onboarding and Account Openings
  The ability to onboard customers from anywhere, at any time became a competitive advantage in the last several years. In 2017, Celent Research published a report on BMO Bank of Montreal’s e-signature deployment. The bank’s first e-signature use case was onboarding. The report stated that “the launch of a contextual and simplified digital account onboarding is a first-of0its kind service in Canada. BMO customers can quickly search, select, and open an account on their smartphones in under eight minutes.” Since the release of that report and the implementation of COVID-19 social distancing measures, the need for a remote onboarding and agreement process has grown from a competitive advantage to a business necessity.

• Consumer and Commercial Lending
  The most common areas for e-signature in lending are consumer loans, small business loans, and retail finance. E-Signatures, e-forms, and digital processes are being used online, in the call center, and in the branch to expedite the agreement process. Furthermore, keeping transactions completely digital and apply workflow rules eliminates risk associated with document errors, such as missing signatures and data. In addition, by eliminating the document errors, e-signatures eliminate the poor customer experience created by document rework, like calling a borrower back to re-sign paperwork.

• Wealth Management
  Wealth management is a good fit for e-signatures. The goal is to shorten the long sales process typically involving multiple meetings and frequent document errors. With e-signatures, this process can be shortened to just a single session where the paperwork can be processes face-to-face with the customer. Both the client and financial advisor usually must sign documents, but authentication can be done in-person.

  However, the wealth management industry is undergoing rapid changes in response to COVID-19. According to an Aite Group survey of wealth management firms in North America, Europe, and Asia, more than half of respondents saw a significant increase in clients requesting digital interactions. Those interactions can be facilitated by electronic signatures.

• Residential Mortgage
  As more mortgages and refinances move online for increased convenience and speed, e-signatures are the ideal solution to bring the digital experience into the customer’s home and make it convenient, secure, and compliant.
  
  Furthermore, non-bank lenders have been able to reduce the lengthy mortgage process by more than half, from 45-55 days to fewer than 20. Signature Mortgage eliminated the 7-10 application process by having the application signed electronically, often the same day it is sent out.

• Commercial Banking and Treasury Management
  Commercial banking processes can be complex, but the speed and convenience provided by electronic signatures can make the difference. No two clients are the same. As a result, most processes involve ad hoc, customized agreements and contracts. Many of these require signature authorizations and approvals for processes such as new service agreements, ACH authorizations, wire transfer agreements, and applications for corporate cards. Bank representatives can get up and running in minutes with a web or mobile e-sign application to ensure agreements can be enacted the same day they are requested.

• General E-Contracting and Other Ad-Hoc Processes
  Outside of commercial banking, there are many other ad hoc processes that require signatures in the banking world. These diverse processes range from e-contracting and procurement, to HR, IT, Legal, Corporate and more. Although typically organizations focus on digitizing customer-facing processes first, there are many other internal efficiencies to be created with electronic signatures.

In addition to the use cases outlined above, organizations in every industry can find value in the security, efficiency, and positive customer experience created by OneSpan Sign electronic Signatures. Other uses include:

• Procurement and sourcing
• Contract modifications
• Federal tax returns
• Service agreements
• Claims and appraisals
• Delivery order requests
   

How do electronic signatures work with OneSpan Sign?

• Step 1: Access
  The invitation link to the signing ceremony is emailed to the customer or delivered through a customer portal.
• Step 2: Identify / Authenticate
  Potential authentication factors include: email, login credentials, challenge-response questions, SMS PIN, third-party ID check, Digipass®, biometrics, government ID
• Step 3: Present
  Documents are presented on a desktop or mobile device. Administrators can define workflow rules and control which documents are visible to participants in the transaction
• Step 4: Data Capture
  Capture data at the time of signing and make that data available to downstream systems
• Step 5: Re-authenticate
  Optionally verify the signer’s identity at the time of signing. For example, signers can use their government-issued electronic ID (eID) to create a Qualified electronic signature (QES)
• Step 6: Sign
  The person signing has the option to click to sign, Click to initial, or capture a hand-scripted signature.
• Step 7: Document Insertion
  Additional documents or images (e.g. a photo of a driver’s license) can be inserted as part of the transaction
• Step 8: Deliver
  Signed records can be distributed electronically or on paper
   

Are electronic signatures legally binding?

Yes. OneSpan Sign’s electronic signatures make it easy for organizations to capture legally binding e-signatures and are valid in countries that have enacted electronic signature laws.

An electronic signature created using OneSpan Sign is designed to meet the requirements of the U.S. ESIGN Act and the Uniform Electronic Transactions Act (UETA), as well as the European Union's Electronic Identification and Trust Services Regulation (eIDAS).

For a legal opinion on the enforceability of electronic signatures in a given country and any local data residency requirements, consult your legal counsel.
 

What are the different types of electronic signature?

There are generally three forms of electronic signature recognized around the world: Basic, Advanced, and Qualified.

The Basic Electronic Signature

The Basic electronic signature is not a standardized term across nations. Depending on the state, some countries may refer to this as a “Simple electronic signature.” However, both terms describe the same concept.

The Basic Electronic Signature is technology-neutral. Meaning, any electronic form or process is generally accepted so long as the resulting electronic signature meets three basic requirements for signing:

1. The electronic signature should be applied in a manner that demonstrates the intent of the signer. The electronic signature can be captured by click-to-sign, typing a name, or a handwritten signature
2. The electronic signature should be applied by the person associated with the signature
3. The electronic signature should be associated with the document or data the signer intended to sign

OneSpan Sign meets the requirements for Basic electronic signature

The Advanced Electronic Signature

Advanced Electronic Signature goes beyond the Basic by tying authentication to the signature and agreement. This mitigates risk in the transaction by providing additional evidence that can be used to verify the authenticity of the signature.

Most organizations and banks opt for the Advanced Electronic Signature as their standard form of electronic signature. The inclusion of built-in authentication increases signer assurance without a significant impact to the customer experience.

This form of electronic signature adds four additional requirements beyond those of the Basic Electronic Signature. The Advanced Electronic Signature must:

OneSpan Sign meets the requirements for Advanced electronic signature.

1. Be uniquely linked to signer
2. Identify the signer
3. Be under the sole control of signer
4. Detect changes to the document or data after the application of the electronic signature

The Qualified Electronic Signature

The Qualified electronic signature is the legal equivalent to a handwritten ink signature.

The extra security of a Qualified Electronic Signature can also create friction in the transaction. Your signers are required to procure a signer-held digital ID and meet face to face. These extra steps create a longer signing process and ultimately increase the overall cost beyond what other e-signatures might require.

OneSpan Sign meets the requirements to use a third party digital certificate as an electronic signature, but we do not issue these certificates to users ourselves. Instead, we can assist clients in finding a trusted partner to issue digital certificates.

The term, Qualified Electronic Signature, is based on the EU regulation known as eIDAS, but it is similar to many other laws around the world that require a certificate issued by an accredited organization.

The information on this site is for informational purposes only and does not constitute legal advice. We recommend that you seek independent professional advice. OneSpan does not accept liability for the contents of these materials.