Digital signatures vs. Electronic signatures: key differences and business implications
Welcome back to another Wednesday and to the latest edition of Privy Presents, a newsletter specifically curated by Privy team to discuss digital identity and other closely related topics, delivered to you every Wednesday.?
The advancement of technology has made the implementation of electronic signatures and digital signatures widely used by people lately. Even though both electronic signatures and digital signatures can serve as methods to authenticate and validate documents, it should be noted that they actually differ in terms of security, legality, and implementation. Hence, what are the key differences between electronic signatures and digital signatures, and which one is better to implement for business??
Get to know electronic signature?
Have you ever clicked an "I Agree" box to get access to something on the internet? Little did you know, it's considered as electronic signature. Electronic signature is a broad term referring to any electronic process that indicates the acceptance of an agreement or document. It can include typed names, scanned signatures, or just by clicking a checkbox.?
Furthermore, electronic Signatures can be created with simple technologies like email or scanned signatures which involve a simple image or text that indicates the signer's consent. Although electronic signatures can provide such convenience, its use is considered less secure. This is because there is no process for verifying the signer's identity, so the signer's identity cannot be validated, and the authenticity of the signed document cannot be guaranteed. With its lack of security, an electronic signature is common for general agreements with low security risks, such as signing online registrations, terms and conditions, or informal agreements.?
What is a digital signature?
On the other hand, a digital signature is a specific type of electronic signature that uses cryptographic techniques to ensure the authenticity and integrity of a document. Each digital signature uses Public Key Infrastructure (PKI), where the signature is generated by a private key and can be verified by a corresponding public key, ensuring that the document has not been altered. The recipient, or anyone who needs to verify the signature, can also use the signer’s public key to confirm the authenticity of the signature. In other words, the use of PKI and certificates provides a stronger proof of identity and document integrity, making it more legally binding in certain contexts.??
Moreover, the digital signature is usually authorized because verification of a digital signature is conducted by trusted authorities. Due to its tight security, digital signature is preferred for more sensitive transactions like legal contracts, financial transactions, government documents, or healthcare records, where higher security and legal assurance are necessary.?
Why should electronic signatures and digital signatures be differentiated??
Since electronic signature and digital signature have vary levels of security, legal, and practical needs, their implementations should also be differentiated. Electronic signatures prioritize convenience and ease of use, while digital signatures focus on robust security, legal compliance, and trustworthiness.?
However, it is quite different in Indonesia. There are two types of electronic signature, certified electronic signature and uncertified electronic signature. The certified electronic signature is verified and issued by a trusted third-party entity called a Penyelenggara Sertifikasi Elektronik (PSrE) or Electronic Certification Authority, which is authorized and recognized by the Indonesian government. This certification process involves strict verification of the signer's identity.??
Meanwhile, an uncertified electronic signature does not go through any formal certification process and does not require verification by a third party. It can be any form of electronic signature, such as a scanned handwritten signature or a typed name.??
Hence, using certified electronic signature in Indonesia is more common since it involves verification by trusted third parties and use cryptographic methods to guarantee the authenticity of the signer and the integrity of the signed document.?
Which one is better for business, electronic signature or digital signature??
Whether to use an electronic signature or a digital signature for business purposes depends on the types of transactions and the level of security and legal assurance required. For business that involves low-risk or routine transactions, such as internal approvals, non-sensitive contracts, or simple agreements, an electronic signature might be sufficient since it's faster and easier to implement, and still legally valid in many jurisdictions.??
However, implementing digital signature is a better choice for high-risk or sensitive transactions, such as legal contracts, financial transactions, or deals involving intellectual property. It is because digital signature provides stronger security, legal enforceability, and identity verification, which is crucial when trust and document integrity are critical.?
Thank you for reading and see you again next week!?
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