What is electronic signature and why does your company need it?

What is electronic signature and why does your company need it?

In a context where digital transformation is a necessity for businesses, being aware of what electronic signature is and its usefulness is absolutely essential.

Definition and differences: digital vs. electronic signature

A signature is a mark that serves to indisputably identify the signer of a document and validate their consent regarding what is stated in that paper. In other words, it is proof of a person's will and their commitment to what the document expresses.

In the digital age, signatures can also be captured through electronic format, which leads us to discuss digital signature vs. electronic signature.

Electronic signature, definition

Electronic signature is defined in Regulation (EU) 910/2014, known as eIDAS, as the set of data in electronic format that is annexed to other electronic data or is logically associated with it, and which is used to sign.

The meaning of electronic signature refers to any electronic method that allows a person or company to express their consent, approval or intention to sign a document digitally. This includes everything from simple formulas like checking a box on a form to cryptographically sophisticated procedures.

Its key characteristics are:

• Link to the signer. It must be logically associated with a person or company.
• Electronic means. It is not a handwritten signature scanned on paper, but an action performed within the digital environment.
• Legal purpose. It shows the willingness to sign and has full legal validity.

Digital signature, definition

This is a technical subcategory within the broader concept of electronic signature. It refers to a form of signature through electronic means that uses public key cryptographic algorithms. This allows:

• Guaranteeing the authenticity of the signer. Verifying that they are who they claim to be.
• Ensuring document integrity. Being able to detect if it has been modified after signing.
• Providing "non-repudiation". Because the signer cannot deny that they signed the document.

For digital signature to occur, two keys must be used. A private key that only the signer possesses and a public key that serves to verify the signature. If the document changes, the encrypted digital fingerprint will change and this allows fraud detection.

The term "digital signature" is not expressly mentioned in eIDAS or in Law 6/2020, regulating certain aspects of electronic trust services. But it is understood that advanced and qualified electronic signatures that use digital certificates are considered digital signatures. Thus, an electronic signature that has a cryptographic basis and digital certificate is a digital signature.

Differences between electronic signature and digital signature

To understand what electronic signature is, what must be clear is that this is a broader legal concept, which includes from simple electronic methods to advanced mechanisms. In contrast, digital signature is a subtype of electronic signature that is based on asymmetric cryptography and is used in advanced or qualified electronic signatures.

Types of electronic signature

Understanding how electronic signature works requires knowing the different types that exist.

Basic or simple electronic signature

It is the simplest form and responds to the general concept of "electronic data associated with a document that the signer uses to sign". This includes electronic methods of accepting contractual conditions, such as checking a verification box, and even a handwritten signature on a paper document that is then scanned.

This type of signature identifies the signer, but offers a low level of security compared to other modalities, because it does not incorporate strong technical verification measures.

Advanced electronic signature

It has a higher level of security than the previous one, because it meets the requirements demanded by eIDAS:

• It is uniquely linked to the signer.
• It allows the signer to be identified.
• It has been created using data that the signer can use under their exclusive control and with a high level of confidence.
• It is linked to the signed data, so that any subsequent modification of that data will be detectable.

This signature is implemented through cryptographic methods such as a digital certificate, thus ensuring the signer's identity and document unalterability. All this achieves a higher level of security than a basic electronic signature.

Qualified electronic signature

It is the one that offers the highest level of legally recognized security. The eIDAS defines it as the advanced electronic signature that is created through a qualified electronic signature creation device and is based on a qualified electronic signature certificate.

That is, it meets all the requirements of advanced signature and, in addition, requires the use of a qualified certificate issued by a qualified trust service provider. This maximally ensures the signer's identity and protects against document manipulation once it has been signed.

It is, therefore, the electronic signature with the greatest technical and legal guarantees collected by both Spanish and European legal systems. As provided by the applicable European Regulation in this matter, this signature has the same legal effects as a handwritten signature on paper, in any Member State of the European Union.

Electronic signature for companies, which one does my business need?

Each company is unique and, therefore, there is no single answer. The electronic signature needed in each case will depend on the level of security and legal validity required. For example, for most private contracts, such as one signed with a raw materials supplier, an advanced electronic signature is sufficient. However, for particularly sensitive or regulated procedures, such as participating in a public tender, a qualified electronic signature may be necessary.

The eIDAS states that electronic signature, whatever type it is, always has legal validity. The difference is that advanced and qualified ones provide greater evidentiary strength and more security. Hence they are the most used in the business environment.

Advantages of implementing electronic signature

The benefits of electronic signature for companies are multiple and extend to different areas.

Time savings and agility in procedures

With this system, signing contracts and documents is much simpler and faster, because there is no longer a need to coordinate physical meetings or send paperwork by postal mail. Documents can be signed instantly from any computer or mobile device, even if the signers do not share the same physical space.

A paper signature can take weeks to materialize, while signing a document electronically can be resolved in less than a day. This shortening of deadlines allows businesses to close quickly and better take advantage of market opportunities.

Operational cost savings and improved use of human resources

By replacing paper signatures with their electronic version, companies save on paper, printing, courier costs, and expenses associated with storing physical documents. Additionally, the automation and/or elimination of processes that were previously manual (document scanning, printing, filing, etc.) allows employees to dedicate their time to higher value-added tasks.

For each document signed digitally instead of by hand, several euros can be saved. Multiplying the savings achieved over a year, the figure can be thousands of euros, or even millions, depending on the volume of documents the company handles.

Greater efficiency and productivity

Repetitive administrative tasks end up reducing employee motivation and negatively affect their productivity. In contrast, by implementing an electronic signature system, teams spend less time on administrative tasks and can dedicate themselves to strategic tasks.

This is very noticeable in sales teams. If they no longer have to worry about printing contracts, meeting with the client to sign them, and sending them to the company, they can dedicate more time to their commercial work and get new clients and more orders.

On the other hand, contract management automation through electronic signature avoids human errors and saves time lost in solving them. The result is that the company is more productive and has more capacity to handle a larger volume of operations without needing to expand its human team.

Ease and convenience

One of the great advantages of electronic signature is that it offers geographical and time flexibility. Documents can be signed from anywhere and at any time, you just need an internet connection.

In a scenario where teleworking and doing business remotely is increasingly common, this system facilitates conducting business remotely.

Security and document integrity

When analyzing what electronic signature is for and what benefits it brings at the business level, one cannot overlook how much it reinforces transaction security. In fact, it becomes more secure than paper signature. Because digital signatures use cryptographic algorithms and digital certificates that are responsible for guaranteeing the undoubted identity of the signer and document integrity.

Each signature has an associated trace or record that serves to know who signed the document and when. This provides greater protection against fraud or forgery compared to handwritten signature on paper.

Legal validity and regulatory compliance

Implementing electronic signature in the company brings advantages at a functional level, but also at a legal level. Because this system is legally secure, even more so when using a qualified electronic signature, which is considered equivalent to a handwritten one.

This provides peace of mind to companies when signing contracts, authorizations and all types of documents.

Environmental benefits

Sustainability is already part of the Corporate Social Responsibility (CSR) of many companies, and there is no better way to care for the environment than by reducing paper and ink consumption, and reducing the CO2 footprint. Because when using digitally signed documents, there is no need to spend energy printing them or transporting them to the recipient.

These sustainability policies are highly valued by consumers, investors, and potential partners, and contribute to improving the public image that a company projects.

Sectors that benefit most

All business sectors can take advantage of electronic signature benefits, but there are some where its adoption is especially important, due to the large volume of documentation handled and/or the need to streamline processes.

Human Resources

Human Resources departments generate a large number of documents that need signatures: employment contracts, confidentiality agreements, etc. Implementing electronic signature simplifies and streamlines procedures such as onboarding new employees.

Automating these tasks saves paperwork and reduces management times, increasing HR employee productivity and improving the employee experience when they need to handle procedures with the company.

Financial and banking sector

Contracts related to financial products involve a lot of in-person signing, but that is changing. Because thanks to electronic signature, contracting financial services and insurance has been simplified and is now much faster.

In a sector where security is paramount, advanced electronic signature is the best way to guarantee the identity of signers and document integrity. Additionally, this system offers greater convenience to the customer, who can sign from the bank's app without needing to go to the office.

Real estate sector

The purchase, sale and rental of real estate involve signing numerous documents: earnest money contracts, offers, rental contracts, purchase contracts, etc. At a time when transactions need to be closed quickly, electronic signature allows transactions to be done instantly, even when the client is abroad.

This system manages to significantly improve the customer experience, who can access the house or premises they need sooner.

Technology sector and e-commerce

Companies with a technological base are examples of electronic signature, because they use it in their daily transactions. Through it they sign contracts with their suppliers, customers, and even investors.

This system allows an agility that is a hallmark of companies operating in the technological field, e-commerce and also in startups. Being able to sign contracts immediately gives them a competitive advantage that can make the difference when it comes to growing faster.

Healthcare and pharmaceutical sector

In hospitals, clinics and pharmaceutical companies, speed and security are critical factors when it comes to handling documentation. In these sectors, electronic signature can be used for very different purposes such as: hiring medical staff, closing agreements with healthcare providers, allowing patients to give informed consent before an intervention, etc.

This reduces bureaucratic procedures and allows more time to be dedicated to patient care or research, which is what really matters.

Conclusion

Now that you know what electronic signature is, what it's for and what its advantages are, you'll better understand why it has established itself as a fundamental piece in the digital transformation process. It's no wonder that more and more sectors are implementing it to optimize their daily operations and gain competitiveness in a highly digitalized environment.

If your company still manages contracts and documents on paper, it's time to take a quality leap towards a digital solution as effective and secure as electronic signature. In a short time you will see how business cycles accelerate, bureaucracy is simplified and the guarantees of your agreements are strengthened. But implementing electronic signature requires having a trusted partner to make the whole process as agile and simple as possible. Therefore, if you are clear that this is a priority within your digital transformation process, don't hesitate to count on our team.