Signing forms in triplicate may soon be a thing of the past thanks to legislation making electronic signatures legally binding.
Almost every developed country in the world has passed, or is getting ready to pass, laws surrounding electronic signatures.
Blake Sutherland, product manager for Ottawa-based Entrust.net, expects digital signatures to be a very popular form of electronic signature.
A digital signature is an electronic signature to be used in all imaginable types of electronic information transfer. Digital signatures are based on mathematical theory and use the form of algorithms. They require that the holder of the signature have a two-key system for signing and verification (one private, the other public). Digital signatures are created by certification authorities. There has been a lot of excitement over the signature authentication legislation worldwide, Sutherland noted.
“This has made it so that things can be done that couldn’t be done before. In the past if you were negotiating a mortgage on-line there would be a point when you would have to print it, sign it, initial it, and then courier the mortgage. Now a digital signature is legally binding. It allows that process to be entirely Web-based,” Sutherland said.
Bob Pratt said he could see digital and electronic signatures being used for one-time transactions, and transactions involving a group of people.
“In the past if you wanted to sign a contract on-line, you had to get a group of people to sign a statement that made their signatures binding – there was no point. Now, the signatures are automatically binding and it will make the process more useful and quick,” said Pratt, director of product marketing for Mountain View, Calif.-based VeriSign Inc.
“It’s not just deciding to do it, it’s deciding to do it and it’s legally sanctioned.”
Entrust’s Sutherland noted that digital signatures are one of the more secure forms as they provide some proof of what was verified.
“The signature is unique to what is being signed,” he said. “If someone tried to change a signed document, the signature would no longer be verifiable.”
Digital signatures are used as a certificate. A certificate is a computer-based record that identifies the subscriber, contains the public key and is digitally signed by the certification authority. The digital signature certificate must be associated with both a private key and a public key. When you publish the certificate, you identify yourself to the certification authority by providing it with your public key.
When you use your digital signature software, you create a matched pair of keys. One is the “private” key, which is typically installed on your computer. The private key is used only by you and is required during the signing process.
The second key is the “public” key. The public key is available for use by anyone wishing to authenticate documents you sign. The public key will “read” the digital signature created by the private key and verify the authenticity of documents created with it. It would be similar to the process of accessing a safety deposit box. Your key must work with the bank’s key before opening the box.
Pratt predicted many people will use this legislation as part of their on-line financial transactions. He mentioned transferring funds from account to account or even bank to bank as one possibility.
Pratt noted that last year when he bought his house he had to go through a lot of paper, and that paper had to go through a lot of hands.
“I would say that next year I would be able to find all the players on-line and have the entire transaction done with the mortgage as the only paper,” he said.
Pratt added the passing of such legislation is not going to bring great change right now.
“It’s not an explosive event,” he said. “It’s more like the beginning of an avalanche.”
Acceptance still pending
Lawrence Weinberg, a partner with Toronto-based law firm Cassels, Brock and Blackwell, said it will take time for people to accept and use electronic signatures.
“I think time will get people over the hurdle. There was a time when people wouldn’t give their credit card number out over the phone and they do now – and that’s probably more dangerous than anything,” he said.
He added there will be fraud, because fraud is everywhere, but noted the on-line transactions will probably be fairly safe.
“I think the Internet will prove trustworthy,” Weinberg said. “Clearly it is the future. A lot of money is being spent to ensure privacy, secrecy and security, and another load of money is being spent on publicizing it so people get over their concerns.”
He said that in Ontario, there are plans underway to make the entire process of land registry paperless.
“The whole land registry system – whereby you get a paper deed to your house – if being replaced by an electronic system. This change has been underway for 10 years and will be underway for another 10. They have to enter all that data and make sure the entries are correct,” he said.
He added that acceptance in that kind of change will come because sooner or later it will be the only way to do it.
He did note that there are some things that could now be bought over the Internet, that people will just not buy.
“There will always be things people want to go out and see and touch before they buy, like a car. But there will be other kinds of transactions where large amounts of money will move across a wire or air, and that will become very commonplace,” Weinberg said.
He has already used electronic signatures, and noted that so far, in the legal profession, it has not cut down on paper use.
“There are reams of e-mails,” he laughed. “Lawyers are known for wanting paper files where they can track a chronology of events by flipping pages.”
He suggested that worldwide standards will have to be developed and systems adopted as people will not only communicate instantaneously around the world but finalize transactions and contracts in a matter of hours versus days.
Pratt agreed, and noted there will be some culture clashes in the way business is handled, but that time will sort out all those differences.
“It’s the same with credit card use. It is less common in Europe than in North America. So at first North America may use electronic signatures more, and then after a time they will be in use globally,” Pratt said, although he noted some of VeriSign’s biggest digital signature certificate clients are in Japan.