A bill signed by US President Clinton on June 30 that granted e-signatures the same legal standing as traditional “wet” ones is now in effect. The businesses pledge is a new world of e-commerce that is faster, cheaper and less vulnerable to fraud.
The Electronic Signatures in Global Commerce Act did not dictate that any particular technology be used. That means consumers can expect a proliferation of competing mechanisms for bringing signatures into the digital age, from encryption-based “digital signature” systems – essentially software that uses scrambled numbers to identify a particular person – from companies like Entrust Technologies and VeriSign to a simple signing mechanism, which updates ancient and familiar practices.
Analysts estimate that electronic and digital signatures will lead to 80 percent of all financial transactions being completely automated the next five years.
Unlike the electronic scribbles consumers leave on devices connected to cash registers when they use credit cards, which merely confirm an earlier pen-on-paper signature used to open the account, the e-signatures stand on their own and can be used to open accounts, buy insurance or even buy a home.
More than 40 US states had already officially recognized some form of electronic signatures before Congress passed legislation in June, but the federal imprimatur is expected to give the technologies the boost they have needed to make them part of the way consumers do business.
Typically, consumers and businesses wait days or even weeks for documents to wend their way through the process of being composed, mailed, signed and rushed back via expensive overnight delivery services. Many of those tasks and added costs can be eliminated when documents exist in electronic form from start to finish.
Software has been developed that will allow users of Palm hand-held organizers and new organizer-equipped wireless phones to turn the devices into signature pads – enabling a user, for example, to lock in a mortgage rate from home, or while commuting.
The CyberSafe Corporation is developing another form of electronic signatures, one that uses a “smart card,” essentially a credit card-sized device that can be embedded with a user’s unique code and other data and then can be plugged into specially equipped computers to establish identity.
James Cannavino, the chief executive of CyberSafe, has estimated that the current $500 that an online brokerage firm he is working with spends in processing the paperwork for a new customer can be reduced to $50 or less with electronic signatures. Cannavino, who has served as a top officer at I.B.M. and Perot Systems, told a trade show audience recently that his company was working with an airline to assemble a smart-card system that would allow frequent business flyers to pay for a ticket, establish their identity and log frequent flier mileage with the swipe of a card.
An online brokerage firm has long allowed new customers to open accounts entirely online, but follows up with paper forms to be signed and returned. Now, under the new legislation, the company will need no paper version.
Although the new technologies have been given greater legal weight under the new law, consumers need not play the e-signatures game. Under the terms of the legislation, consumers have a choice as to whether to sign their contracts with a pen or a click.
Electronic signatures could mean cost savings and convenience for consumers, but questions about security and liability for fraud have yet to be worked out.