On June 30, 2000, President Clinton signed the Electronic Signatures in Global and National Commerce Act guaranteeing digital signatures to be every bit as valid as traditional handwritten signatures. This law, which went into effect on October 1, 2000, will almost certainly affect the way people do business in this country because it promises to streamline business transactions.

The new federal law states that "a signature, contract, or other record relating to such transaction may not be denied legal effect, validity, or enforceability solely because it is in electronic form." Plainly stated, this means that a document with a digital signature is as legally binding as one with a handwritten signature. In the near future, people will be able to sign contracts, automobile titles, real estate deeds, and even wills without pen and paper. This new technology has many advantages since digital signatures are more reliable, fraud-resistant, private, and secure. A standardized method of implementing digital signatures will allow people to enter contracts and pay debts remotely without the use of credit cards. This technology will facilitate other transactions that credit cards can't handle such as the verification of doctor prescriptions and invoices.

The concept behind how digital signatures work is fairly simple. Someone must first record their identity with a registration authority, which then issues that person a unique digital signature. Anytime that person uses the digital signature, the merchant checks with the registration authority to confirm that the person and their signature match. This eliminates the possibility of forgery because one person may only be associated with one signature. In the wake of this new legislation, many companies are now trying to corner the market with systems that will support widespread use of this technology. One such company is DocuTouch, which struck a deal with Microsoft to incorporate their technology into Microsoft Word 2000, allowing people to use digital signatures down to the paragraph on secure documents. When a person records their identity, DocuTouch will send a licensed notary to their home or office for verification before it is recorded in their system. Another company that wants a share of this market is Orem, Utah-based iLumin. This company has built digital signature systems for courts and government agencies and they are now looking to expand into industries such as banking and real estate. While these industries will probably adapt first to this technology, the need still exists in the industrial marketplace for things such as purchase orders and bills of lading.

The biggest obstacle digital signature companies face is the element of consumer trust. Many people who use the Internet on a daily basis are still hesitant to make online purchases. The same will probably hold true with people using digital signatures. Just because this law is now in effect does not mean that people will be eager to sign a mortgage with their digital signature. Even though this new technology is safer and more secure than the traditional method of signing documents, it won't make a bit of difference if people aren't comfortable using the technology for major transactions and contracts. Right now, this market is wide open and waiting for one company to step up and become the leader. Industry analysts tend to believe that the company that is first to make the consumer comfortable using this technology will emerge as the pacesetter. VeriSign, one of the most recognized brands in software authentication, is striving to become the Intel or Cisco of digital signatures. They are currently working with several other companies to develop technology that runs in the background of signature transaction processing. Because VeriSign is a trusted brand name with their seal of approval on thousands of web sites, they will be in better position than some of the lesser-known companies trying to compete in this space.

Digital signatures stand to change the way Americans conduct business for years to come. This is especially true regarding business-to-business e-commerce. People will no longer have to be physically present in order to sign a contract or legal document. They will be able to swipe a smartcard to provide verification of their identity. Up until now, a document would have to be sent out, signed and returned to the originating party. This will no longer be necessary with the advent of digital signatures. Business can be conducted more rapidly and seamlessly than ever before with less margin for error.

Source: The New Deal
Rick Overton
Business 2.0, November 28, 2000
http://www.business2.com/content/magazine/indepth/2000/11/20/22841