Secure and remote signature processing is more important than ever — the digital signature market is projected to reach $5.5 billion by 2023. The pandemic has made asynchronous and remote signing more popular than ever. But this innovation has a dark side, security incidents are increasing, and not all signing solutions are secure. Before you decide on a signature system, here’s what you need to know about wet, electronic, and digital signatures and what you should expect from your vendor.
101: Wet Signatures
A wet signature is simply whatever physical mark someone applies to a written contract to signal agreement. For example, it could be an inked name, an X, a particular stamp, or a wax seal, depending on the laws and culture around the contract. And though wet signatures might seem obsolete, they’re still widely used, and sometimes even required for financial and legal paperwork. Stock certifications, deeds, new account applications and government licenses are just a few of the documents that still use pen-to-paper signatures.
Because these tend to be documents of vital importance, some of them require extra security. A notary public can witness the signing and attest to its validity with a specialized stamp or seal. In some cases, the signee needs to obtain a Medallion Signature Guarantee before securities can be assigned or transferred. These verification measures protect all parties from accusations of fraud, identity theft, or duress.
201: Electronic Signatures 101
An electronic signature, or e-signature, is simply a signature transmitted in an electronic form. This type of signature occurs in a broad spectrum of forms, including the point-of-sale signature pad consumers see at supermarkets, writing one’s name at the close of an email, checking a box and clicking “I agree” to consent to a user agreement contract, and even scanning a document with a wet signature and transmitting it electronically.
However, because electronic signatures allow easy use and can be applied so broadly, verification is difficult. There’s no notary public equivalent for electronic signatures, and they’re more vulnerable to legal challenges. That’s where digital signatures come in.
301: Digital Signatures
A digital signature combines the convenience of an electronic signature with the security of a wet signature. It’s still electronically transmitted but remember: all digital signatures are electronic, but not all electronic signatures are digital.
The security of a digital signature is based on public-key infrastructure (PKI), which embeds a digital, encrypted certificate in the document to verify the identities of the signing parties and ensures that no tampering has occurred after signing.
Further, digital signatures are differentiated under eIDAS (which applies to EU member states and serves as a guideline for other countries) as one of three types: simple, advanced, or qualified.
All three rely on PKI, but an advanced digital signature includes some form of ID verification for the signer, and a qualified digital signature guarantees that the signer’s identity has been verified face-to-face.
Obviously, digital signatures represent the height of convenience and security, so what’s the drawback? For most small enterprises, it’s cost.
Digital signature systems must adhere to strict regulations, and building the infrastructure from scratch is almost impossible. But with Docupace’s tech-forward platform, independent broker-dealers and RIA firms can offer their clients ease and safety in digitally signing their financial documents. Digital signatures are an embedded feature of the platform. Every process is SEC- and FINRA-compliant and encrypted data is securely stored in a Tier IV Gold data center. Contact us today for more information.
About Docupace
Docupace is a solutions provider focused on digitizing and automating operations in the financial advice and investment industry. Financial services firms use the Docupace Platform (a cloud-based, integrated software suite) to reduce back-office expenses, improve efficiency, strengthen recruiting, and enhance the experience of advisors and investors. With headquarters in Los Angeles, California, Docupace is proud to serve some of the largest independent broker-dealers and registered investment advisers (RIAs) in the financial services industry. For more information, please visit www.docupace.com.
