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By Jason
Lemkin
Since the federal Electronic
Signatures in Global and National Commerce Act (ESIGN) was passed a decade
ago, the availability of legally binding electronic signatures has
revolutionized the way companies work with partners, customers and
vendors. ESIGN just celebrated its 10th
birthday, and the market can look back on a decade of secure, legal
e-signatures that facilitate business, close deals quickly and overhaul
paper-wasting systems in an ecologically sensitive and cost-effective way.
A
Law to Protect Consumers and Businesses
In October 2000, ESIGN delivered the
convenience of electronic signatures with the consumer protections of
appropriate notifications, disclosures and assurances of technological
neutrality and universal access. The
legislation also provided for authentication processes, privacy protection,
legal certainty, fraud shields, easy document access and record retention. Among the most important ESIGN provisions
are:
· Consumer
protection and notification: This provision protects the signer
and clearly discloses information to consumers so they can consent to sign
electronically; the notification must be disclosed so that it is timely,
conspicuous and easily understandable. Most
e-signature services notify the signer a number of times that they are being
asked to use an electronic signature before they actually e-sign the document.
· Technology
neutrality and universal access: ESIGN does not
prescribe the use of a particular technology for the transmission of electronic
signatures; rather, the act leaves those choices to the marketplace. However,
this provision mandates that the consumer have access to a computer, to the
Internet and to the necessary software required to open the documents.
· Authentication
and privacy: Consumers
who sign contracts electronically have the same security that they have when
accessing their personal or corporate e-mail. In addition, the sender can use a
password to protect the contract and communicate this password to the signer
(also known as out-of-bandwidth password protection) separately.
· Legal
certainty and fraud protection: Businesses can
be certain that they obtain consent and provide documents in a manner
sufficient to make the electronic signature transactions legally valid.
Consumers are protected from businesses changing the terms of the contract.
Both parties gain easy access to an electronic trail to confirm the
transaction.
· Document
access and retention: This
provision ensures the ability of all parties to easily access contracts and
retain records. After the contract has
been signed, the signer and the consumer should get a copy of the executed
contract via e-mail. The executed contract will generally arrive as a PDF file
to prevent changes post execution.
E-Signatures Mature to Reflect Modern Business Applications
and Etiquette
In
the 10 years since ESIGN established general parameters for electronic
signatures, the market has adopted the practice of Web-based authentication and
built upon the original technology that spurred the law. The results have changed the business
landscape for industries including insurance, travel, law and many others. There are several reasons why. First, e-signatures deliver a proven return on investment with a
sales cycle reduction of between 200 and 400 percent. With more efficient sales processes,
employees are free to follow new leads and create more positive experiences for
prospects.
Businesses have
also found ways to leverage today’s social networks to further enhance the
e-signature process. ESIGN laid the
foundation for incorporating the social graph into business applications.
Facebook, LinkedIn and Google Web identities enable users to e-sign contracts and
other documents with easier and more secure authentication. With more than 500 million users on Facebook
and more than 100 million users on LinkedIn, virtually every signer currently
has a rich Web identity via her or his social graph. The social signing process is one sign of the
ways in which this 10-year-old market has grown up in recent years.
Another sign of
maturity in business practices is the rise of widely acknowledged etiquette
practices. As
electronic signatures have moved from the early-adopter phase to the
mainstream, the questions regarding the technology have evolved, as well. In the early days, the basic questions had to
do with legality. Now, subtler questions arise. Many of them have to do
with acceptable customs. More and more businesses complete their contracts via
e-signatures than ever before, but this process is still new enough in many
industries that proper etiquette demands that initiating parties give their
partners and customers some information up front.
It’s easy enough to have a
conversation first, either by phone or e-mail, to alert a recipient that the
expected documents will arrive electronically and can be signed in the same
manner. By initiating this discussion,
the document owner gains the chance to educate his partner or customer, who
will undoubtedly, in turn, educate others.
Future Innovation In Electronic Signatures
If the next 10 years follow the
example of the last, we will see a number of significant innovations in
e-signing practices by 2020. Hints of
what they might be are already visible in the market. Among the future trends to track are
customized and branded e-signature home pages, integration with business
applications such as Google Docs, pre-population of customer messages,
multi-language support and untold other features that are bound to make
e-signatures an integral, value-added method of doing business in the modern
world.
The ESIGN law of 2000 was prompted by calls
to make electronic signatures legally binding.
Its long-term effects, however, are more far-reaching. The enforceable electronic signature enables
greater business efficiencies, better customer service and quicker sales
cycles. The act itself, signed with ink
on paper, will resonate digitally for years to come.
Jason
Lemkin is CEO and co-founder of EchoSign,
a web-based provider of electronic signatures.
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