What is an Electronic Signature & How it Works: A Full Overview
- Last Updated: Mar 13, 2025
- 15 min read
- Sirion
intro
Businesses and individuals are moving away from traditional paper-based agreements and embracing electronic signatures. But what is an electronic signature, and how does it compare to a wet signature? This comprehensive guide will explore electronic signatures, their benefits, legal aspects, and how they integrate with modern contract lifecycle management systems like Sirion.
What is an Electronic Signature? Understanding the Basics
At its core, an electronic signature (or e-signature) is a digital representation of a person’s intent to sign a document. Unlike a wet signature, which requires physical ink on paper, an e-signature leverages electronic methods to authenticate and execute agreements seamlessly.
What Qualifies as an Electronic Signature?
An electronic signature can take many forms, including:
- Typed Signatures: Entering a name in a digital document.
- Click-to-Sign: Clicking a checkbox or button to indicate consent.
- Handwritten Digital Signatures: Drawing a signature using a touchscreen or stylus.
- Cryptographic Digital Signatures: Using encryption-based authentication to ensure security and validity.
Types of Electronic Signature
Electronic signatures (e-signatures) come in different forms, each varying in complexity and security. Understanding these types can help businesses and individuals choose the right method for their specific needs. Below are the main categories of electronic signatures:
1. Simple Electronic Signatures (SES)
Simple electronic signatures are the most basic type and can include:
- Typing your name at the end of an email.
- Clicking an “I Agree” checkbox on a website.
- Signing with a stylus on a touchscreen.
Use Case: Quick approvals, low-risk transactions, internal documents.
2. Advanced Electronic Signatures (AES)
Advanced electronic signatures offer a higher level of security by ensuring the signer’s identity is uniquely linked to the signature. They use encryption and authentication methods such as:
- One-time passwords (OTPs) sent to a mobile device.
- Multi-factor authentication (MFA).
- Unique digital certificates.
Use Case: Business contracts, legal agreements, and financial transactions.
3. Qualified Electronic Signatures (QES)
The highest level of security, a Qualified Electronic Signature is legally equivalent to a handwritten signature in many jurisdictions (e.g., under the EU eIDAS regulation). QES requires:
- A certificate issued by a trusted Certificate Authority (CA).
- Secure signature creation devices, ensuring encryption and authentication.
Use Case: Government documents, high-value financial agreements, legal filings.
Each type of electronic signature serves a different purpose, balancing convenience, security, and legal enforceability depending on the requirements of the transaction.
Benefits of Electronic Signatures
Electronic signatures have transformed the way businesses and individuals sign documents, offering a wide range of advantages. Here are some key benefits:
- Faster Document Processing: Gone are the days of printing, signing, scanning, and mailing documents. E-signatures allow instant signing, reducing turnaround times from days to minutes.
- Cost Savings: Using electronic signatures eliminates expenses related to paper, printing, postage, and storage. Companies save money by reducing administrative costs.
- Enhanced Security and Compliance: Digital signing methods (such as AES and QES) provide encryption, identity verification, and tamper-proof audit trails, making electronic signatures more secure than traditional paper-based signatures.
- Increased Convenience and Accessibility: E-signatures allow documents to be signed from anywhere, anytime, using a smartphone, tablet, or computer—ideal for remote work and global transactions.
- Eco-Friendly and Sustainable: Switching to electronic signatures helps reduce paper waste and carbon footprint, making it a greener alternative to traditional document signing.
- Legal Validity and Global Acceptance: Many countries legally recognize electronic signatures, ensuring they hold up in court when properly authenticated. Regulations like the ESIGN Act (USA) and eIDAS (EU) make e-signatures legally enforceable worldwide.
The use of electronic signatures and the tools that generate them has surged in recent years, with global eSignature transactions increasing from 89 million to 754 million over a span of five years.
Digital vs Electronic Signature: Is There a Difference?
Yes, there is a difference between digital signatures and electronic signatures, although they are often used interchangeably. Here’s a breakdown of how they differ:
- Electronic Signature (E-Signature)
An electronic signature is a broad term that refers to any electronic method of signing a document or agreement. It can be as simple as:
- Typing your name at the end of an email
- Clicking an “I Agree” checkbox on a website
- Drawing your signature with a stylus on a touchscreen
- Using e-signature platforms like DocuSign or Adobe Sign
- Digital Signature
A digital signature is a more secure form of an electronic signature that uses cryptographic algorithms to ensure the integrity and authenticity of a document. Digital signatures rely on:
- Public Key Infrastructure (PKI) to create unique, encrypted signatures.
- Certificates issued by trusted Certificate Authorities (CAs) to validate identities.
- Hashing and encryption to prevent tampering.
Digital Signature vs. Wet Signature: Which One is More Secure?
As businesses and individuals transition to digital workflows, a key consideration in contract execution is whether electronic signatures are more secure than traditional wet signatures. While wet signatures have long been the standard, digital signatures provide significant security, efficiency, and convenience advantages that are reshaping how agreements are executed.
The Security Limitations of Wet Signatures
Wet signatures require a signer to physically mark a document with ink, typically followed by manual verification. This process presents several vulnerabilities:
- Forgery and Fraud Risks: A wet signature can be easily forged, altered, or duplicated without proper safeguards.
- Lack of Authentication: Paper-based documents do not inherently verify the signer’s identity, making impersonation a significant risk.
- No Tamper Evidence: Changes to a signed paper document can go undetected, leading to potential legal disputes.
- Physical Storage and Loss: Paper contracts require secure physical storage, which can be cumbersome and susceptible to loss, damage, or theft.
The Security Advantages of Digital Signatures
Digital signatures, on the other hand, incorporate advanced security measures that enhance document integrity and authentication:
- Encryption and Authentication
- Digital signature technology uses encryption algorithms that protect the document from tampering.
- Authentication protocols, such as multi-factor authentication (MFA), ensure that only authorized individuals can sign.
- Audit Trails for Transparency
- E-signature software generates a comprehensive audit trail that tracks every action taken on the document.
- Metadata such as timestamps, IP addresses, email verification, and user identity logs provide undeniable proof of who signed and when.
- Remote Signing and Accessibility
- Unlike wet signatures, which require signers to be physically present, digital signatures allow contracts to be signed from anywhere.
- This is particularly beneficial for businesses with global teams, remote workers, and clients spread across different locations.
- Tamper-Evident Technology
- Once a digital signature is applied, any modification to the document renders the signature invalid.
- This provides an additional layer of fraud prevention, ensuring document authenticity remains intact.
- Regulatory Compliance and Legal Recognition
- Digital signatures comply with global e-signature laws, such as the ESIGN Act (USA), eIDAS (EU), and Information Technology Act (India), making them legally enforceable.
- Unlike wet signatures, which may require notarization for legal validity, digital signatures often meet compliance requirements without additional verification steps.
The Shift Toward a Fully Digital Contracting Ecosystem
The reliance on traditional paper-based contracts is rapidly diminishing as businesses recognize the inefficiencies of manual processes. Organizations are increasingly embracing e-signatures as part of a broader digital ecosystem that enables:
- Faster Turnaround Times: Digital contract signing eliminates delays caused by physical document handling, postal services, and in-person meetings, allowing agreements to be executed within minutes.
- Improved Compliance and Security: With built-in audit trails, encryption, and multi-factor authentication, e-signatures enhance document security and ensure adherence to international legal standards.
- Global Accessibility and Remote Collaboration: As businesses expand across borders, the ability to execute contracts remotely ensures seamless operations without geographical barriers.
How to Sign a Contract Electronically
Signing a contract electronically is straightforward and varies based on the electronic signature methods used. Here’s a step-by-step guide:
- Choose a Reliable Electronic Signature Software: Platforms like DocuSign, AdobeSign, and Namirial provide secure and compliant e-signature solutions.
- Upload the Document: The contract is uploaded to the e-signature platform.
- Place Signature Fields: Define where the signer needs to sign, initial, or provide additional information.
- Authenticate the Signer: Some platforms require identity verification via email, SMS, or biometric authentication.
- Review and Sign: The signer receives the document, reviews it, and electronically signs it.
- Store and Manage the Signed Document: Once signed, the document is securely stored and accessible for future reference.
By following these steps, organizations can ensure a smooth and legally compliant contract execution process. The ability to sign contracts electronically not only saves time and reduces paperwork but also enhances security and traceability. With seamless e-signature adoption, businesses can streamline approvals and focus on driving strategic initiatives.
The Key Legal Aspects of Electronic Signature
For an electronic signature to be legally binding, it must meet certain criteria. Below are the essential electronic signature features that ensure legal compliance:
- Intent to Sign: The signer must show clear intent to sign the document.
- Consent to Use E-Signatures: Both parties must agree to sign electronically.
- Tamper-Evident Technology: Documents must be protected against unauthorized changes.
- Audit Trails & Timestamping: E-signature platforms track every action taken on the document.
- Compliance with Legal Standards: Regulations like the eIDAS (EU) and ESIGN Act (US) dictate the legality of e-signatures.
These features ensure that electronically signed agreements hold the same legal weight as traditional handwritten signatures. Businesses adopting e-signatures must leverage platforms that comply with these key legal and security requirements. By doing so, they can mitigate legal risks, enhance contract enforceability, and facilitate seamless transactions in an increasingly digital landscape.
What Makes an Electronic Signature Legal?
The legality of electronic signatures depends on regulatory frameworks. Most countries recognize e-signatures as valid if they meet key criteria:
- U.S.: The ESIGN Act and UETA grant e-signatures the same legal status as wet signatures.
- Europe: The eIDAS Regulation categorizes electronic signatures into simple, advanced, and qualified signatures.
- India: The Information Technology Act, 2000 recognizes digital signature agreements as valid.
Understanding these regulations is crucial when choosing electronic signature software for business use.
The Challenges of Managing E-Signatures: Bottlenecks in Contract Approval and Execution
E-signatures have revolutionized contract execution, but when not integrated into a Contract Lifecycle Management (CLM) system, they can introduce inefficiencies that disrupt workflows, delay approvals, and complicate compliance. Managing e-signatures separately from contract management processes can create major bottlenecks and expose organizations to operational risks.
Key Challenges of Disconnected E-Signature Management:
- Fragmented Workflows: Without CLM integration, e-signatures must be manually tracked across multiple platforms, increasing the risk of missed deadlines and misplaced agreements.
- Compliance and Legal Risks: Different jurisdictions have unique e-signature laws. Manually ensuring each contract meets regulatory requirements can be error-prone and lead to compliance gaps.
- Limited Visibility and Tracking: Organizations struggle with real-time status updates on contracts, making it difficult to determine which documents are pending, signed, or awaiting approval.
- Inefficient Contract Execution: The lack of automation forces teams to rely on email-based document exchanges, which slows down execution, increases administrative overhead, and reduces productivity.
- Security and Authentication Issues: Manually handling e-signatures without a centralized system increases the risk of unauthorized access, document tampering, and fraud.
A CLM software with integrated e-signature capabilities, like Sirion, eliminates these challenges by providing a unified platform where contract execution, approvals, and compliance tracking are all seamlessly managed. By ensuring a smooth and legally compliant signing process, businesses can accelerate contract finalization, reduce risks, and enhance operational efficiency.
Sirion: A Unified Platform for CLM and E-Signature Management
Sirion provides a seamless way to manage e-signatures alongside contract lifecycle management. Instead of juggling multiple systems, businesses can oversee the entire contract execution process—including e-signing—within a single platform. This integration ensures that documents move efficiently through the signature process, reducing delays and administrative overhead.
One of Sirion’s biggest advantages is its integration with multiple leading e-signature providers, allowing businesses to choose the solution that best fits their needs. Sirion supports seamless e-signature execution with:
- DocuSign
- AdobeSign
- Namirial
- Moxis
- Leegality
- OneSpan
- SirarSign
By consolidating e-signature capabilities within the CLM platform, Sirion eliminates the friction associated with switching between different tools. This unified approach not only simplifies compliance and security but also enhances operational efficiency, ensuring that contracts are signed and finalized without unnecessary delays.
Sirion’s Product Update on Electronic Signature Enhancement
The Future of Electronic Signatures
The widespread adoption of electronic signatures is revolutionizing the way businesses handle agreements, marking a significant shift toward efficiency, security, and seamless collaboration. As digital transformation continues to accelerate across industries, organizations that leverage e-signature technology, especially when integrated with robust Contract Lifecycle Management (CLM) solutions like Sirion, will gain a distinct competitive advantage in contract management.
