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What is a digital signature and what advantages does it offer SMEs?

Published on 2022-01-10 by Tessa Anaya and Bruno Peláez

Paper has been overshadowed since the use of digital systems took over the business world. These digital systems provide convenience and immediacy that other formats can’t offer. However, to validate and authenticate digital documents, a cryptographic system is necessary, especially for legally binding documents.

Out of all of the types of electronic signatures, digital signatures are the most interesting for remote organizations; but, what is a digital signature and how can SMEs use them? 

what is a digital signature? discover the uses, definitions, and benefits of digital signatures

What is a digital signature?

A digital signature is a system that allows the recipient of a message to:

  • Identify the company/person/organization who created and sent the message. This is called authentication.
  • Confirm that the message has not been modified after it has been signed and sent. This is called integrity.

To do this, digital signature systems use cryptographic technology. In other words, they encrypt the data related to the sender so that they are undecipherable to anyone who might try to access them without authorization.

For legal purposes, the digital signature has the same value as a handwritten signature, since it makes it possible to establish the identity of the author. In fact, it is much more difficult to forge and, therefore, much more secure.

What’s the difference between electronic signature, digital signature, electronic certificate and digitized signature?  

Often, these four concepts are used as synonyms when, in fact, they have nothing to do with each other. Let’s explain what each one refers to so that there is no confusion:

  • Digital signature: as explained above, this is an encryption and encoding system that allows the receiver of a message to identify who has sent it and confirm that it has not been altered since its creation. It has legal validity. For example, it can be used to validate a contract between two companies or between an individual user and a company providing a service.
  • Digitized signature: a signature made by hand that is subsequently scanned using a camera or a specific device so that it can be manipulated using a computer. For example, once stored, it could be pasted at the end of any email, typed letter or text document. It lacks legal validity and is used primarily as a symbol.
  • Electronic signature: This is a legal concept that encompasses the digital signature but is not synonymous with it. It is an action by which a subject confirms that they understand, validate and accept the content of a message using an electronic medium. An electronic signature would occur, for example, when you enter your credit card PIN code in a card reader to make a purchase, when you access your email account and enter your username and password, and even when you accept the terms and conditions or cookie policy of a website.
  • Electronic certificate: this is an electronic file that, once installed in a web browser, allows authorities to identify the person using the equipment. With it, the user will be able to carry out procedures and perform digital signature processes. For example, to file a tax return through the Canada Revenue Agency’s (CRA or Revenue Canada) online portal, an electronic certificate is required.

Advantages and benefits of a digital signature

A digital signature offers a wide range of benefits compared to the traditional handwritten signature. These include:

  • Guaranteed confidentiality: The signed document will only be visible to users with authorization to access it. For others, it will be fully encrypted.
  • Offers more security: Once the document is digitally signed, it cannot be modified. Therefore, its authenticity, as well as the identity of the signatory, is beyond doubt.
  • Saves on travel and transportation: documents can be digitally signed from anywhere with access to a computer or mobile device.
  • Protects the environment: Obviously, the use of digital signatures means a considerable reduction in the use of paper. This also means less space is needed to store documents (especially when cloud storage is used).
  • Achieves greater efficiency when carrying out processes: digital processes are always faster than manual ones. With a digital signature, waiting time is reduced and the company’s productivity can be increased.

Examples of the uses of digital signatures

Here are some examples of digital signature software’s uses:

  • Signing invoices: this is not the same as generating electronic invoices. For example, digitally signing these documents is mandatory whenever interacting with a city council, regional government or other public administrative body.
  • Signing contracts: your company may operate remotely or you may simply want to streamline certain tasks by avoiding unnecessary travel. With a digital signature, you can give legal validity to a document from anywhere.
  • Signing emails: generally, people think of digital signatures as simply recording data related to the time of creation, sending, place, etc. However, using a digital signature program adds an additional layer of security so the recipient can be absolutely sure it was you who sent it. Obviously, this is not required for every message you send, but it is necessary for the most important and sensitive messages.
  • Confirmation of documents: digital signature software can verify minutes of virtual meetings carried out via applications such as Skype, for example. This system allows more than one digital signature to be added to the document.
  • Confirmation of official procedures: from a simple tax return to a grant application, some documents require careful verification. In these processes, it is useful to use a digital signature.

Why should SMEs use digital signature software?

There are many reasons for using digital signature software. Digital signature software allows small and medium-sized companies to save time and paper as well as improve their document management . In addition, it speeds up contracting processes and administrative work and guarantees the highest degree of confidentiality and privacy. These tools help SMEs generate trust and allocate finite resources like time where they are most needed.

When it comes to choosing which tool suits your business best, there are a number of factors to take into account. For example, it depends on the type of business you operate in, the contracts you handle and the volume of transactions you have to carry out every day.

You need to consider all these factors to be able to make the right decision when it comes to implementing digital signature software for your business.

Looking for digital signature software? Check out our catalogue.

This article may refer to products, programs or services that are not available in your country, or that may be restricted under the laws or regulations of your country. We suggest that you consult the software provider directly for information regarding product availability and compliance with local laws.

About the authors

Tessa is a Content Analyst for GetApp, delivering software-related insights to local SMEs. She was featured in the Globe and Mail, La Presse, the Financial Post, and Yahoo.

Tessa is a Content Analyst for GetApp, delivering software-related insights to local SMEs. She was featured in the Globe and Mail, La Presse, the Financial Post, and Yahoo.

Bruno is a Senior Content Analyst for GetApp. Tech expert, currently specialized in B2B software trends. You can find him immersed in data and text or in drawing a labyrinth.

Bruno is a Senior Content Analyst for GetApp. Tech expert, currently specialized in B2B software trends. You can find him immersed in data and text or in drawing a labyrinth.