What Are the Advantages & Disadvantages of an Electronic Signature?

by Wanda Thibodeaux; Updated September 26, 2017
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As of 2010, businesses rely increasingly on technology to produce goods and services and fulfill business tasks. To accommodate these changes, businesses sometimes use electronic signatures, also known as e-signatures or digital signatures. These signatures take the place of traditional ink-on-paper signatures. There are pros and cons associated with using an electronic signature, all of which a businessperson should know before implementing an electronic signature system or policy.

Equipment Cost

Electronic signatures are created and read by sophisticated technologies that use networks to verify personal data like business location or social security numbers, or which are advanced enough to compare points within handwriting or a fingerprint with points in images in databases. This equipment isn't always cheap, as pointed out by Beginners Guide. Even once initial costs are met, advances in electronic signature technology will mean that a business must continually update its electronic signature systems and provide technical support.

Deterred Clients

Electronic signature systems assume that people will be comfortable or familiar with the electronic signature methods and equipment. However, previous generations of individuals may not have been exposed to the newer technology and thus may have trouble initially using it. Even tech-savvy individuals still will have to stay abreast of technological changes if they want to conduct business electronically in the future. The lack of exposure to methods and equipment, along with a need for continuing technology education, may deter some clients from using an electronic signature.

Recognition

Work led by Fritz Grupe published in the 2003 issue of The CPA Journal indicates that there is inconsistency in the recognition of electronic signatures as of 2010. People are not necessarily required to recognize an electronic signature as valid, depending on their jurisdiction.

Authentication and Verification

In terms of authentication and verification of identity, an electronic signature can be better than an ink-on-paper signature, depending on the system used. For example, if someone loses an unsigned credit card, someone else can sign it and the signature on the back of the card will match receipt signatures, even though the person signing isn't the card owner. By contrast, an electronic signature system that relies on fingerprints is much more secure because one cannot replicate or forge the fingerprint matrix.

Long-Distance Business

With an electronic signature, an individual does not have to be in the same geographical location to complete a transaction or validate a contract. People thus can use electronic signatures to conduct business from thousands of miles away if needed, increasing global business opportunities and potential profit margins.

Material and Storage Reduction

The U.S. Immigration and Customs Enforcement and Grupe both argue that electronic signatures reduce the amount of materials used on a regular basis and take less space to store. Furthermore, electronic signatures facilitate tasks such as e-filing and electronic file and database searches. This reduces time needed to find and verify data. Overall, these factors can reduce business costs.

About the Author

Wanda Thibodeaux is a freelance writer and editor based in Eagan, Minn. She has been published in both print and Web publications and has written on everything from fly fishing to parenting. She currently works through her business website, Takingdictation.com, which functions globally and welcomes new clients.

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