Signing Off

President Clinton endorses digital signatures, but the benefits will be slow to appear

Digital signatures dangle the promise of relief for companies buried in paperwork by offering a faster, cheaper method of conducting online transactions. Everyone stands to benefit; the only question is when.

On June 30, President Clinton signed the Electronic Signatures in Global and National Commerce Act. Interest groups and analysts lauded the legislation, which is technology-neutral and contains consumer protections, including opt-in requirements and the provision that vital notifications such as eviction notices and utility cutoffs must be in “written” form.

But don’t expect widespread adoption soon. Congress, wary about stifling business growth on the Internet, deliberately omitted any mention of specific technology. That approach, however, may be both a blessing and curse. According to a Forrester Research July 6 brief, a plain-text email contract could have the same legal standing as one with strong encryption protections. By leaving authentication standards for contracts ambiguous, Congress has left the validity issue to the judicial body to decide.

The initial confusion over standards may mean additional costs and legislation before e-signatures are commonly adopted. Forrester predicts that consumer use of e-signatures may be as far away as five years.

Many analysts acknowledge that before consumers begin to trust this technology, e-signatures must carry the same psychological impact as putting pen to paper. Most companies producing digital signature technologies rely on public key infrastructure (PKI), which uses encrypted keys authenticated by a third-party certification authority. Some companies believe that these digital signatures, which are invisible to the user, need to be more consumer friendly.

The San Francisco Chronicle (July 5, 2000) reports that Signature-mail.com, which offers consumers the ability to attach a digital picture of their signature to an email, may offer the needed “human touch” to make encryption products like those offered by Mountain View’s Verisign more approachable to users. The paper also reports the use of biometric signatures by companies such as Communication Intelligence Corp. of Redwood Shores, Calif., and PenOp, a privately held New York company. Both offer authentication systems based on how people write their names on a digital pad.

Despite the eagerness of these companies, the law places the burden on businesses to verify whether consumers have the ability to use digital signatures, and the associated implementation costs are high. Initial adopters will most likely be B2B businesses — 50 percent of those interviewed by Forrester will have a PKI initiative in place by 2001— but even B2B use may be limited until 2003 while businesses align their processes and infrastructure.

The new law will eventually have a deep impact on the way the public views online commerce, but don’t throw away your pen any time soon. Consumers will need education and incentives to use e-signatures, and the current arena does not make this technology profitable for all businesses. The rules and guidelines need to be ironed out before a true paperless society can be achieved. In the meantime, the new law is a step in the right direction.—Michelle Nichols