The law is designed to make consumers and businesses feel more secure about sealing big-ticket deals, such as buying a house, online by making an electronic signature just as binding as one in ink. While that legal guarantee is expected to accelerate the growth of e-commerce, the law may be more of a boon for companies developing e-signature technology than for consumers or businesses, analysts said.
Corporations and government offices have been working to implement a variety of competing e-signature technologies since June, when President Clinton signed the bill into law--doing so first with a ballpoint pen and then using a smart card to mark his digital signature.
While this is an important first step in moving all aspects of business online, analysts say it will take time for the program to gain consumer confidence.
"Most of the digital signature excitement is fluff," said Gartner analyst Joe Pescatore. "We will not see immediate results. Consumers aren't leaping to buy cars or homes online. There is no real public outcry for a need for digital signatures."
A digital signature generally looks nothing like the handwritten version. It relies on encrypted algorithms that must be used with a password. That means that people don't actually have to sign their name on the dotted line to make a contract legitimate. A person might use a smart card, password, Web tablet or face scan to replace the act of scrawling a signature on a piece of paper.
Signature-mail.com is hoping to benefit from the new law. The Greenwich, Conn., company allows consumers to attach pictures of their actual signatures to emails.
Communication Intelligence of Redwood Shores, Calif., and PenOp, a privately held New York company, also offer ways to submit actual signatures on digital pads using biometrics--the practice of using a person's physical traits as identification markers--to authenticate the names. For instance, the software captures a picture of the signature and then measures underlying information such as how long it took the individual to sign his name and how many strokes it took.
"In many ways it's more secure than a handwritten signature," said Jeff Sandler, vice president of marketing at Communication Intelligence.
Eye lasers, fingerprint pads, voice recognition and face scans, which have long been used for top-secret government purposes, are also ways of marking a person's identity over the Internet. But biometrics faces some pretty steep hurdles.
|Digital signatures bill (6/17/00)|
By taking away the need for ink signatures, companies buried in paperwork are banking on saving billions a year in administrative costs. Most records will be stored electronically, doing away with the need for towering file cabinets or the space to store documents. Transactions that once took days to wrap up can be handled instantly online.
The law does not extend to all transactions: Paper will still be required for many court documents such as eviction notices, wills and court orders.
Still, the new law is expected to draw consumers who had been frustrated or ambivalent about doing business on the Net, giving e-commerce new respect.
"Until now enterprises have been tentative about using the technology for fear that the signatures would not be legal," said Sandler. "With the legal risk out of the way, businesses can now focus on which system will best work for them."
But not everyone exalts the merits of digital signatures.
Implementing the equipment to accept these new-age signatures--be it through a fingerprinting device, face scanner or, more likely, something as simple as a password--is a heavy cost burden for most business, Pescatore said.
Issuing a private key could cost anywhere from $5 to $10 per customer, Pescatore said. Add that to the price of providing the software to accept the key, which could run about $10 to $100 a person, and suddenly the much-touted technology is no longer a cost-saving device.
"The cost becomes unacceptable," Pescatore said, noting that benefits of the bill probably won't be felt for another two years.
In addition, consumer advocates remain dubious of the law.
Concerns of fraud remain high. The bill doesn't set standards for e-signatures or provide a defense against fraud, whereas the Fair Credit Billing Act of 1975 gives consumers protection against fraud over $50. It also intentionally leaves open the type of technology that can be used for the online transactions. Signatures may be a cinch to forge--some say stealing a password or faking an electronic autograph is far easier than duplicating a handwritten signature.
Proponents say the law was deliberately written broadly to show no favoritism to any one technology or interest group.
"This basically extends the same law on signatures to cyberspace," said an aide to the House Commerce Committee. "It would not allow a 13-year-old to buy a house. Once the signature is deemed invalid, so is the transaction."
Critics of the law also worry it will widen the digital divide by encouraging businesses to charge more for offline transactions.
"All manner of pie-in-the-sky cost reductions and wonderful benefits are being promised," wrote Lauren Weinstein in his paper for People For Internet Responsibility, a consumer advocacy group. "Unfortunately, it seems probable that the real costs are likely to be the problems that such systems, implemented in the standards and security vacuum of truly staggering proportions, could bring to us all."