Complete guide to understanding eSignatures in 2023

April 21, 2023
Deepak Dhanak

Deepak Dhanak

Co-Founder & CEO at | CA, HBS, IIM-A
17 min read

The pandemic has dramatically changed the way we work today. 

Come to think of it, it has changed more than work. 

Think about the last time you stepped into your bank for withdrawal of cash or money transfer or commuted for 2 hours for a 15 minutes meeting that you could do over zoom? 

So, when everything is online, why stick to the age-old way of signing documents and agreements? 

If you’ve been struggling with printing documents, signing them physically, and scanning them to take them back online, this guide is for you. Even if you are currently using electronic signatures for signing documents and agreements and want to make the best use of it and get up-to-date with it, this guide is for you. 

Electronic signatures have been around for over a decade now and more than 50 countries have regulations in place accepting it as a legal method to enshrine documents and agreements. 

This guide covers everything you need to know about eSignatures – what, why, how, benefits, and it all (we’ll, of course, reserve some information for later too)! 

What is an electronic signature (eSignature or eSign)? 

An eSign or eSignature or electronic signature refers to a method and process used to sign and authenticate an online document or agreement such that it can be logically associated with the signer. It is a quick, efficient, more secure, and safe replacement of the traditional pen-paper signature form. 

In the United States, Federal ESIGN Act of 2000 defines eSignatures as “An electronic sound, symbol, or process, attached to or logically associated with a contract or other record and executed or adopted by a person with the intent to sign the record.”

Europe has eIDAS Regulations which defines eSignatures as “data in electronic form which is attached to or logically associated with other data in electronic form, and which is used by the signatory to sign.”

India too has relevant regulations in place in the form of Information Technology Act of 2000 which defines electronic signatures as “authentication of any electronic record by a subscriber by means of the electronic technique specified in the Second Schedule and includes digital signature.”

Trusted by individuals, businesses and even governments worldwide, eSignatures have gradually replaced handwritten signatures in many processes. 

Several software today provide eSignature services/platforms for a better solution and quicker workaround to the tedious process of physical signing and converting it into an electronic format. 

What is the difference between an electronic signature and a digital signature? 

You might have heard the term digital signature used interchangeably with electronic signature. 

While both are legally valid methods of signing the documents and agreements, digital signatures are more secure, have better legal weight and are more suitable for signing business and important documents and agreements.  

Standard eSignatures

Basic electronic or virtual signatures (attaching a scanned image of wet signature or signing via checking the online tick box) that do not use any kind of cryptographic encryption or signer identity verification. It largely relies on the intent of the signer for authentication and is easier to use but also easier to refute.

Digital signatures or Advanced eSignatures

A better and more secure way to sign digital documents and agreements. This method typically authenticates the signer identity by various methods and uses PKI (public key infrastructure). These signatures carry the same legal weight as wet signatures in most countries and hence, ideal for business transactions and important documents and agreements. 

How do eSignatures work? 

Signing documents electronically on platforms like DocuX is a very simple process. 

  1. Upload or create the document in either PDF or Word format.
  2. Place fields for signatures, stamps, and other information at appropriate places in the document.  
  3. Send document to the counterparty who’s signature is required by adding his/her email address. He/she shall receive a link to the document through the eSign platform. 
  4. The recipient(s) can view and sign the document on any device. They can select the type of eSignature they want to use. It could be an option to draw the signature or choose from the predefined styles based on the platform. 
  5. Once all the signees complete the required steps, the document is considered eSigned, a copy of the same is sent to all the signees via email. Some eSign service providers like DocuX also makes it available to all on the platform forever.
  6. Platform like DocuX also attach a certificate of signature with relevant audit trail to the main document. 

These steps can be completed within a few minutes, which is much more efficient than wet signatures. 

Common use cases of eSignatures

eSignatures can practically be used for all documents and agreements barring few exceptions. At DocuX, we have seen companies of all sizes and scale and companies from wide spectrum of industries using eSignatures for: 

1. Non-Disclosure Agreements (NDAs)

The most widely used agreement form in the world, NDAs are typically the start of a commercial negotiations and relationships where parties share non-public information with each other and want to protect the same from unauthorized disclosures. 

2. Sales Contracts

Whether it is the sale of goods, services or software, this is the most essential contract for every business entity. Parties collaborate, negotiate terms and conditions, and chalk out commercial agreements which need to be enshrined with signatures that are legally valid and admissible in the courts of law in case there is a breach or other issue.

3. Quotes and Proposals

This is one of the most common use case of electronic signatures. In most cases, electronic signatures are integrated with the quotes and proposal software for automation of the process and to add to customer delight, speed, and transparency. 

4. Offer Letters 

In a fast scaling world of hiring, electronic signatures help roll out offer letters, keep control over the process, and delight prospective employees with better experience. But for such enablement, the entire process of offers, campus hires etc. would become extremely slow. 

5. Employment Agreements

eSignatures do help greatly in automation of all employee agreements and communications- from hire to retirement. Employment Agreements are very important documents. Execution of the same via a reputed platform and electronically enhances the employee’s confidence.  

6. ESOP Agreements

Agreements related to stock options and other equity benefits (ESOP) are an important part of the company’s relationship with employees. Sometimes, they remain valid even beyond the employment tenure. Again, most equity management platforms today integrate with electronic signature providers for end-to-end automation.  

7. Increment & Bonus Letters

As mentioned earlier, all and every communication and agreements with the employees can be executed via electronic signatures. It helps communicate at scale without errors and delays. 

8. Vendor Contracts

Like sales contracts, vendor contracts are an important part of a business’s operations. These agreements- whether for purchase of goods, services, software, or lease of premises – need to be enshrined and electronic signatures can greatly improve efficiency, speed and accuracy. 

9. Funding Documents

Funding is all about speed and confidentiality. eSignature can ensure quicker turnaround with better control and security of the documents and information contained therein.

10. Consulting Agreements

Electronic signatures are a boon for individuals or freelancers who can confidently rely on them and give professional and better experience to their clients. 

11. Lease and Rental Agreements

Just like any vendor contracts and procurement agreements, leases are an essential part of the business and personal life. Executed with the electronic signatures, it can add to credibility of the concerned parties and significantly increase the speed of the leasing and rental transactions.

12. Non-Compete Agreements

Typically, an agreement between employer-employee or business partners to not compete with each other for a specific period of time and subject to agreed terms and conditions. Such arms’ length and sensitive agreements are better executed via independent platforms and are legally binding with an audit trail that is admissible in the court of law.  

However, there are a few cases wherein use of eSignatures is not advisable / allowed. These exceptions are governed by the regulations in respective country legislations. 

In the United States, eSignatures are not accepted for signing wills, adoption and divorce papers, product recall notices, court documents etc. 

In India, similarly, notable exceptions are negotiable instruments, real estate transfer agreements, power of attorney etc. You should consult your legal advisor or refer to DocuX legal guide for country specific regulations and exceptions. 

Interesting facts and statistics about eSignatures 

eSignatures have been a real game changer for businesses in the recent history of documents automation and digitalization, making the process much easier, faster, safer, and cheaper.  

  • The digital signature market is multiplying. It is expected to grow from $5.5 billion in 2022 to $25.7 billion by 2027 (Markets & Markets report). 
  • If it’s a pen-to-paper process, losing documents is highly probable. eSignatures changed this. They prevented file loss by 66% in financial institutions alone. (LunarPen)
  • Scanning a document to email the signed copy is an error-prone process. However, eSignatures reduce such errors caused through scanning by 92%. (OneSpan)
  • Handling documents isn’t a simple process; it could also become expensive. eSignatures can reduce document handling costs by 85%. (MSB)
  • Pen-on-paper or wet signatures used by 65% of the US-based companies often end up adding a day to their work processes. (MSB)
  • eSignatures are considered the most critical aspects of legal and security transactions by 81% of business users. (Cygnature)
  • eSignatures take 37 minutes to sign, whereas traditional signatures take upto five days. (LunarPen)
  • Productivity increased by 80% when businesses use eSignatures in their workflow. (LunarPen)
  • On average, users saved $20 per document while using eSignatures. (LunarPen).
  • Customer service is crucial to finalize sales deals. Considering how 60% of businesses lose sales due to poor customer service, eSignatures are integral to making the process smooth and hiccup-free. We have seen 10-12X faster closing of sales deals by the businesses that use CLMs and eSignature software. 
  • The eSignature tools have seen rapid adoption. Since 2016, usage of the eSignature for businesses has increased by 747%. 

What are the benefits of eSignatures? 

eSignature has changed (for good) how the contracts and agreements are signed. It has also brought along several benefits to businesses, governments, individuals and the environment in the long run. Here are some of them:  

1. Convenient and faster

When you send a physical document for signing, you lose time in logistics, printing, signing it, scanning it, or sending it back to the source. You are also dependent upon physical availability of the signer.

Compared to that, eSignatures are more convenient, faster, do not require physical transportation, and can be signed via electronic devices from anywhere. An eSigner only needs a computer/phone and an internet connection. It is independent of location or timing issues. The eSignatures software is generally user friendly and one can be set up quite easily without any assistance or technical knowledge.  

2. Easy storage and retrieval 

Digital documents and agreements are easy to store and retrieve and never get torn or destroyed (if appropriately backed up). They are available on-demand and more suitable for data crunching and analysis. 

3. More secure 

eSignatures enhance integrity of documents and agreements, information contained therein . Handwritten signatures can be denied in the court or can differ in given circumstances but eSignature is easier to logically associate with signer and there are less chances of tempering. Therefore, in case of any legal proceedings, eSignatures provide better protection against the breach of contracts or obligations.

4. Enables automation and ensures controls

With physical signatures, automation and efficiencies are not possible to a level which eSignature tool can get to. Most eSignature tools today integrate with templates, approval workflows, document generation, automatic follow ups, notifications etc. This greatly facilitates the use cases and saves a substantial amount of time for everyone.

5. Saves costs

On an average, as per the LunarPen study, eSignature saves $20 per document/agreement. This saving is even more if you consider the time cost of the human efforts required in the physical signature process. The cost of the eSignature is coming down with the passing of every year and hence, these savings are only increasing. DocuX offers eSignatures for free along with its lifecycle solution and hence, making it no brainer to adopt eSignatures for all documents and agreements.

6. Improves topline

Studies have proven that sales teams are able to not only sign deals faster in the cases of eSignature but also give better customer experience thereby increasing chances of sales. eSignatures adopted and used right way can significantly boost the topline growth.

7. Gentle on environment

eSignatures have helped reduce the demand for paper documents, which means cutting fewer trees and avoiding the wastage of paper. According to reports earlier mentioned, eSignatures are estimated to have saved close to 2.5 billion trees in 2020 alone.

How to create a custom eSignature (eSign) with DocuX? 

DocuX lets you create your personal electronic signature and initials in 3 different ways. 

Draw your signature: You can draw your signature using the cursor of the mouse or touchpad and save it.

How to draw eSignatures on DocuX

Upload your signature image: It could be a scanned copy of your wet signature or an image (.jpg, .gif or .pdf) you want to set as your signature.

How to upload your eSignatures on DocuX

Font based signature: You can select your full name, abbreviation, and initials. You can also select the font style and the color of your signature.

How to create font based eSignatures on DocuX

Electronic signature laws and regulations across the globe 

eSignatures are widely adopted by businesses and users globally. It is, therefore, essential to know their legal status in a particular country. Currently, more than 60 countries across the globe have specific regulations governing the use and requirements of electronic signatures. Some notable regulations and list of such countries is as under: 

USA: The Electronic Signatures in Global and National Commerce Act (ESIGN)

On June 30, 2000, ESIGN Act became law. This Act is how eSignatures became enforceable and legalized digital contracts. 

This law defines the requirements for an electronic signature and provides definitions. “Any electronic sound, symbol, or process” that could be “logically associated” with an agreement is an electronic signature. 

The Act also defines the user’s rights to the document. It describes how consent must be taken and how the user must be provided with all the information before they sign the document. This includes how they can withdraw permissions, obtain a PDF copy of the signed document, and more. 

USA: The Uniform Electronic Transactions Act (UETA)

While ESIGN Act is a federal law, UETA is a state law practiced in 49 or 50 US states. It makes additional obligations that aren’t stated in ESIGN.

This law provides additional legal footing to the eSignatures. It states how nobody can deny the legitimacy of an eSignature only because it is in a digital format. It says that even an electronic record is enforceable if a document is required to be in writing. 

EU: Electronic Identification and Trust Services (eIDAS)

The European Union introduced the eIDAS Regulation in 2014, and it was finally passed in 2016. The Electronic Identification and Trust Services (eIDAS) recognizes three different signatures. For a business to be authenticated by this Regulation, it must comply with one of the following: 

  • Standard Electronic Signature (SES)
  • Advanced Electronic Signature (AES)
  • Qualified Electronic Signature (QES)

India: Information Technology Act, 2000 (ITA)

India enacted relevant regulations quite early and has been an early adopter of digital technology. The ITA is supplemented by Electronic Signature or Electronic Authentication Technique and Procedure Rules, 2015 (ESEATPR).

Australia: Electronic Transactions Act (ETA)

Australia passed the Electronics Transactions Act (ETA) in 1999, making them one of the earliest adopters of this process. However, they hadn’t made it enforceable in all circumstances, and many processes required wet signatures. 

List of countries where electronic signatures are legally accepted and relevant regulations are in place:

ChileChinaColumbiaCzech Republic
GuatemalaHong KongHungaryIceland
MexicoNew ZealandNetherlandsNigeria
RomaniaRussiaSaudi ArabiaScotland
SingaporeSouth AfricaSouth KoreaSpain
Sri LankaSwedenSwitzerlandThailand
TaiwanThe United Arab EmiratesTurkeyUruguay
United KingdomVietnam

How DocuX ensures compliance and meets eSignature laws and regulations 

DocuX eSignatures comply with federal laws across the globe.

We comply with stringent requirements by:

  • Providing auditable IP tracking of each eSigner
  • Authenticating identity of the eSigner
  • Securing your data and documents with encryption while in transit and at rest
  • Providing traceable and QR verifiable certificate of signature with each eSigned document  
  • Complying with GDPR regulations
  • Complying with PDPA (Singapore) regulations
  • Complying with LGPD (Brazil) regulations
  • Complying with the CCPA privacy standards

What is the cost of an eSignature?

There are two methods adopted by most eSignature software providers- per user pricing with some limits on number of eSignatures per month or volume based pricing based on number of documents signed using eSignatures. 

Most eSignature tools give personal, team and enterprise plans with various features. Below is the indicative list of prominent eSignature tools and their plans costs:

Sno. NameCost range per user, per month
4PandaDoc$19- $89
6ZohoSign$8-$15 + credits

How to choose the best eSignature tool? 

There are several eSignature tools available today. Some of the parameters we encourage looking into include the following: 

1. Easy to use and easy to implement 

Look for a tool with a glitch free, simple, and intuitive user experience with a minimum learning curve. End-to-end user experience must be fast and smooth, whether reviewing the document (PDF or any other format) or signing it. 

At the same time, it should be easy to implement within your IT and technology environment and compatible with your IT and Infosec Policies. If it requires assisted implementation or is complex in implementation, you will know it isn’t the best tool in the long run. The workflows shouldn’t be complicated to code. 

2. Security and compliance 

The eSignature tool must have the best security standards and protocols, ensure encryption of data at rest and in transit, and should authenticate the signer. Along with that, here are some questions you should have answers to: 

  • Are they prepared to provide your team support whenever needed? 
  • Do they meet the required regulatory standards and requirements of security and data encryption?? 
  • Do they have adequate processes and documentation in place to comply with the best practices on data security, data hosting and security, hardware and software security, software development process, data retention and disaster recovery processes?
  • Are they compliant with regulations such as GDPR, if applicable to you?
  • How do they collect and store Personal Information (PI)? 
  • Do they have necessary certifications (SOC / ISO) and is platform tested for vulnerability?

3. Integrations 

You need a tool that is a team player and not a standalone tool. It should connect with your CRM, collaboration, and other tools you use for your business to derive maximum benefits from the automation. Also, do not forget to check if these integrations are paid or included in your plan. In many cases, the premium integrations (like Salesforce, HubSpot, Zapier) are very costly. You do not want to be surprised here. 

4. Pricing 

Before committing to any eSignature tool, you must understand the total pricing and not only the monthly/annual list price of a plan you are purchasing. Make sure you understand if there are any usage or storage limits, additional cost of integrations, implementation, support, workflows, single sign-on etc. Also check if they offer you a free trial before the start of the subscription to ensure the tool is fit for your purpose. 

Did you know that DocuX offers free electronic signatures? Sign up for a free account today. 

5. Custom branding options 

For a business, to look professional to their clients, vendors, and employees, branding is very important. Check if the tool you are subscribing to provides such branding options throughout the eSignature process. 

In conclusion

eSignatures have become integral to managing agreements and making documentation easier. The information above should provide you enough comfort and confidence to adopt an eSign tool or to critically evaluate the one you are using now. 

If you are looking for a simple, secure, intuitive, comprehensive platform that can meet all your eSign needs, then DocuX might be the right fit for you. In addition to legally binding, free eSignatures, it also offers the entire documents and contracts lifecycle at a fraction of a cost of CLM tools and at substantially lower cost than most eSign tools. 

Sign up for a free account today.  

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