My DocSafe white paper 1

April 2016

Why e-signatures will soon be used in every accountancy

practice

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Executive summary• Wet ink signatures are not going to disappear anytime soon

but we all know how inconvenient they are if the contracting parties are not co-located. The familiar algorithm of ‘receive a document by email, print it, sign it, scan it, email it back, send original in a letter, wait for the counterparty to send their signature, archive the digital copy’ is tedious, expensive and frustrating.

• It is therefore not surprising that the electronic signature market is expected to continue growing and attracting new innovative companies. In this white paper we are looking at the current state of the e-signature market from the regulatory and adoption perspectives. In the next one we propose a how-to guide to selecting an e-signature provider.

This document is for information purposes only and not a solicitation for the purchase of any security.DocSafe is a Community Trademark.

1. Types of e-signature

3 This document is for information purposes only and not a solicitation for the purchase of any security.DocSafe is a Community Trademark.

The UK government divides electronic signatures into three groups:

• Simple electronic signatures - these include scanned signatures and tickbox plus declarations

• Advanced electronic signatures - can identify the user, is unique to them, is under the sole control of the user and is attached to a document in a way that it becomes invalidated if the contents are changed

• Qualified electronic signatures - an advanced electronic signature with a digital certificate encrypted by a secure signature creation device e.g. smart card

2. Current regulatory regime

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From 1 July 2016 the current regulatory framework will change. The Directive on Electronic Signatures (1999/93/EC) will be replaced with a new framework, commonly called e-IDAS (910/2014/EU). E-IDAS provides mutual recognition of e-signatures, e-seals, time stamping, website authentication and e-registered delivery services among EU member states which adopt the regulation. E-IDAS also introduces the advanced electronic signature concept as well as the definition of qualified and non-qualified trust services. The aim of E-IDAS is to build public confidence in the security of digital transactions and to encourage them to use electronic signatures.


3. State of adoption

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The US has been an early adopter of electronic signatures where paper saving and customer experience are the primary drivers of adoption. In Europe, due to fragmented regulatory frameworks, the adoption has been slower. Some EU countries did not adopt the ‘advanced electronic signature’ type at all requiring all signatories to purchase physical equipment from a handful of licenced providers to be used for authentication (similar to Secure Key tokens used in electronic banking). This clearly created a significant barrier to wider adoption.

In the UK the electronic signature is now gradually finding customer acceptability especially in the context of signing of standard documents (such as purchase orders, new client forms, dispatch documents, non-disclosure agreements, company accounts). In more complex situations, such as venture capital transactions electronic signatures are used if there are no deeds involved. If contracts are signed as deeds, however, wet signatures are still the only option as there is no clarity whether they can be executed electronically. Industries which seem to be the early adopters include logistics (remember the squiggle you made with you finger to acknowledge the delivery of that parcel?) and professional services (accountants, lawyers, real estate agents, financial advisers), where time is expensive and slick customer experience can impress clients.


4. What are the benefits of using e-signature?

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How much benefit you want to get out of your e-signature is up to you. Some accountancy practices, for example, use it on an ad hoc basis, some use it regularly as part of their client service. Others treat it as an integral part of their ‘paperless strategy’ where the wet ink option is simply no longer available.

For a single contract

For efficient document

management

For better client service

Faster completion Lower transaction

cost Better user

experience

Cheaper compliance (easier to audit documents)

Easier KYC checks and updates

Easier document retrieval

Perception of better value for money

Automation of document archiving

Faster client on-boardingThis document is for information purposes only and not a solicitation for the purchase of any security.

DocSafe is a Community Trademark.

5. What questions to consider?

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If you are thinking about imbedding electronic signature in the DNA of your practice, you may want to consider a number of questions related to your legacy IT systems, your customer base and your price sensitivity.

What type of electronic signature do I need?

Probably ‘advanced electronic signature’ will work for most people. The question of non-repudiation and authentication can now be resolved with software alone. Also, it would be a difficult ask to require your clients to buy a Smart Key device just to do business with you.


5.1 What type of electronic signature do I need?

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Probably ‘advanced electronic signature’ will work for most people. The question of non-repudiation and authentication can now be resolved with software alone. Also, it would be a difficult ask to require your clients to buy a Smart Key device just to do business with you.


5.2 Is my date going to leave the eu?

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Since the end of the Safe Harbour framework, the onus of making sure data is properly handled increasingly falls on European companies who can no longer rely on the self-certification mechanism that American suppliers could use to fall under the Safe Harbour umbrella. Some clients may not want to have their data leave the EU irrespective of who handles it. Others may be relaxed about it and worry primarily about the price and convenience. We expect several US providers to open EU based data centres in the near future to resolve any concerns related to data privacy.


5.3 How secure is my data?

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Most software as a service providers (“SaaS”) such as e-signature players use a handful of physical server specialists to store their data, such as Amazon Web Services, Rackspace or Microsoft Azure. That data is encrypted ‘at rest’ with keys that are held by the storage company and in some cases by the SaaS company. This might not be enough to some clients who worry about unauthorised snooping or data theft due to a hack. To our knowledge however, not a single company we reviewed empowers their clients to control encryption keys to their data. This might change in the near future as the privacy concerns, especially in Europe, force companies to adapt.


5.4 Can I continue using my preferred cloud storage?

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About half of companies we surveyed built integrations with third party storage systems. The remaining ones hold the documents themselves. It is likely that your clients are using a different storage provider than you do. It may or may not matter because a growing number of companies (and most of those we surveyed) are increasingly open to using ‘a special dedicated place’ for their most important documents, especially signed contracts.


5.5 Is e-signature enforceable?

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This is probably your main concern. The case law related to electronic signatures is richer in the US than the UK. Still, quick desktop research reveals that several UK law firms mention cases where electronic signatures were successfully used in court. To quote Walker Morris:

“The provisions of the Electronic Communications Act 2000 (ECA) aim to ensure that the legal effect of documents or signatures will not be denied simply because they are represented electronically. For instance, section 7 of the ECA confirms that electronic signatures are admissible in legal proceedings to determine the authenticity of any electronic communication in which they are incorporated. However, the ECA does not consider how a signature can demonstrate the necessary authenticating intent. Instead, the courts must determine the evidential weight to be granted to such signatures.”

Keeping electronic correspondence leading up to the signing of important contracts can form part of that ‘evidential weight’ as it can demonstrate that parties were negotiating a deal that they wanted to sign. It is common sense to store that correspondence whether a contract was signed electronically or not. This document is for information purposes only and not a solicitation for the purchase of any security.

DocSafe is a Community Trademark.

5.6 Is e-signature only about the signature?

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Assuming that all e-signature providers are essentially selling a commodity, it is user experience and ancillary services that will make or break their business.

Do you need help creating the documents, managing reminders, monitoring progress of the document journey, archiving and distribution?

Do you need to manage encryption keys?

Do you need a paper version printed anyway and stored somewhere just in case?


5.7 Can I afford to wait?

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E-signature is here to stay and is likely to transform your practice not only by letting you sign deals faster but also by letting you serve your clients better. The emergence of ‘digital only’ accountancies is an interesting innovation that should, through competitive pressure, increase the speed of adoption by more traditional firms. Some companies introduce e-signatures gradually by, for example, initially offering digital onboarding facilities to help them win business easier. Others take a more conservative approach, yet others let their customers lead the way. Where do you fit?

If you are prepared to try e-signature, wait for our second white paper in which we will compare main market players, or simply write to us directly.


6. About mydocsafe

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We are a UK-based angel-backed technology firm that is building a digital office for professional service firms.

We solve the problem of divergent objectives: convenience vs security/compliance vs sharing, by offering innovative security features and clever value-added services including electronic signature.

Sign up today for a free trial at https://mydocsafe.com/signup

or write to:Daniel Stachowiak at [email protected]


https://mydocsafe.com/signup



My DocSafe white paper 1

Economy & Finance

Transcript of My DocSafe white paper 1