Category: Contracting SDK

Reserve Bank of India (RBI), on 15th April 2024, announced the new guidelines for Key facts statement (KFS) for retail and MSME terms loans and advances, containing essential information such as the all-inclusive APR and recovery and grievance redress mechanisms.

These guidelines are mandatory to ensure enhanced transparency in lending and enable customers to make informed decisions, thereby empowering borrowers to make informed financial decisions.

To whom are these changes intended?

• • All Commercial Banks
    • Local Area Banks,
    • Small Finance Banks, 
    • Regional Rural Banks, 
    • excluding Payments Banks
  • All Co-operative Banks
  • All NBFCs
    • Housing Finance Companies (HFC)
    • Microfinance institutions (MFI)

   

Here’s a quick checklist for your perusal

I am a bank and we use KFS for credit cards as well. Do these guidelines apply to credit card products as well?

No – these changes are only for “Retail and MSME term loans.” However, with implied regulations and the changing lending landscape, we prefer to look for new guidelines from the RBI.

“Credit card products and corporate loans” are not included in the recent KFS guidelines shared by RBI.

What are the changes mandated by RBI?

1. “The new KFS statement should be in a standardized format with an added APR and Amortization sheet.”

As per Annex A, provided by RBI

The KFS annex A has ensured transparency by providing the exact format in 2 parts:

Part 1: Interest rate and fees/charges

• Loan proposal/account No.
• Type of Loan
• Sanctioned Loan amount (in Rupees)
• Disbursal schedule (including stages and related clauses if not disbursed 100% upfront)
• Loan term (specified in years, months, or days)
• Installment details (type, number, amount of EPIs, and commencement of repayment)
• Interest rate (percentage and type: fixed, floating, or hybrid)some text
• Additional floating rate information: Reference Benchmark, Benchmark rate, Spread, Final rate, Reset periodicity, Impact of benchmark change on EPI, and number of EPIs
• Fees/Charges (payable to the RE, payable to a third party through RE, including specifics like processing fees, and insurance charges)
• Annual Percentage Rate (APR) (expressed as a percentage)
• Details of Contingent Charges (penal, foreclosure, switching charges, etc.)

Part 2: Other qualitative information

• Clause of Loan agreement relating to engagement of recovery agents
• Clause detailing grievance redressal mechanism
• Contact details of the nodal grievance redressal officer (phone number and email)
• Information on potential transfer of the loan to other REs or its securitization
• Details related to collaborative lending arrangements: Names and proportions of funding by the originating and partner REs, blended interest rate
• Specific disclosures for digital loans: some text
  • Cooling off/look-up period
  • Details of the LSP acting as a recovery agent

KFS annex B has illustrated the computation of ARP for retail and MSME term loans:

KSF annex C has illustrated the repayment schedule under equated periodic installment (EPI) for the hypothetical loan.

2. “The KFS should be written in standard language for borrowers to understand.

It has been mandated by RBI that the content of KFS should be explained to the borrower and the KFS shared with the borrower should be in the language understood by the borrower.  

Since most of the borrowers don’t speak only English or Hindi, as a best practice, the KFS and loan agreement should be in a language understood by the borrower and the loan execution journey for eSign should also be in the same language.

3. Lenders should help borrowers understand KFS before loan execution.

It has been mandated by RBI to allow borrowers to review the entire KFS before signing.

In physical flow, the KFS should be shown and reviewed by the borrower.

In digital flow, during the loan execution journey, the KFS shall be reviewed by the borrower who could accept or reject it.

4. Loans with tenure >7 days -> The KFS validity will be 3 working days.
Loans with tenure <7 days -> The KFS validity will be 1 working day.

Simply put,

For loan tenure => 7 days or more, the lender has to provide at least 3 or more working days for the borrower to review and sign the KFS

For loan tenure <= 7 days, the lender has to provide at least 1 working day for the borrower to review and sign the KFS

Note: The validity period will start from the day KFS is provided to the borrower. It is a minimum timeframe in which the borrower is entitled to either accept or reject the KFS.

There are two approaches by which lenders can share the KFS document with the borrower:

1. Approach 1: It suggests that the KFS shall be sent to the borrower first – To review, acknowledge, and eSigned. Afterward, the loan agreement shall be sent to the borrower – To review, acknowledge, and eSigned.The KFS and loan agreement will not be part of the same loan kit.Note: The validity period as stated above is only for KFS. The lenders can choose loan agreement expiry as per their internal regulations.
2. Approach 2: It suggests that the KFS and loan agreement shall be sent to the borrower as part of the same loan kit – To review, acknowledge, and eSigned.

Note: The validity period as stated above is now for the entire contract. 

Note: Lenders can also upload scanned copies of KFS and loan agreements and share them with borrowers for signing.

5. The borrower should consent and acknowledge the agreement before signing.

In the digital KFS flow, there are multiple ways you can get consent and acknowledgment:

In the digital KFS flow, there are multiple ways you can get consent and acknowledgment:

• Aadhaar eSign (OTP, FaceAuth, Fingerprint, Iris)
• Smart eSign (Draw signature, upload, select auto-generated signature)
• Clickwrap (Based on your legal/compliance need)

All these methods are valid by IT Act, 2000 for collecting eSigns from the borrower.

For high-stakes loans where legal enforceability is crucial, you can often prefer robust authentication methods such as Aadhaar eSign.

For lower-risk loans where regulatory compliance is the primary concern, simpler electronic verification methods such as Smart eSign or clickwrap can be opted for.

6. Without the borrower’s explicit consent, lenders cannot charge any fees not mentioned in KFS, ensuring fair practice.

Simply put, if you wish to levy any additional charges that are not mentioned in the KFS document, you will need to have the explicit consent of the borrower.

In all cases wherever the RE is involved in recovering such charges, the receipts and related documents shall be provided to the borrower for each payment, within a reasonable time.

7. Updating loan terms requires consent from both the lender and the borrower.

When modifying loan agreements, it’s essential to follow proper contractual procedures, the process involves creating a new KFS and loan agreement that accurately reflects the proposed changes.

These documents should be presented to the borrower for review and approval.

The borrower’s explicit consent is crucial in this process. It’s important to note that lenders cannot force borrowers to accept new terms.

The borrower has the right to decline any proposed modifications to the original agreement.

In scenarios where a borrower refuses the new terms, lenders must respect this decision. It’s not permissible for the lending institution to unilaterally terminate the loan based solely on the borrower’s rejection of proposed changes.

The original terms of the loan agreement should remain in effect unless both parties agree to modifications.

How to comply with KFS’s new regulations using Contract360

1. Template Engine: You can easily create pre-build templates where data can be pre-populated as per borrowers’ details and can be easily sent to borrowers for eSign.
   
2. Setting up the KFS flow – You can easily set up both of the flows where KFS can be sent separately or together as a KFS loan kit, for borrower to eSign. 
3. Selecting borrower-preferred language – You can easily build a template and eSigning journey in borrower-preferred language from 13+ local language support for a personalized borrower experience.
   
4. KFS Consent and acknowledgment – Borrower can easily review the KFS, simply accept the KFS by acknowledging via eSign, or reject if any discrepancies are found. 
   
5. Validity period – You can easily set custom expiry links for borrowers to eSign the agreement.
   

Using Contract360, you can easily comply with all new KFS regulations within a week.

Contact us to schedule an expert call on how Contract360 can help you comply!

FAQ

Q. What would happen if I’m unable to comply with new KFS regulations?

A. RBI rolled out strict guidelines with a deadline of 1st October 2024.

Incase of non-compliance, RBI can charge a hefty fine or penalty. The new guidelines are mandatory for Banks, Co-op banks, SFB, NBCF, HFC, and MFI.

Using the Contract360, you can seamlessly comply with new KFS rule and be complaint in 1 week.

Get on an expert call

Q. KFS needs to be in a language understood by the borrower. I don’t have the bandwidth to change the language fluency for the borrower.

A. Contract360 provides support to convert your existing KFS into 13+ local languages. With Contract360, you can select the borrower-preferred language to complete the loan execution journey.

With dedicated ESP like eMudhra, you can easily change the consent text in 10+ different vernacular languages as well, providing an end-to-end personalized experience. 

Q. What loans are covered in new KFS regulations that I need to comply with?

A. New KFS regulations suggest all loans including:

1. Retail Lending by all REs 
2. Term loans to MSMEs by all REs
3. Loans by SCBs to individual borrowers 
4. Digital lending by any regulated entity
5. Microfinance loans whether by MFIs or other REs

Loan excludes

1. Credit card debt
2. Corporate loans

Q. What exactly comprises of retail loan?

A. Retail loans may include all types of loans to individuals, including the following :

1. Vehicles/Auto loans 
2. Educational loans
3. Home Loans
4. Loan against shares
5. Loan against property
6. Loan against fixed deposit, etc.

The retail loan does not include:

1. Business loans
2. Lines of credit – as the circular specifically refers to term loans
3. Loans to corporates (other than MSMEs)
4. Dealer financing (other than individuals)
5. Builder Finance (other than individuals)

Q. Is it applicable to an LSP displaying loan information?

A. If LSP is acting on behalf of the lender, and the authority of the lender, what applies to the lender applies to the LSP as well. 

If LSP only has a platform that aggregates lenders and borrowers and provides a digital interface, they are not obliged to adhere to these new guidelines. However, we recommend you know about new regulations if needed to comply in the future.

Q. What are the differences between MITC and KFS?
I’m an HFC, do I need to comply with both?

A. MITC is Most Important Terms and Conditions and KFS is Key Facts Statements. The format of KFS is more focused on interest rates and other charges as well as a few qualitative terms of the loan, whereas MITC provides several other relevant details.

However, there are no new rules for MITC but lenders should prepare MITC as well as KFS in case of home loans.

Q. I am an LSP or digital lending platform. Will I be issuing the new KFS?

A. KFS should be issued by the lender and not the LSP/DL platform.

KFS needs to be reviewed and acknowledged by the borrower by a link sent via verified email ID/SMS/ Whatsapp

In the case of co-lending KFS is issued on behalf of joint lenders 

In an increasingly digital world, the verification of documents and certificates has transitioned from traditional methods to online platforms. One such document that has undergone this transformation is the e-Stamp certificate. E-Stamp certificates are digital documents issued by authorized authorities to represent the payment of stamp duty. These certificates contain electronically signed information, including the unique identification number (UIN), date of issuance, stamp duty value, document type, and other relevant details. Verifying the authenticity of these certificates ensures that the stamp duty has been paid correctly and the document is legally valid.

In this article, we will provide a step-by-step guide to verifying e-Stamp certificates online, and offer practical insights and tips for individuals and businesses to navigate this process efficiently. Let’s get started.

A step-by-step guide to verifying e-Stamp certificates online

Step 1: Identify the State

The first step involves identifying the state where the e-Stamp certificate was issued. Different states in India have different e-stamping websites and verification procedures. Some common e-Stamping websites include:

• Stock Holding Corporation of India Limited (SHCIL): https://www.stockholding.com/
• eGRAS (e-Governance for Registration and Administration of Stamps): https://egrashry.nic.in/
• V-Stamp: https://www.empirephilatelists.com/stamp-gradings

Step 2: Locate the Verification Section

Once you are on the e-Stamp certificate verification portal, locate the section or tab dedicated to e-Stamp certificate verification. It is usually prominently displayed on the homepage or listed in the main menu for easy access.

Step 3: Enter the Certificate Details

The specific details required for verification may vary slightly between different states. However, some common information you will need to enter includes:

• State: Select the state where the e-Stamp certificate was issued.
• Certificate Number (UIN): This is the unique identification number printed on the e-Stamp certificate.
• Stamp Duty Type: Select the type of document for which the e-Stamp was used.
• Certificate Issue Date: Enter the date on which the e-Stamp certificate was issued.
• Verification Code: Some websites may require you to enter a verification code displayed on the screen.

Make sure you enter these details accurately to avoid any discrepancies during the verification process.

Step 4: Submit the Request

After entering the required certificate details, click on the “Submit” or “Verify” button, depending on the terminology used on the portal. This action will initiate the verification process.

Step 5: Review the Verification Result

The website will display the verification results, indicating whether the e-Stamp certificate is valid or not.  The results typically include information like the UIN, stamp duty value, document type, and the issuing authority. 

Tips and Insights for Efficient E-Stamp Certificate Verification:

• Make sure you enter the certificate details accurately. Even minor errors in the certificate number or other information can lead to verification issues.
• Download the e-Stamping mobile app. Many e-stamping authorities offer mobile apps that facilitate convenient certificate verification on the go.
• It’s advisable to keep a record of the verified e-Stamp certificates for future reference. This can be especially useful for businesses and individuals who frequently deal with e-stamping.
• Don’t delay the verification process. It’s essential to verify e-Stamp certificates promptly to ensure their authenticity before proceeding with any legal or financial transactions.
• If you encounter any issues during the verification process or if a certificate is not verified, don’t hesitate to reach out to the customer support provided on the portal or the relevant government authority for assistance.

Verifying e-Stamp certificates online is a crucial step to ensure their authenticity and prevent fraud. By following the step-by-step guide provided in this article and adhering to the practical insights and tips, individuals and businesses can navigate the e-Stamp certificate verification process efficiently. As the use of e-stamping continues to grow, understanding and practicing these verification procedures becomes increasingly important for ensuring secure and transparent transactions.

One such reliable solution is Signy’s E-Stamping. This API plays a crucial role in simplifying and enhancing the e-stamping process. Signy’s E-Stamping API offers an innovative and user-friendly platform for e-Stamping, making it easier than ever to ensure the authenticity of your certificates. By incorporating Signy’s advanced technology into your e-stamping workflow, you can streamline the verification process, reduce the risk of errors, and promote secure transactions.

About Signzy

Signzy is a market-leading platform redefining the speed, accuracy, and experience of how financial institutions are onboarding customers and businesses – using the digital medium. The company’s award-winning no-code GO platform delivers seamless, end-to-end, and multi-channel onboarding journeys while offering customizable workflows. In addition, it gives these players access to an aggregated marketplace of 240+ bespoke APIs, easily added to any workflow with simple widgets.

Signzy is enabling ten million+ end customer and business onboarding every month at a success rate of 99% while reducing the speed to market from 6 months to 3-4 weeks. It works with over 240+ FIs globally, including the 4 largest banks in India, a Top 3 acquiring Bank in the US, and has a robust global partnership with Mastercard and Microsoft. The company’s product team is based out of Bengaluru and has a strong presence in Mumbai, New York, and Dubai.

Visit www.signzy.com for more information about us.
Contact us directly!

Franking documents has long been a cornerstone in the realm of legal and financial transactions, serving as a time-honored method of validating important papers. In this comprehensive blog post, we will explore the intricacies of franking, its various applications, and how it stands in comparison to e-stamping. Additionally, we will discuss its drawbacks and how Signzy’s eStamping API is modernizing the traditional franking process.

What is Franking?

Franking is a process of affixing a revenue stamp or seal to a document to indicate the payment of stamp duty. The practice has been around for many years and is often used in property transactions, lease agreements, and other high-value contracts.

When to Frank Documents?

Franking is generally necessary when creating legal documents that involve significant financial transactions. Before a document can be legally enforceable or admissible in court, it must be properly franked.

What are Franking Charges?

Franking charges are fees paid in addition to the stamp duty when using a franking machine to affix a stamp on a legal or financial document. These charges are essentially a kind of service fee for the franking service provided by authorized banks or franking agencies. The cost of franking charges can vary based on jurisdiction, the nature of the transaction, and sometimes even the total value of the stamp duty itself.

Franking charges are generally nominal but can add up for organizations that rely heavily on franked documents for their business transactions. It’s always advisable to inquire about the specific franking charges applicable to your transaction beforehand. These charges are usually separate from the stamp duty and are paid to the entity providing the franking service, not to the government.

It can vary between different states in India due to varying regulations and guidelines set by state governments. Here are hypothetical examples for four states, Maharashtra, Karnataka, Delhi & Tamil Nadu, to give you an idea of how franking charges might differ.

Maharashtra:

In Maharashtra, franking charges could be set at 0.1% of the transaction value for property transactions. So if you are buying a property worth ₹1 crore, you may have to pay franking charges of ₹10,000 in addition to the stamp duty. Note that there may be a cap on maximum franking charges, depending on the guidelines set by the state.

Karnataka:

In Karnataka, franking charges for the same kind of transaction could be at a fixed fee, say ₹500, regardless of the property value. This would make it more cost-effective for higher-value transactions compared to a percentage-based system.

These examples are hypothetical and not based on actual current rates. Always consult with your legal advisor and check the latest rates and regulations for the most accurate information.

By comparing the two, you can see that the method of calculating franking charges can be quite different, affecting the total cost of the transaction. Always make sure to check the latest regulations in your specific state to know what you will be required to pay.

Delhi:

In Delhi, the charges could be a flat fee of ₹100 for certain kinds of agreements, irrespective of the transaction value. This flat fee structure is easier to navigate and can be cost-effective for large transactions.

Tamil Nadu:

In Tamil Nadu, the charges might be calculated as a percentage of the transaction value, let’s say 0.2%. If you were entering into an agreement with a transaction value of ₹50 lakhs, the franking charges would be ₹10,000.

These are simplified examples intended to illustrate the differences in how franking charges can be calculated. Always consult with a legal advisor and check the latest rates and regulations for the most accurate and up-to-date information.

By comparing the above hypothetical examples, you can see that the method of calculating franking charges can be quite different, affecting the total cost of the transaction.

The Impact of Franking Charges on Overall Transaction Expenses

These charges are an essential part of various transactions like property purchase, business agreements, and legal contracts. Though usually a minor portion of the overall transaction value, they can still impact the total cost in several ways:

1. Direct Cost: The charges add to the overall cost of the transaction. Depending on the state’s regulations, these charges can either be a flat fee or a percentage of the transaction value.
2. Convenience Factor: It can simplify the payment of stamp duty, but you might need to physically visit a bank or authorized center for franking, incurring additional time and travel costs.
3. Compliance Costs: Failure to pay appropriate charges can result in penalties, adding further costs and complications to the transaction.
4. Variable Rates: If the charges are based on a percentage, fluctuations in transaction value will directly affect the overall cost.
5. Speed of Transaction: Depending on the jurisdiction, franking can be quicker than other methods like stamp papers, potentially speeding up transaction completion and reducing carrying costs.
6. Double Costs: In interstate transactions, both parties need to be aware of franking charges in both states. Inconsistencies in rates can cause one party to incur higher costs than anticipated.
7. Legal Certainty: Properly franked documents have strong legal validity, which can save money in the long run by providing clearer proof of the transaction, thus reducing the potential for legal disputes.

Franking vs Stamp Duty: Understanding the Distinctions

Stamp Duty and Franking Charges, while related, are distinct concepts in the realm of legal documentation. Stamp Duty is a tax levied by the government on various legal transactions to make them legally binding. It represents a percentage of the transaction value and can be paid through various modes such as adhesive stamps, e-stamps, or franking. On the other hand, FC refer to the fees paid to authorized banks or agents for stamping a document, indicating the payment of the requisite stamp duty. Essentially, while stamp duty is the actual tax, franking is one of the methods to pay and evidence that tax on the document.

A few other differences between the two are:

1. Scope:
   • Franking: Limited to being a procedure for confirming payment.
   • Stamp Duty: A broader term that includes various rates and rules depending on the type of transaction.
2. Beneficiary:
   • Franking: Benefits both parties in a transaction by providing proof of tax paid.
   • Stamp Duty: Benefits the government as a source of revenue.
3. Legal Requirement:
   • Franking: One of several ways to meet the legal obligation of paying stamp duty.
   • Stamp Duty: A mandatory tax required by law for certain documents.
4. Duration & Timing:
   • Franking: Has to be done before executing the document.
   • Stamp Duty: The obligation to pay exists as long as the relevant document needs to be legalized.
5. Evidence:
   • Franking: Acts as evidence that stamp duty has been paid.
   • Stamp Duty: Is a financial obligation, the proof of payment for which could be a franked stamp, an e-stamp, or a physical stamp paper.
6. Flexibility & Utility:
   • Franking: Once done, it’s difficult to change the franking amount & Specific to the document it is applied to
   • Stamp Duty: Depending on jurisdiction and transaction type, the amount could be subject to change or negotiation. Applicable to a variety of transactions, including property transfers, leases, and many others.

Difference Between Franking and E-Stamping

E-stamping and franking both serve the purpose of paying stamp duty, but they differ in terms of convenience, efficiency, and security. Here are some reasons why e-stamping may be considered better than franking:

1. Ease of Access: E-stamping can be done online, eliminating the need to visit a bank or any other authorized franking agent. This makes it more accessible and convenient.
2. Time-Saving: The e-stamping process is usually quicker. Once payment is made, the e-stamp certificate can be generated almost immediately, while franking may require you to wait or come back to collect the document.
3. Accuracy: E-stamps come with a unique identification number, making it easier to verify their authenticity. The chances of error or fraud are comparatively less than in franking.
4. Flexibility: E-stamping allows you to accurately input the exact amount of stamp duty, whereas with franking, you are often limited to denominations available, which might lead to payment of a slightly higher amount.
5. Storage and Retrieval: Digital records of e-stamps are easier to store, retrieve, and reproduce if the original document is lost or damaged. With franked documents, the loss of the original is a more significant issue.
6. Cost-Effectiveness: Although both methods entail similar costs in terms of the actual stamp duty, e-stamping can be more cost-effective when you factor in the convenience and time saved.
7. Security: E-stamping databases are securely maintained by government-appointed agencies, providing an additional layer of security.
8. Nationwide Validity: E-stamps have nationwide validity, making them universally acceptable, while franking might not be recognized everywhere, and policies can vary from state to state.

Signzy’s eStamping API Solution

Signzy’s cutting-edge eStamping API brings about a transformative shift in the way stamp duties are paid and documents are validated. By offering an integrated solution that can be seamlessly embedded into your existing platforms, we streamline the entire stamping process, making it more efficient, transparent, and accountable.

Key Features:

1. Real-Time Verification: Our API offers immediate validation of e-stamps, providing both parties with instant confirmation of a transaction’s authenticity. This is a quantum leap over traditional franking, which may require manual checks and extended verification periods.
2. Multi-State Compliance: Signzy’s eStamping API is programmed to adhere to the varying stamp duty laws and regulations across different Indian states. This ensures that your transactions are compliant no matter where they are initiated.
3. Secure Transactions: Enhanced with state-of-the-art security features, the eStamping API ensures that all transactions are encrypted and securely stored, thereby mitigating the risk of fraud or data breaches.
4. Scalability: Whether you’re a small enterprise or a large corporation, our API scales to meet your needs, allowing for high-volume transactions without compromising on speed or security.
5. API Integration: The API can be easily integrated into existing enterprise systems, CRM software, or any other platforms where transactions requiring stamp duties are performed, thereby offering a unified, streamlined experience.
6. Cost-Effectiveness: By cutting down on manual labor, printing costs, and time spent on traditional franking, Signzy’s eStamping API offers a cost-effective alternative that enhances operational efficiency.

Interested in simplifying your documenting process? Contact us today to learn how Signzy’s eStamping API can benefit your organization. 

To know more about Signzy’s eStamping API solution, click here

In today’s digital age, the way we handle documents has undergone a significant transformation. With the increasing adoption of digital tools and platforms, especially in legal and corporate environments, the methods of signing documents have evolved. Two of these modern signing methods, which are sometimes used interchangeably but are distinctly different, are the electronic signature (eSignature) and the digital signature.

What is an Electronic Signature (eSignature)?

An electronic signature, often known as an eSignature, is a broad category that includes any electronic process that indicates an acceptance of an agreement or a record. These can range from a scanned image of a physical signature, a typed name, to a click-to-accept checkbox on a terms of service page.

Benefits of eSignature:

1. Convenience: eSignatures offer the ability to sign documents from anywhere, at any time, and on any device, ensuring processes aren’t halted due to geographical constraints.
2. Speed: Accelerates the document signing process by eliminating the need for print, sign, scan, and send routines.
3. Reduced Costs: Saves on printing, paper, ink, mailing, and storage expenses.
4. Enhanced Experience: Provides an improved and modern user experience for both the sender and the recipient.
5. Environmental Friendly: Supports green initiatives by reducing the dependence on paper.

What is a Digital Signature?

Digital signatures are a subtype of electronic signatures. They offer a higher level of security and operate based on Public Key Infrastructure (PKI). Digital signatures use a certificate-based digital ID, which is issued by an accredited Certificate Authority. They not only verify the signer’s identity but also ensure that the document has not been altered since it was signed.

Benefits of Digital Signature:

1. Enhanced Security: Provides cryptographic proof of the signer’s identity and ensures data integrity.
2. Authentication: Validates the identity of the parties involved in the signing process.
3. Non-repudiation: It’s challenging for the signer to deny signing a document as it uniquely links the signature to the signer.
4. Data Integrity: Assures that the signed document has remained unchanged post-signing.
5. Legal Compliance: Meets strict legal and regulatory requirements in many countries, making it legally binding.

Why Choose One Over the Other?

The choice between eSignatures and digital signatures boils down to the specifics of the situation:

• Document Type & Sensitivity: For highly confidential documents where the stakes are high, such as legal contracts or official government documents, digital signatures’ added security layer is invaluable. However, for day-to-day documents or internal approvals, an eSignature might suffice.
• Industry Regulations: Industries like finance, healthcare, and real estate might have stringent regulations that mandate the use of digital signatures for certain transactions due to their higher authentication and non-repudiation properties.
• Global Transactions: Different countries have varied regulatory landscapes. For global businesses, understanding which type of electronic signature is legally accepted in a particular jurisdiction is crucial. Digital signatures, with their robust security protocols, are often universally recognized.

Cost Implications

Implementing digital signatures involves additional costs. Certificate Authorities (CAs) need to verify an individual’s identity before issuing a digital certificate, and this comes at a price. However, the investment might be justified by the reduced risk of forgery and the enhanced trustworthiness of documents.

Future Outlook

As cyber threats continue to evolve, the emphasis on secure digital transactions will only grow. While eSignatures offer a quick solution for many scenarios, the assurance and robustness provided by digital signatures will continue to be invaluable for high-stakes transactions and industries with stringent compliance requirements.

In Conclusion

While both electronic and digital signatures aim to speed up the process of signing and authenticating documents, their applications and levels of security vary. Electronic signatures are suitable for everyday use, where high-level security isn’t the primary concern. On the other hand, digital signatures are best for high-stakes transactions, legal documents, and where a strong, verifiable process is necessary.

Choosing between them depends on the specific needs, regulatory compliance requirements, and the level of assurance needed regarding the signer’s identity and the integrity of the information.

At Signzy, we’re dedicated to paving the way towards a more efficient, secure, and digital future! Contact us to book a demo!