Think about the last time you started a new job or entered into an agreement with a landlord.

We’d wager that you didn’t physically put pen to paper when signing the necessary documents.

Why would you have? Electronic documents are more popular now than ever, and, as a result, so are electronic signatures.

They’re much quicker and more convenient than the traditional method, and you can sign from any location rather than having to set up a face-to-face meeting or rely on the mail.

You might have heard about digital signatures, too. Which begs the question, “what’s the difference between electronic and digital signatures?”

Good question! While the two share many similarities, they are, in fact, two very different things.

Let’s dive deeper into the unique aspects of both types of signatures, where they came from, and why they matter.

Key takeaways:

• eSignatures are the digital equivalent of putting pen to paper on a contract or agreement.
• Digital signatures are a form of encryption which guarantee the authenticity of a document and protects it from being tampered with or altered.
• The two dovetail to ensure the legitimacy and security of any documents.
• Enjoy improved security and trust with a solid contract management system.

Electronic signature vs. digital signature

eSignature solutions

Also written as “e-signature” an electronic signature represents verified intent to sign a document.

They can be anything from a verbal authorization to an electronically signed authorization, or even just checking a box.

The most traditional form of authorization is simply typing or signing your name on a document, but you can also use an electronic sound, symbol, or process that indicates your intent to sign, like entering a numbered code.

Technically, the first electronic signatures were sent via the pantelegraph.

Developed in the mid-19th Century, it was mostly used by bankers to transmit and receive important, signed documents.

It scanned, reproduced, and transmitted images over telegraph lines. Think of it as an early fax machine.

While the concept of an electronic signature has been around for centuries, the electronic form has advanced and become more widely accepted.

Now, digital signing forms are easier and better suited to the changing landscape of the world than ever.

In recent years many businesses have adapted to remote life, and signature software is one tool that every industry must now rely on.

Not only does it keep deals in motion, but PandaDoc’s type of electronic signature enables remote organizations to streamline sales, onboarding, training, and much more.

Digital signature technology

So, what are digital signatures, and how do they work?

Well, a digital signature contains an algorithm that encrypts the signature to generate a unique digital certificate.

It’s a type of signature that encrypts a document with invisible digital codes that make tampering and duplication practically impossible for hackers.

The very first algorithm for a digital signature was invented in 1976. In its early iteration, it, unfortunately, contained workarounds for anyone determined to forge or tamper with the document.

It was not fit to prevent outside forgery until the security requirements were defined in 1988.

Now, there are electronic signature laws that protect the signer’s identity and support the fact that digital signatures are the most secure way to sign documents.

Difference between digital signature and electronic signature

Now that we know what digital signatures and electronic signatures are, let’s look at the ways in which both are implemented.

Purpose

Digital signatures and electronic signatures are trying to achieve two different things, but ultimately, they are working towards the same goal.

So it’s more of a partnership than an electronic vs. digital signature contest.

The aim of a digital signature is to guard your document against forgery and being tampered with.

An electronic signature is the online version of putting a pen to paper and shows that the person or company signing is willingly entering into a contract or agreement.

The former establishes a document’s authenticity, and the latter denotes the agreement of a party to the terms therein.

But, while their individual purposes are different, both of them dovetail to make sure to ensure the legitimacy of legal documents, contracts, and agreements.

Common use cases

Digital signatures are used across several sectors.

They are commonly utilized in software distribution, financial transactions, and contract management software.

If you can think of an area of business where it is crucial to verify authenticity and detect forgery, it’s likely that area uses digital signatures.

Electronic signatures, on the other hand, are used as a proxy in any situation which requires you to sign your name.

Think employment contracts, sales contracts, non-disclosure agreements, and anything else that has historically required someone to sign their name on a document.

Level of security

Digital signatures use asymmetric cryptography to verify the authenticity of digital documents, provide a layer of validation and security and make themselves very difficult to forge.

Parties privy to the document can also see if any changes have been made to it and who has signed it, and when.

Electronic signatures benefit from this level of security by association.

If you’re signing a document that is already safeguarded by a robust digital signature, this change to the document will be under the same protection.

In most cases, they are safer than wet signatures because you can see when and where they were signed.

In a nutshell:

An electronic signature is an authorized way to sign a document, while a digital signature is a way to encode a document for cybersecurity.

But, are they legal?

Yup!

Both types of digital signatures are legally binding forms of accepting signatures.

Electronic signatures are legally enforceable in the United States, Canada, U.K., Australia, the European Union, and dozens of other countries.

In most cases, electronic signatures are no different than handwritten ones — the primary difference being that signing a document electronically is more convenient than by hand.

PandaDoc’s eSignature solution is compliant with the U.S. ESIGN Act (Electronic Signatures in Global and National Commerce Act), the UETA Act (Uniform Electronic Transactions Act), and the European EC/1999/93 Directive, ensuring their legality. Our software also generates a unique barcode that emphasizes its certificate authority.

However, there still are some cases where handwritten signatures are required. In U.S. tax forms, voter registrations, and new driver’s license applications are all instances in which a handwritten signature is still required for legitimacy and legality.

However, given the current state of the world, we believe it’s only a matter of time before these institutions begin to accept electronic signatures.

Final thoughts

Now you know the key difference between digital vs electronic signature types, what can you do with this information?

You can use the best electronic signature software to create meaningful, legally binding digital documents that are quicker and easier for you and your customers to sign!

PandaDoc’s contract management software makes the entire process easier and streamlines it for your business.

Our built-in, legally compliant eSignatures guarantee security and trust.

Disclaimer

PandaDoc is not a law firm, or a substitute for an attorney or law firm. This page is not intended to and does not provide legal advice. Should you have legal questions on the validity of e-signatures or digital signatures and the enforceability thereof, please consult with an attorney or law firm. Use of PandaDocs services are governed by our Terms of Use and Privacy Policy.

Originally published August 30, 2016, updated November 2, 2023