5 Benefits of Digital Signatures for Startups

Digital Signature

As per Wikipedia, a digital signature is a mathematical scheme for verifying the authenticity of digital documents. It ensures any electronic document such as email, spreadsheet, a text document, etc. is ‘authentic’ and not tampered, from the time it left the sender till it reached the receiver. The digital signature ensures data integrity and non-repudiation.

Authentication is the process of verifying that the sender is indeed the actual individual who sent the message and not an impostor.

Data integrity ensures that the message reached the recipient in the same state as it started from the sender. The underlying data is not modified on the way.

Non-repudiation is a cryptographic term to establish the authorship of any document, which implies that the author cannot deny from owning the document. This becomes extremely important in legal and regulatory documents.

HOW DO DIGITAL SIGNATURES WORK?

Digital signatures employ various encryption techniques to do their job. Encryption is to ‘encode’ a set of data from a computer before it leaves and then ‘decode’ it at another computer with a matching key while maintaining its ‘authenticity’.

Password-checksum, cyclic redundancy check, private key – public key encryption, etc. are examples of techniques used by digital signatures, depending upon the degree of encryption required. Practically, all of these cover these 3 steps –

  1. Key ‘generation’ algorithm – this algorithm generates a random pair of keys for the document signer. The algorithm ensures the uniqueness of this ‘key pair’ to ensure the security of the document where they will be deployed.
  2. Document ‘signing’ algorithm with the Key – using an appropriate algorithm, the user signs the document and sends it across to the recipient.
  3. Key ‘verification’ algorithm – this is deployed at the receiving end, to verify the sender’s key.

 

For this entire mechanism to be effective, it is imperative that the data signed with the ‘private key’ of the individual, is verified by the ‘matching public key’ of the same individual. Adequate confidentiality has to be ensured, so as not to forge the private key of the sender.

 

HOW DO BUSINESSES BENEFIT FROM DIGITAL SIGNATURE?

Now that we know how a digital signature works, let’s go over some key benefits it offers to businesses –

1. SIMPLE & INTUITIVE

The biggest benefit of a digital signature is its simplicity and ease of use. Once the signer has acquired his/her digital signature, it becomes very easy to apply it to any document and send it across in a secured manner. The recipient signs the document and the process is complete. It is that easy and can be accomplished from the comfort of the office.

2. HIGH LEVEL OF SECURITY

In today’s IoT era (Internet Of Things), e-business is the norm and everyone opts to send documents over the electronic media versus traditional paper documents. Digital signatures become essential in such scenarios. Not only do they contain the signature of the sender, but they also contain traceable information on who signed the document, when was it signed and where. These inherent features of the digital signature enforce stronger security than a conventional paper document.

3. CONVENIENCE

All businesses operate in geographically disparate locations. Even small businesses have to deal with suppliers, customers, and partners located in different states, cities and even countries. Digital signature facilitates online authentication, which makes it a very convenient solution instead of a paper-based printed and scanned version.

4. QUICK TURNAROUND

The convenience of digital signatures inherently implies a faster turnaround time. Instead of involving multiple players, who will handle printing, signing, scanning and sending one side of the business transaction and the same set of actions on the other side, a digital signature authentication happens at the click of a button. Naturally, it gives businesses the necessary agility, edge and helps to improve trust with their stakeholders.

5. LOWER COST

Undoubtedly, with the entire paraphernalia of manual printing, signing, and scanning going out of the way, a digital signature is highly cost-effective. Besides, it saves paper! Over a longer period, all this adds up into the business’ incomes.

HOW TO GET A DIGITAL SIGNATURE?

The Ministry of Corporate Affairs (MCA) of India defines a Digital Signature Certificate (DSC) as the digital equivalent (electronic format) of the corresponding physical or paper certificate. They are legally admissible in a Court of Law, as provided under the provisions of IT Act, 2000 of India.

A licensed ‘Certifying Authority’ (CA) issues the digital signature. A good Certifying Authority can help with the issuance, revoking, renewing and providing directories for DSCs. The MCA maintains an up-to-date list of various agencies that are authorized to issue these DSC’s.

The Certifying Authorities issue a Digital Signature Certificate with a validity of one or two years. A lead time of 3-7 working days is required to get a DSC, once it is applied. In the case of individuals holding a valid Aadhaar number, online verification can be conducted via eKYC and the DSC gets issued immediately on the same day.

The Certifying Authorities have been granted flexibility on the fees that they can charge, within permissible limits set by the MCA.

TYPES OF DIGITAL SIGNATURES

Primarily, there are four types of digital signature certificates, issued in India –

  1. Class 1: The class 1 DSC is used just for the identification of credentials of a particular person. It cannot be used for authentication and hence, not permitted to sign any documents.
  2. Class 2: In this case, the identity of the signer is verified against a trusted, pre-verified database. It is issued for purposes such as filing of income tax e-returns, MCA/ROC (Ministry of Corporate Affairs / Registrar of Companies) returns, provident fund claims, etc.
  3. Class 3: This is the highest level of DSC where the person needs to be physically present before the Registration Authority and prove his/her identity with appropriate documents. The certificate is most commonly used for booking online tickets, e-tenders, e-procurement, and more.
  4. DGFT Digital Signature Certificate: The certificate is issued by the Directorate General of Foreign Trade (DGFT), and is used to sign foreign trade transactions and while communicating with DGFT.

At Filings.in, our end-to-end startup services can help you choose the right DSC for your business. Checkout how you can launch your startup with us.

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