We are living in the digital era where everything around us has been changed drastically. Online shopping is the biggest example that has created a new world not only for the buyers but for the businesses as well.
The stats confirm that around 60% of the shopping has been made via E-Commerce solutions that means the online interactions between customers has been increased a lot.
As the customers are using online payment methods, so we can see that the banks and financial institutions are digitizing themselves as well.
Other industries like manufacturing, utility services, software, and app development, transportation, education, and medical services have changed themselves according to the world requirement.
In this way, the E-Commerce solutions are contributing towards making the eco-friendly environment, as the paperless model is ready to hit the business world now.
Moreover, we can observe the involvement of technology in the B2B market, which is more complicated.
The reason is that the bulk of products are sent, and against it, online payment procedures are dealing in transferring huge amounts.
To keep this whole process protected, secure, and free of malware, the concept of filling a digital signature form for using electronic signature is flourishing in the businesses as well.
It confirms that if you are trading internationally, you need an electronic signature.
According to some surveys, businesses are showing interest in this technology. One survey says that more than 50 million customers are using electronic signatures for doing business.
More importantly, these people belong to 188 countries. It confirms that understanding about e-signature is increasing worldwide.
Why are the businesses showing interest in e-signature forms?
Well, in this way, they can cut short the cost, which can be 90% more than that of using e-signature in some cases. Moreover, this technology has helped businesses reduce the use of paper in the premises.
However, due to the electronic signature, the businesses are facing some critical issues as well. The first thing in this regard is the unavailability of globally harmonized legislation.
The situation becomes more complicated when you find uncertainty in the cumbersome local laws.
With that, using cloud storage for completing the electronic signature process is also creating issues for the businesses. The businesses think that they feel discomfort when thinking about data security and data residency.
However, during the Covid-19 Pandemic, they needed to rely on electronic signature even in the presence of such critical issues, related to it.
How are businesses managing electronic signature?
Currently, the businesses are using e-signature to streamline local and international business transactions. In this way, they are eliminating the paper documents for signing the documents, contracts, and agreements.
They have also improved the transportation of documents, as they can send these documents via the cloud system.
Another important aspect regarding these transactions is that some countries like the United States of America and the European Union have established e-signature related laws.
But, transacting internationally can be ambiguous because may countries have no accurate laws. Therefore, lack of conformity arises, which stops the businesses to use e-signature while doing business in these countries.
World Economic Forum (WEF) has also some serious concerns about international trading in connection with e-signature. They think that the complexity in the cross-border digital activity can make the whole process of trading difficult and complex.
They think that it can be a threat to the world economy. The reason is that in the absence of effective electronic signature laws, the costs of doing business in the international markets can increase to a large scale.
If it happens, the percentage of the businesses, who explore new markets, will reduce, and world economies will face the circumstances.
From onward, we will summarize this topic by providing you all the types of e-signature and their contribution to international trade.
What challenges, the electronic signature is facing in international trading?
Overall, B2B businesses are expanding rapidly. This trend continued in the Covid-19 Pandemic as well. According to the United Nations, the B2B E-Commerce sales in 2019 were $3,763 billion worldwide. It means that businesses rely on the electronic signature to a large extent.
However, they prefer those countries for international trading that have legal acceptance for e-signature. As the governments are now fully aware of its value, they are incorporating this technology into their legal frameworks.
Till today, according to research, roughly, 80% of the countries have implemented these laws. Moreover, 10% more countries are now ready to implement it. However, while talking about the percentage of developed and developing economies, the difference is huge.
Statistically, 98% of the developed economies have fully-developed e-signature laws. On the other hand, only 46% of the developing countries have incorporated such regulations in their legal frameworks.
In the following section, we will discuss the main challenges that are related to electronic signatures:
No Uniformity in Laws
However, the major concern is that these laws are not uniform. This reason has created complications for businesses. For example, some countries do not basic electronic signature legal, while in some other countries, you can use these signatures.
The United Nations Commission on International Trade Law jumped into this issue to make these laws uniform in all the members of the World Trade Organization. We can find some agreements in the world as well that have developed agreements about e-signature.
For example, the 2001 Model Law on Electronic Signatures (MLES), which has 30 members. Another agreement is the 1996 Model Law on Electronic Commerce (MLEC) that has been signed by 70 countries.
Some other treaties have also been signed but the number of members is minimal. However, according to the experts, the impact is limited, and the world leaders have not become a part of these treaties until today.
Different implementations of same laws in different countries
Despite these efforts, many cross-border traders are using e-signatures, although they know that there are legal disparities in all the regions. According to UN model law, it is allowed to a country to implement all the features of one model and leave other ones.
Some countries are using different models without signing the treaty. However, these scenarios help international trader continue their business transactions in these countries.
In this way, many businessmen are now fully aware of the differences in law in different countries that help them continue international trading.
Technology is faster than the changes in Laws
One more challenge is in front of the legal authorities. The experts claim that enhancement and improvement in technology are faster than the legal changes in the framework.
This challenge becomes more relevant while talking about international trading. The legal authorities do not react immediately if they find a change in the technology that stops evolution and proliferation.
The WEF suggests the exchange of contractual information to address this issue.
How do the experts confuse in understanding the types of E-Signatures?
Well, the experts find themselves confused while differentiating electronic and digital signatures. To help them understand, it is important to mention that electronic signature is considered a process that helps both the parties indicate the agreement acceptance.
The experts of electronic signature have included a wide range of identification processes and technologies in which email addresses, scanning of the original signatures, acceptance procedure.
On the other hand, digital signatures are more specific in nature that are designed with the incorporation of encryption. For those businesses, who want more security and verification procedures, digital signatures are more reliable and secure.
These signatures require that the signer should authenticate the whole procedure by using a digital ID.
An Independent Certificate Authority generates this certificate-based ID to fulfill the requirements of a digital signature.
How many types of legal frameworks are available?
According to international experts, these frameworks can be of three types. We will discuss them separately:
According to these laws, all electronic and digital signatures are acceptable. It means that you can use these signatures without any legal hurdle, as these are equivalent to handwritten signatures. According to these laws, mutual consent is required for e-signature.
The purpose of these laws is to facilitate businesses to a large extent. In this way, the legal authorities of these particular countries create a business-friendly environment that encourages businesses to work independently.
Through these laws, the legal authorities of the specific country design a specific purpose for signing the documents electronically. It means that you need to follow the process as it is mentioned in the law.
For example, some countries allow only those signatures that are verified by a specific certificate provider.
Hybrid legal frameworks
Under these frameworks, the countries may accept all types of signatures but prefer only those that are with some evidentiary weight.
The Bottom Line
Electronic signatures have a significant value in the business world. international traders love to adopt this technology to penetrate the international markets.
However, they are facing some serious challenges while using electronic signatures.
Some of the challenges are related to the procedure but the businessmen are fully aware of all of them and facing them through corporate behavior.
However, their major concern is the difference in laws in different countries.
In some countries, they adopt a different technique. However, when they come to another country, they find something new.
These challenges avoid businesses to make a uniform process for electronic signature. This particular reason has created some serious concerns for businesses.
To address these concerns, the World Economic Forum jumped into the issue and suggest some steps. However, processing is taking the time.
But, the legal authorities of the world need to address these concerns.
In the case of getting success to develop a uniform legal framework for electronic signature, the business opportunities will increase that will have a trickle-down effect, and it will contribute a lot to remove the stagnancy from the world’s economy.