A digital signature is a mathematical technique used to validate the authenticity and integrity of a message, software or digital document. It’s the digital equivalent of a handwritten signature or stamped seal, but it offers far more inherent security. A digital signature is intended to solve the problem of tampering and impersonation in digital communications.

Digital signatures can provide evidence of origin, identity and status of electronic documents, transactions or digital messages. Signers can also use them to acknowledge informed consent.

In many countries, including the United States, digital signatures are considered legally binding in the same way as traditional handwritten document signatures.

Classes and types of digital signatures

There are three different classes of digital signature certificates (DSCs):

  • Class 1. Cannot be used for legal business documents as they are validated based only on an email ID and username. Class 1 signatures provide a basic level of security and are used in environments with a low risk of data compromise.
  • Class 2. Often used for electronic filing (e-filing) of tax documents, including income tax returns and goods and services tax (GST) returns. Class 2 digital signatures authenticate a signer’s identity against a pre-verified database. Class 2 digital signatures are used in environments where the risks and consequences of data compromise are moderate.
  • Class 3. The highest level of digital signatures, Class 3 signatures require a person or organization to present in front of a certifying authority to prove their identity before signing. Class 3 digital signatures are used for e-auctions, e-tendering, e-ticketing, court filings and in other environments where threats to data or the consequences of a security failure are high.

Uses for digital signatures

Industries use digital signature technology to streamline processes and improve document integrity. Industries that use digital signatures include the following:

  • Government. The U.S. Government Publishing Office (GPO) publishes electronic versions of budgets, public and private laws, and congressional bills with digital signatures. Digital signatures are used by governments worldwide for a variety of reasons, including processing tax returns, verifying business-to-government (B2G) transactions, ratifying laws and managing contracts. Most government entities must adhere to strict laws, regulations and standards when using digital signatures. Many governments and corporations also use smart cards to ID their citizens and employees. These are physical cards endowed with a digital signature that can be used to give the cardholder access to an institution’s systems or physical buildings.
  • Healthcare. Digital signatures are used in the healthcare industry to improve the efficiency of treatment and administrative processes, to strengthen data security, for e-prescribing and hospital admissions. The use of digital signatures in healthcare must comply with the Health Insurance Portability and Accountability Act (HIPAA) of 1996.
  • Manufacturing. Manufacturing companies use digital signatures to speed up processes, including product design, quality assurance (QA), manufacturing enhancements, marketing and sales. The use of digital signatures in manufacturing is governed by the International Organization for Standardization (ISO) and the National Institute of Standards and Technology (NIST) Digital Manufacturing Certificate (DMC).
  • Financial services. The U.S. financial sector uses digital signatures for contracts, paperless banking, loan processing, insurance documentation, mortgages and more. This heavily regulated sector uses digital signatures with careful attention to the regulations and guidance put forth by the Electronic Signatures in Global and National Commerce Act (E-Sign Act), state Uniform Electronic Transactions Act (UETA) regulations, the Consumer Financial Protection Bureau (CFPB) and the Federal Financial Institutions Examination Council (FFIEC).
  • Cryptocurrencies. Digital signatures are also used in bitcoin and other cryptocurrencies to authenticate the blockchain. They are also used to manage transaction data associated with cryptocurrency and as a way for users to show ownership of currency or their participation in a transaction.