People planning to go online now might want to think about bringing along some identification–digital identification, that is.
Thanks to a new federal law that took effect on Oct. 1, it’s likely to become important to prove who you are on the Internet.
The new law, which builds on a similar California law that took effect in January, grants electronic signatures the same binding legal status as their ink-drawn cousins. It makes it possible for businesses and individuals to sign enforceable contracts online simply by clicking a mouse.
For businesses, the Electronic Signatures in Global and National Commerce Act has the potential to dramatically slash administrative costs and reduce fraud. For individuals, the law makes it more convenient to do things like buy an insurance policy or open a brokerage account on the Internet. But there’s a downside.
By encouraging more business to be done over the Internet, the new law could expose consumers to a growing risk of security and privacy breaches.
The vulnerable state of computer networks and the frequency of malicious attacks on them means that personal information sent over the Net or stored on a device connected to the Net is in jeopardy of being stolen and misused. The more valuable the information is, the more it attracts cybercriminals.
Moreover, the new law has its limits. It merely provides legal recognition to electronic signatures. It doesn’t specify the form they should take, and it has no provisions for preventing electronic forgeries. “They took pains to be technology neutral, and that’s a plus and it’s a minus,” said John Pescatore, research director for Internet security at research firm the Gartner Group.
Under the law, an electronic signature can be anything from an audio snippet to a string of invisible computer code attached to an electronic document.
Digital IDs are one step consumers can take to protect themselves. Also referred to as “digital certificates,” they enable Web surfers to establish their own identities as well as to authenticate everything from documents they send to the Web sites they visit.
Using a digital ID, a user can create an electronic signature and then safely encrypt the document before sending it over the Internet.
In the coming months, following enactment of the new law, consumers can expect a deluge of digital ID offers from banks, credit card companies, health insurance providers and employers. Visa USA, the nation’s leading credit card brand, recently unveiled a new technology platform that, among other things, enables Visa’s 21,000 member banks to issue digital IDs to customers.
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VeriSign, a Mountain View, Calif.-based company that strongly supported the new law, already makes digital IDs available to consumers, though its main market is businesses. For $14.95 individuals can download a digital certificate from the VeriSign Web site.
Users of Microsoft Outlook e-mail can obtain similar technology for free by clicking on a toolbar and inserting an electronic signature. In both instances, the electronic signature is actually a complex string of invisible computer bits that ties the sender of the message to the message itself.
Businesses hope the use of digital IDs and electronic signatures will decrease the risk to their bottom line. According to the Gartner Group, online businesses suffer 11 times as much credit card fraud as offline businesses. Because the information exchanged during an online transaction was not considered to be the equivalent of a signed receipt, credit card companies were not obligated to cover fraudulent purchases–until now.
By granting online agreements the same force as offline contracts, the new law means credit card companies will have to honor online transactions.
Another benefit the new law brings to businesses is savings in time, money and labor. Instead of faxing and sending paper documents back and forth, they can simply affix electronic signatures.
“You spend more time exchanging signatures offline than you do processing the transaction online,” said Dale Boeth, senior vice president of PurchasePro.com, which operates an electronic marketplace that encompasses 25,000 businesses. “This promises to add the next step of automation.”
But while the new law will help businesses become more efficient, consumers may find themselves in a more complicated world.