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This article is written by Pooja Wagh,  pursuing a Diploma in Advanced Contract Drafting, Negotiation and Dispute Resolution from LawSikho.

Introduction

We are all aware of E-Commerce and how it is not a new concept especially during the pandemic. The industry of e-commerce is evolving substantially in recent years because it plays a prominent role as consumers and businesses can interact online. But do you know that digital signatures play an important role in e-commerce? 

In India, the emergence of “Digital India” in this decade, the concept of e-signatures or digital signatures in e-commerce or e-contracts has definitely proved to be beneficial to the people to save their time. But what is Digital India? Digital India is an initiative by the government with an intention to boost digital infrastructure and its prime focus is to remodel India into a paperless economy. Many businesses and corporations in India are utilizing digital signatures to proceed with their transactions. Various government agencies are now adopting Digital Signature or Digital Signature Certificates. Over time, Digital Signature may be a statutory requirement in various applications, contracts and documents. If you are looking for more information regarding digital signatures and e-commerce, this article is for you!

Digital Signature

In modern days where the campaign of Digital India is on the rise, a digital signature is a modern alternative to the traditional signing of documents on a piece of paper with a pen. An advanced mathematical technique is used to validate the integrity and authenticity of digital messages, software, and documents by Digital Signature. Even if a digital signature is equivalent to a handwritten signature or stamped seal, it provides extreme security. It is guaranteed by the Digital Signature that the contents of a message are not altered in transit.

The areas where it is crucial to validate the authenticity or the integrity of digital communications such as financial transactions, email service providers, and software distribution, digital signatures are used in addition to the digital document signing. It intends to help us overcome the problem of impersonation and tampering in digital communications. Additional information relating to evidence of the origin of the message, status, and consent by the signer is also provided by digital signatures. The data authenticity and integrity of digital signature is ensured by the public key infrastructure, which is industry-standard technology.

In many big countries including the United States and the other European Countries t, etc, digital signatures hold the same status that of traditional handwritten document signatures. Hence, digital signatures are considered to be legally binding.

  • Digital Signature encrypts a customer’s signature with a code that others cannot duplicate. 
  • The potential errors in the important documents can be reduced by having this form of signature. The chances of fraud are eliminated. 
  • The risk of forged signatures, like with paper documents, is also eliminated. 
  • Digital Signatures are easily transportable, cannot be imitated by someone else, and can be automatically time-stamped. 
  • The ability to ensure that the original signed message arrived means that the sender cannot easily repudiate it later.

E-Commerce is not a new concept. The industry of e-commerce is evolving substantially in recent years because it plays a prominent role in how consumers and businesses shop. Digital Signature plays a significant role in e-commerce. In India, because of the emergence of Digital India, the employment of digital signatures in e-commerce or e-contracts is on the rise. Digital India is an initiative by the government with an intention to boost digital infrastructure and its prime focus is to remodel India into a paperless economy. Many businesses and corporations in India are utilizing digital signatures to proceed with their transactions, which helps them to fasten the process. Various government agencies are now adopting Digital Signature or Digital Signature Certificates. Nowadays, Digital Signature may be a statutory requirement in various applications. 

E-commerce

E-commerce stands for Electronic Commerce. E-commerce is the trading or facilitation of trading in products or services using computer networks, such as the Internet. In 1979, Michael Aldrich demonstrated the first online shopping system. Modern electronic commerce typically uses the World Wide Web for at least one part of the transaction’s life cycle.

E-commerce is commonly known as Electronic Marketing. It consists of buying, selling, and exchanging goods and services over electronic systems such as the Internet or other computer networks, through which transactions or terms of sale are performed electronically.

Why E-commerce?

  1. Low Entry Cost
  2. Reduces Transaction Costs
  3. Access to Global Market
  4. Secures Market Share
  5. Easy Access 24*7
  6. Wide selection to cater for all consumers

Different modes of e-commerce

  1. Business to Business (B2B): This type of e-commerce refers to the electronic exchange of products, services or information between businesses rather than businesses and consumers.
  2. Business to Consumer (B2C): This is the retail part of e-commerce on the internet where businesses sell products, services or information directly to consumers. Nowadays, there are innumerable virtual stores and malls on the internet selling all types of consumer goods. For example, Amazon, which dominates the B2C market.
  1. Consumer to Business (C2B): It is a type of e-commerce in which consumers make their products and services available online for companies to bid on and purchase. This is the opposite of Business to Consumer.
  2. Consumer to Consumer (C2C): In this type of e-commerce, consumers trade products, services and information with each other online. These transactions are generally conducted through a third party that provides an online platform on which the transactions are carried out.

Government initiatives

There are various initiatives by the government for the promotion of e-commerce. A few of them are as follows:

  1. Better broadband connectivity for Tier-2 and Tier-3 cities.
  2. Introduction of cashless transactions.
  3. The Ministry of Urban Development has proposed a Smart National Common Mobility Card for traveling as well as retail purposes.
  4. Introduction of GST, which enables easier movements of goods across the country.

Digital signature and e-commerce

Isn’t it easier to urge users for signatures on key documents like license agreements, subscription deals and general contracts? As a result, digital signature plays a prominent role in E-Commerce. If the close ties between Digital Signature and E-Commerce are clear, it is a critical process to understand the collection of digital signatures for E-Commerce companies. E-commerce companies are obliged to ensure the public as well as customers purchasing from to use the payment methods they are presenting and that people buying goods are contractually obligated to follow any licensing terms.

E-commerce, software distribution, financial transactions, and other situations that rely on forgery or tampering detection techniques are some of the examples where digital signatures can be misused. Hence, with their proper utilization, their misuse can be reduced to a great extent. These signatures serve as a fingerprint for the buyer, regardless of the involvement of business owners in business-to-consumer (B2C), business-to-business (B2B). 

The legal complexity that comes into the picture could be a never-ending issue. Hence, e-commerce retailers are probably dealing with them regardless of the degree to which they are committed to e-signatures. If online retailers desire the consumers to purchase their products or avail their service, they are highly dependent on their reputation. They must find ways to ensure that the data is safe and stored in compliance with regulatory standards. This stems from how e-commerce organizations use e-signatures and store the source data of the process capture.

The key considerations that e-commerce companies or online retailers must adhere to while implementing digital signatures are as follows: 

  1. Digital Signatures are essential: A collection of encrypted data that captures the important data about the activity surrounding e-signature is known as a Digital Signature. They are essential to protect the authenticity, integrity and privacy of online transactions. By giving e-signatures a layer of legitimacy and protection against tampering, digital signatures boost the implementation of e-signatures. However, E-commerce organizations must note that all of their operations are secure and legally defensible. Digital signatures are essential as it plays a significant part in the process of using e-signatures and help protect buyers and sellers alike.
  2. Understanding the Terms: An e-signature is much more than just a tick box where you select the “I agree” option. It must be ensured that users clearly assent to the conditions of their website and in order to ensure the same, the terms used in the agreement should be in clear, simple language that can be understood by a layman.
  3. Country-specific laws: E-signature policy in a majority of nations or jurisdictions makes the use of technology a favourable option. However, different national and international bodies have different methods to incorporate laws for the consumers and how their data needs to be stored. If there is any dispute regarding this, you will be tried under the laws applicable to the specific jurisdiction.

Security

E-commerce is built on blind trust as both the parties don’t really know who they are transacting with. Therefore, to treat its security with utmost priority is important. It is easier to obtain user signatures on documents with the technology of digital signature. It is a crucial part of security whose primary purpose is to secure e-commerce transactions, and plays a significant role in the security of e-commerce. They must ensure that the people transacting with them are not cyber-criminals and are authorized to complete the transaction with the e-commerce companies. With the growth of e-commerce, there is a growth of the need for digital signatures.

Conclusion

To protect the privacy, integrity, and authenticity of online transactions, it is essential to include digital signatures in our transactions. The people who attempt to use the services of online businesses, i.e. e-commerce, must provide accurate and verifiable information. Online enterprises must ensure that the information provided by the consumers is true and accurate. The problem of information being misused by the means of fraud is on the rise, but at the same time, it is traceable. Digital signature technology protects the consumer because it offers extreme security to protect the information with a private key, i.e. it is only known to the signer. Hence, it prevents the consumers from being victims of identity theft.

References

  1. https://searchcio.techtarget.com/definition/e-commerce
  2. https://www.zoho.com/sign/how-it-works/electronic-signature/digital-signature.html
  3. https://www.certificate.digital/certificate/

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