Signs are good for e-commerce

A recent report into digital certificates in Europe suggests that progress is slow. But 2007 could be when the technology starts significant adoption. FST’s Neil Davey reports.

Security is very much the Achilles’ heal of e-commerce. Although online retailing continues to proliferate, one experience of online fraud or identity theft would be enough to discourage most shoppers from e-commerce for at least the short-term. Once bitten, twice shy. So efforts to secure online transactions have understandably been regarded as something of a priority since the dotcom explosion.

In the EU, the Commission embraced digital signature technology as a silver bullet solution to the issue of security. The technology applies a seal to an electronic document that allows the recipient to be certain of the origin of the data (confirming identity) and also confirms that the document has not been tampered with since it was signed (confirming integrity).

Confident that these would be invaluable in encouraging trade in goods and services via the internet, the Commission pushed through a Directive in 1999 that established a Community framework for electronic signatures, which was subsequently implemented in all 25 Member States. So far, so good, and the Commission was rightly commended for its efforts.

Yet when a progress report into the operation of the Directive was unveiled earlier this year, it was revealed that the market for advanced electronic signatures backed by ‘qualified certificates’ from Certification Service Providers has been much slower to take off than expected.

“A reliable system of electronic signatures that work across intra-EU borders is vital to safe electronic commerce and the efficient electronic delivery of public services to businesses and citizens,” Information Society and Media Commissioner Viviane Reding emphasised. “The EU rules that all 25 Member States have transposed into their national laws make e-signatures legally recognised on their territory. However, I am not fully satisfied with the take-up of electronic signatures in Europe. Much work still has to be done in particular to make signatures work across borders.”

According to the Commission’s report, the main reason for the initiative’s slow development is an economic one. “Service providers have little incentive to develop multi-application electronic signature and prefer to offer solutions for their own services, for instance solutions developed by the banking sector,” the report highlights. “This slows down the process of developing interoperable solutions.”

So, is the digital signature campaign coming off the rails already? Not necessarily so. In fact, if you can look past its slow start, there is still plenty to suggest that the signs are good.

The main reason for this optimism hails from a number of factors that are likely to drive digital signature adoption in the coming years. For instance, the rising use of electronic signatures in e-government services – such as online income tax returns and in electronic public procurement and ID management, as stressed in the Commission’s e-Government Action Plan – is expected to be influential.

But arguably the biggest factor to drive digital signature demand in the near future will be the growing use of electronic ID cards in the EU. The roll-out of electronic ID cards are emerging as popular government policies in many European countries such as the UK, where they are planned to be a robust identification document and provide online access to public services for citizens. In most cases these ID cards will also serve to identify the holder and authenticate the signature, as well as enabling the holder to sign.

Nevertheless, the Commission won’t be resting on its laurels. Although the report concludes that the Directive has introduced legal certainty with respect to the general admissibility of electronic signatures and continues to provide, for the moment, a valid basis for electronic signatures in the internal market, there are already efforts afoot to further encourage the development of e-signatures services and applications. For instance, it has announced plans to encourage further standardisation work in order to promote the interoperability of e-signature systems within and across borders and the use of all kinds of technologies for qualified electronic signature in the single market.

Elsewhere, the Commission has made it known that it intends to hold a series of meetings with EU Member State experts and stakeholders to consider possible complementary measures, to address: any differences among national laws transposing the e-signatures Directive that could fragment the single market, any clarifications needed in specific articles of the e-signatures Directive and any technical and standardisation work needed to improve the cross-border interoperability of e-signature systems.

The Commission also plans to prepare a report on standards for electronic signatures in 2006 to see whether further regulatory measures by the EU could be required. “I see a need for asking whether we need further adaptations of our EU framework for electronic signatures to technological and market developments and to the better regulation-policy of this Commission,” Reding has suggested. “The development of e-signatures in the internal market will therefore continue to be under my close scrutiny in the year to come.”

European Commission concerns that reluctant adoption of electronic signatures could slow the growth in online commerce are understandable, particularly as trade in goods and service over the internet is such significant business on the continent. But with growing use of electronic ID cards, the use of e-signatures in e-government services and momentum from the EU all accompanying growing interest from companies, e-commerce should be in safe hands in the future.