Shaping The New Digital Economy

By Steven Chan, International Head of Government Relations & Public Policy, Asia Pacific & Latin America, PayPal

The COVID-19 pandemic has changed and created new business models as customers increasingly transact online and adopt e-commerce as part of everyday life. Greater digital adoption by small and medium-sized enterprises (SMEs) and digital transformation of businesses is not only a matter of survival but also, an opportunity to reach new customers and markets.

Among the myriad facets of doing business that underwent digital transformation over the past two years were identity verification and authentication, as well as contracting and documentation processes. For instance, as people became reluctant to handle physical money, a corresponding shift away from cash and towards digital payments began to take place. This led to many previously unbanked individuals and businesses opening accounts with financial institutions during the height of the pandemic but movement restrictions and lockdowns disallowed them from physically verifying their identities. Subsequently, know-your-customer (KYC) processes and accompanying documentation had to be shifted online to ensure the continuity of businesses and economic activities. A key element in making this possible was the recognition and acceptance of e-signatures.

According to a recent report by National Center for APEC (NCAPEC) that PayPal contributed to and collaborated on, the wider use and adoption of e-signatures and digital signatures across the Asia-Pacific Economic Cooperation (APEC) economies create significant tangible benefits – including improvements in the efficiency of both domestic and cross-border transactions. The use of e-signatures can also enhance security and data protection – especially if encrypted forms of such signatures are used in concurrence with digital identity systems to verify the provenance of transactions and the identities of those who initiate them.

However, challenges remain, including entrenched social and business practices that place more trust in physical documents and wet signatures. The greatest challenges to the adoption of e-signature lie in regulatory hurdles that render the validity of e-signatures uncertain. Such hurdles include limitations on the type of documents that can be signed using e-signatures, notarisation or certification requirements that create delays that negate the efficiency gains provided by e-signatures and most worrisome of all – regulatory heterogeneity across jurisdictions, which create uncertainty about the validity and legality of e-signatures.

To mitigate this, there are key steps that governments across the region can undertake to ensure that the benefits from the adoption of e-signature can be realised.

First, APEC member countries should come together to make permanent some of the pandemic-related special measures and allowances that were implemented which allowed for wider use of e-signatures in their respective economies.

Alongside extending such measures beyond the pandemic, member countries should work together to ensure interoperable standards for documentation, verification, and authentication. This would significantly reduce operational costs and delays and enable SMEs in APEC member countries to provide their goods and services to customers in other markets in the region with greater speed and efficiency.

APEC members should also seek to reach accordance on mutual recognition of e-signatures so that cross-border transactions can proceed smoothly even in the absence of physical documents or wet signatures. The wider use and acceptance of e-signatures is a first step towards building out a robust digital identity regime.

For example, Singapore’s national digital identity mechanism called SingPass, which came into effect in November 2020, has revamped the way Singaporean firms and residents conduct financial transactions. SingPass holders can electronically sign contracts, agreements and other legal documentation using “Sign with SingPass” – a feature through which a uniquely identifiable digital signature is cryptographically linked to the signer and automatically validated at the point of signing. One of the most important aspects of “Sign with SingPass” is its platform agnosticism; which enables its use across diverse systems. Singapore’s national digital identity ecosystem is one of the most widely adopted in the world - covering 97% of Singapore citizens and permanent residents aged 15 and above. More than 350 million personal and corporate transactions are facilitated through SingPass yearly.

A key factor for Singapore’s success is the consultative and stage-by-stage manner each building block of the ecosystem was put in place. The government has, at each step, consulted widely with the private sector and civil society to ensure that needs are met, and pain points are addressed. In addition to this, Singapore has also advocated for electronic authentication and electronic signatures in the pioneering digital economy agreements that it has signed in recent years.

As APEC economies look to build a digitally and financially inclusive future, Singapore’s approach to a strong digital identity infrastructure can support post-pandemic recovery and future economic growth.

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