Two years ago, Congress approved legislation that many hailed as a milestone for e-commerce—recognizing electronic signatures as a legitimate method for signing legal documents.

The original intent of the legislation was to recognize that people may and can use the Internet to enter into contracts. Its primary benefit is to reduce the amount of time it takes to conduct financial or legal transactions between parties.

The federal government enacted this legislation in June 2000 in response to states that were trying to set their own standards for recognizing e-signatures. The federal legislation attempts to provide one set of standards.

The bill accords online electronic signatures intended to complete legal agreements or commercial transactions the same legal status as formal signatures scrawled out on a paper document.

Among its many uses: hiring a lawyer; signing a mortgage, commercial lease or insurance contract; and opening a brokerage account.

Although the technology exists for the use of e-signatures, it is still not widely used in light of security concerns and the fact that, when it comes to big deals, people still prefer to handle paper.

However, it has opened the door to conducting transactions online. Last summer, Wells Fargo Bank began allowing students to apply for U.S. government-backed student loans online using a Department of Education-issued personal identification number.

Some brokerage firms allow customers to access and fund accounts online. And 2002 marked the highest-profile use of e-filing of taxes. However, it also illustrated the problems, primarily that the Internal Revenue Service has restricted the types of forms taxpayers can file electronically.

The other burning question involving the use of e-signatures is what constitutes an e-signature? Prior to enactment of the law, public key infrastructure (PKI) was considered the legal standard. It uses encryption keys to lock and unlock data. Other methods include issuing a PIN number.

But the bottom line is that consumer demand for use of e-signatures is not great. After all, there are many consumers who are still uncomfortable using their credit cards online, let alone conducting the purchase of a home. And businesses are looking to the federal government to lead the way toward a more paperless society.  e