Tech Law

Clickwrap Technology Brings Speed, Efficiency to Digital Transactions

With the holidays approaching and the pandemic surging, clickwrap transaction platforms (CTPs) are emerging as a valuable tool to help businesses navigate the increased volume of online transactions.

CTPs help companies secure transactions that are, or have moved, online. These business transactions are purpose-built for high volumes of agreements. Clickwrap transactions replace electronic signatures and provide an archived digital record of online interaction.

Instead of signing, the user clicks to check a box, or clicks on a button with a label such as ‘I Agree’ or ‘Accept’. That action authorizes the included consent language.

Aragon Research in October published a report identifying the new up and coming automated technology called workflow and content automation (WCA). The report identified clickwrap transactions as a key capability for WCA.

Content automation has become a foundational component as enterprises implement more and more digital transformation initiatives. The Aragon Research Globe for Workflow and Content Automation from Aragon highlights 14 major providers in the WCA category.

In June, Aragon Research named PactSafe a hot vendor in the WCA category. In October, Aragon named PactSafe an Innovator of the Aragon Research Globe for Workflow and Content Automation. PactSafe is one of a few early clickwrap transaction platform providers.

“Most enterprises clearly understand that, to remain competitive, they must go fully digital with customer-facing documents and processes related to those documents,” according to Aragon’s report.

“Businesses have not yet heard of clickwrap because it is in its early stages of adoption. Clickwrap is going to be as big as digital transaction management was six years ago,” Jim Lundy, founder and CEO at Aragon Research, told the E-Commerce Times.

The bottom line is this is an emergent technology. Companies realize that with the current move to online transactions and e-commerce, they are in trouble with trying to do things manually, he said.

Legal Process in Progress

Clickwrap is a legitimate legal term that already is in use. His report did not invent that term, explained Lundy.

PactSafe is one of the platform providers. There are a few others.

The movement to replace digital signing for online transactions goes back to a rise in online transactions that began around 2013. There is a race to getting rid of contracts and paper signing as phase one of the transition process, Lundy observed.

Companies have been looking for an automation play in an attempt to eliminate the often-week-long delays in getting agreements signed for online transactions. Aragon Research has spent the last six years looking at all the different ways of automating web transactions.

“We started getting insight into the need for automating the legal processes online. That led to the idea behind clickwrap. The whole idea is to be able to dynamically generate the terms and conditions that go with the purchase of a product and have the customer click that they agree. The result is an archived record,” he said about the developing online transaction verification process.

He estimated the transition process will take about 18 months. Clickwrap has only been available with this platform for a couple of months.

“Along the way, companies have been doing it piecemeal with a homegrown approach,” Lundy said.

Clickwrap Primer

PactSafe’s platform is proprietary and is purpose-built for handling the creation, presentation, integration and auditing of clickwrap transactions presented in e-commerce or other online workflows, according to Eric Prugh, chief product officer at PactSafe. The platform sits atop a dedicated clickwrap API and microservice.

The technology includes a number of SDKs for developers to easily integrate into their own sites and apps (think like Stripe and Twilio). APIs and integrations are crucial for clickwrap transaction platforms.

“Our goal is to seamlessly integrate into a customer’s existing technology and workflows,” Prugh told the E-Commerce Times.

Part of the beauty of clickwrap is that it is implemented into existing business workflows. A CTP can actually automate many of the existing manual processes for legal teams, he explained.

For example, many customers will turn manual, labor-intensive contracts such as NDAs into an automated, standardized clickwrap agreement process because these documents generally are not negotiated and should be easier to execute and manage.

“The explosion of global e-commerce and the ease of buying on mobile have acted as catalysts not only for change within online transaction verification but also for clickwrap adoption,” said Prugh.

Lawyers cannot interrupt conversion flows with contracts, but it is still super-important to add clear, conspicuous terms and conditions to the purchasing process. Now that e-commerce is even more prolific, legal teams need a way to create, deliver, manage, track and archive all the online terms and conditions between customers and businesses,” he noted.

Aragon’s research illustrates that CTPs are the solution as they provide the scalability, automation, and safety that businesses need during this e-commerce boom. CTPs enable common, enforceable terms that protect businesses from lawsuits, major disputes, warranties, chargebacks, and more.

Adoption Set in Motion

Numerous e-commerce companies have already implemented clickwrap agreements into their checkout process. Wayfair, for example, has a simple clickwrap agreement when a customer creates an account and when a customer makes a purchase.

What is new about the CTP is that this part of the workflow is typically managed by a product or engineering team — not by the legal team. Updating terms and versioning is hard, and it is nearly impossible to audit or search for completed transactions and the agreement that was in place, according to Prugh.

“Most litigation and disputes also center around what the agreement looked like when it was accepted, which creates a whole host of problems and manual labor to recreate. In that sense, it improves the business operations as a whole but is not changing the way your e-commerce company does business,” he said.

PactSafe’s platform is unique from other workflow and content automation platforms in that it focuses specifically on the complexities and nuances associated with simplifying agreement workflows. Most of these rely on clickwrap transactions as the agreement in a transaction.

Shift in Thinking Needed

Adopting clickwrap requires businesses to shift their thinking from a traditional contracting workflow PactSafe calls the “signing mindset” into a more automated, digital, self-service workflow for customers called the “acceptance mindset,” according to Prugh.

Agreements like NDAs typically require field inputs like name, company, signature, and dates on the agreement. Much of that can be automated with mobile-friendly form inputs and timestamps.

The problem is that most companies are working to get over the hurdle of adding e-commerce or digitally native buying options for their products. They have a complicated contracting process that inhibits that level of scale.

“We have worked with a lot of companies that are trying to streamline the products that they offer, segment out more standard products to simplify the buying process, and use clickwrap as the last step to complete an online transaction. Revisiting whether signatures and typical contract workflows are really required can save thousands of hours and millions of dollars,” explained Prugh.

Inevitable Takeover

Today there are over 400 million websites on the planet. As time goes by, a larger percentage will build e-commerce into their go-to-market strategy. Aragon Research predicts the market for CTPs will hit $15.5 billion by 2025.

“Every company is shifting to become an e-commerce company, and as they do that, clickwrap agreements will be an essential part of securing every transaction,” noted Prugh.

The adoption of clickwrap should start with the high-volume, low-complexity agreements because it is easy to standardize the agreement and build a simpler workflow. That automates currently manual processes and gives you time to explore more strategic initiatives, suggested Prugh.

“The adoption process comes back to businesses shifting the way they think about contracts. Once you get a taste for what kind of automation you can create, you will have fun working through what else can be automated,” he concluded.

Jack M. Germain

Jack M. Germain has been an ECT News Network reporter since 2003. His main areas of focus are enterprise IT, Linux and open-source technologies. He is an esteemed reviewer of Linux distros and other open-source software. In addition, Jack extensively covers business technology and privacy issues, as well as developments in e-commerce and consumer electronics. Email Jack.

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