Reading on Finextra last week about dematerialisation in the Netherlands reminded me about the issues that you face when you want to move from paper documents to electronic documents – particularly when those documents have a legal and transactional importance.  Information that investment firms depend on - term sheets, prospectuses, corporate actions, trade reporting, etc – flows through systems, but how do you know that the information hasn’t been changed at some point along the way?

For some documents you want to have the original and sole version: a cheque would be an example of that, because only the original is valid and you also don’t want people copying cheques and re-using the copies fraudulently.  But probably for most of the data that firms move around, you don’t want the original data – you don’t want the sender to delete the bytes from their computer and send those original bytes to your computer.  You want a digital copy of the original data.  And in many situations you want to know that that copy is complete and a true unchanged copy of the original.  If one comma has changed or if one digital bit is different, you want to know about it.

We depend so much on all of this data that in some ways it’s surprising that we don’t check the validity of data as much as we should.  Typically we depend on someone further up the data “food chain” – but how often do we check for validity and completeness of data when we depend on those two characteristics?

Digital notaries can provide that validation, letting you check that the data that you receive – the term sheet, the prospectus, corporate action, trade report - is complete and unchanged, just as the originator created it.  Digital notary services can be critical to successful dematerialisation projects.