Introduction to digital escrow
Escrow is a common process in any business transaction, which has been around for 200 years. Escrow is money or certain documents or property that is held by a third party, on behalf of the parties that are engaged in a transaction. It is commonly used in a purchase and sale transaction. The escrow agent is the third party and he duly performs his task of being the dispassionate one who holds up the terms of a contract or agreement. This is a type of financial arrangement for people to have some security while doing business. And like everything has gone online, so has escrow – through digital escrow.
Who can use escrow?
Escrows are beneficial when there is a huge amount involved. There are obligations that have to be met before payment and here is where escrow can help. For example, if you are having something built – a house or a website, then the quality of the work has to be inspected before partially or fully making secure payments. When the payment is in escrow, that is with the legal third party, then both the buyer and seller can carry out the transaction without any tension. It is also useful when a person buys or sells goods or property from people that they hardly know. An escrow can establish trust and ensure safety.
Escrow bank accounts are great for people who deal with online businesses. They could be selling on Facebook or Instagram and the seller interacts with people who could be making impulsive purchases. The buyer and seller are strangers and there could be risks. The risks involve payment not being received, the goods not being received or even dealing with non-serious buyers. Escrows come in handy here as the money or payment can be held in escrow till the buyer gets the goods. It is also helpful when the seller has to issue a refund in case goods aren’t up to the mark. Buyers and sellers are both protected in an escrow until all terms are met. For example, the seller doesn’t ship until the money is in escrow and the seller doesn’t get money unless the buyer is satisfied with the product.
Traditionally escrow services provided by lawyers and banks had a process that was long and quite cumbersome. But now with the use of the internet, escrow services have gone online or digital.Just like a traditional escrow, a digital escrow acts as a third party to ensure that all transactions are carried out properly and as described in the escrow agreement. All one has to do is register on a digital escrow portal.
Digital escrow rose to prominence at the time of internet commerce and auctions. Digital escrows are licensed third parties and facilitate transactions. Because of more transactions online, escrow companies and providers have gone online as well. Digital escrows are easy to use and offer privacy to people who sign up for it.
Using a digital escrow portal, a seller or buyer can initiate a transaction and both parties have to agree to certain terms. The buyer will deposit money through online payment options and the escrow will verify the payment and notify the seller. Then the seller will ship their product and submit the details for tracking to the escrow. The escrow will verify that the buyer has received the product and allow a few days to inspect the product and then reject or accept it. Once the buyer has accepted, the digital escrow will send funds to the seller.
A digital escrow platform has proved to be quite beneficial locally and globally. In a digital escrow, the account used is a non-interest bearing account. This account also keeps one informed and updated at every step of the process. It is highly regulated and doesn’t leave any room for problems.
Benefits of digital escrow
- Digital escrows can help gig workers, sellers and buyers by protecting their interests and providing online payment security.
- It benefits a digital marketplace, which is the need of the hour. The buyer can be in one country and the seller will be in another, so trust levels are virtually zero. But an escrow builds trusts and facilitates business.
- The disbursements are quick and secure, reducing risk and fraud.
- It also helps gig workers get online and get paid for their work. Freelancers also get jobs and their money is secured with the escrow. Once the work is delivered, he/she can get paid.
- They are used widely in real estate as a means to provide a safe transacting environment for both parties, because the amount of money involved is huge. Escrow in India is quite popular in the real estate field as most home buyers and property dealers are strangers to each other.
- A digital escrow can be used for different things and the process is quite simple. In a traditional escrow, there is a lot of things that need to be completed to get a third party to act as your escrow. It is quite tedious.
- The digital platform has simplified things and has opened up a global marketplace.
- It is a great way to secure payments and have a smooth business operation.
Digital escrows are growing rapidly in the current scenario. So, many companies are coming up to offer such services. They are usually licensed to provide escrow transactions and services. However, wherever there are opportunities, there will be some unscrupulous people who will try to illegally make use of it. So, there could be sites acting as escrows and offering services, but you must do your own research to use the right escrow service. Go for a licensed and registered providerto enjoy a smooth business process. Use personal devices to secure payments and beware of malicious software.