Escrow Services - Fraud Library

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Escrow services insert a middleman into the payment process, responsible for collecting funds from the consumer, and for paying the seller for goods or services rendered. Escrow services are intended to be a neutral participant in the process, insuring both parties are protected from fraud.

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How Good is it?

Deciding to use an escrow service is a big decision, with major impacts on the financial side. Escrow services will make your consumers more comfortable with buying from you, and they will ensure you are protected from fraud losses, but there is a cost for this. Beyond the financial cost of the service, this process typically takes 5 to 20 days for the seller to receive their money. Unlike the traditional credit card payment, where payment is received before goods are shipped, in the escrow model, funds are only received once the consumer verifies receipt of the goods or service.

In general these services are pretty reliable and they offer a valuable tool for merchants. The best application for this tool is in higher cost goods, non verifiable identities or cross border transactions.

How Buyers are protected:

• Shipments are tracked and delivery confirmation is required.
• The Seller isn't paid until the Buyer accepts the goods or services.

How Sellers are protected:

• The escrow provider is responsible for confirming the consumer has received the goods.
• The Seller doesn't have to ship the goods until the escrow service has confirmed the funds are good.

Considerations When Implementing or Buying This Functionality    

• Do they support the payment methods you know are appropriate for your business?
• Do they guarantee funds!
• How much "padding" time have they built into the settlement of funds?
• How does your consumer feel about this process, are you the trusted participant, or is the escrow service?

Estimated Costs – Costs will vary based on the vendor you select and the value of the purchase. The costs can range from 4% to 27%.

Alternative Solutions –Verified by Visa, Securecode, eCommerce Insurance .

Vendors – Escrow.com, iEscrow.com, SafeFunds

How Does it Work?  

1. Buyer and Seller Agree to the terms of the transaction
   
   
   
2. Buyer Pays the Escrow provider
   
   
   
3. Seller Ships Merchandise
   
   
   
4. Buyer Confirms the receipt of goods or services
   
   
   
5. The Escrow Service Pays the Seller
   

How Do I Use the Results? 

N/A

Building This In-House 

While it is technically something you can build in-house you should remember an in-house service defeats the value proposition for the buyer, and makes it a one way process. If, as a company, you represent both the buyer and seller, like an auction site, than building it in-house is plausible.

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