Current technological developments allow all kinds of transactions to be done online, from buying and selling goods and services to financing. In the past, buying and selling online was considered quite risky, because transactions were carried out without face to face.
Buying and selling online
In addition, the process of sending goods to the buyer and money to the seller does not involve a third party who mediates between the two parties to the transaction. Such transaction practices are at great risk of fraud, especially by the seller, where the buyer has transferred an amount of money according to the price of the item plus shipping, but the seller has not sent the goods to the buyer.
Fraud risks can be minimized
Now the fear of fraud can be minimized or even avoided, because an escrow account is now available. The existence of an escrow account is considered to be a solution for those who want to transact online safely. However, what is an escrow account?
What is an escrow account?
What is an Escrow Account? The definition of the term escrow account is an account that is used to hold special funds for which procurement is carried out with certain conditions in accordance with the agreement between the depositor and the parties that have an interest in the fund.
A 3rd party to control funds flow
Simply we can define, an escrow account can be understood as an account provided by a third party to hold and distribute funds to the parties involved in online transactions.
What is escrow agent?
This third party is called an escrow agent. The existence of an escrow agent not only manages funds, but also ensures that the parties involved in the transaction carry out obligations and get their rights.
Working method in Escrow Account
For example, in an online buying and selling transaction, the escrow agent receives a sum of funds paid by the buyer for the goods he bought after adding shipping charges. These funds are held in an escrow account for a few moments until the seller sends the goods to the buyer. If the buyer has received the goods he bought from the seller, the escrow agent then distributes funds to the seller.
Does Escrow involve banks?
In the procurement of escrow accounts, escrow agents utilize escrow services that are available in all conventional banks. Thus, the escrow account in holding and storing funds from interested parties still involves the role of the bank’s financial institutions. Escrow accounts are not only used for buying and selling goods and services online, but also peer to peer financing services, even property and stocks.
Benefits of escrow accounts?
In principle, an escrow account is provided to increase security in online transactions, where the parties involved in the transaction are not face to face. This escrow account service system received positive response from the public because it was considered capable of suppressing the number of fraud cases that often occur in online trading transactions.
Securing assets in escrow accounts
Escrow accounts are managed by an escrow agent whose role is to secure assets in the form of money that has been deposited by the buyer to later be handed over to the seller. The delivery of money from the buyer can be done by the escrow agent if the seller has sent the goods and received by the buyer. If not, the escrow agent will not hand over the money to the seller, but will be returned to the buyer.
The use of escrow accounts in principle guarantees the security of transactions for both parties. Not only that, the escrow account also benefits the parties who transact. Because, escrow accounts actually provide benefits for both parties.
Protection of buyers
In online buying and selling transactions, buyers often become the losers because they are victims of fraud. The online buying and selling mechanism is generally that the new seller will send the item to the buyer, after the buyer has made the payment via bank transfer.
Of the many cases of online fraud that occur, the seller does not send goods to the buyer even though the buyer has made payment. And that’s why we often hear the term online fraud. We should utilize this service if we want to get success while running business online.