Escrow made easy: Why third-party payment trusts are the best way to protect against payment fraud and crime
One only needs to take a quick look at a website like scambuster.co.za to get a first hand sense of how prevalent payment crime and fraud is. Regardless of the platform; whether traditional classifieds, online trade sites like OLX or Gumtree, or simply the phishing scams that come to your inbox, payment crime and fraud are at epidemic proportions in South Africa. In fact, in a 2014 survey by global firm PwC 69% of South African respondents said that they had been a victim of some form of economic crime in the two years preceding the survey, compared to 37% of global respondents.
Increased payment crime, sees increase in payment protection services
With the escalation of payment crime and fraud, it’s no surprise that we’re seeing escrow services starting to mushroom in South Africa.
Designed specifically to add an extra layer of security and convenience to a buyer and a seller, an escrow service is a neutral third party that securely holds money for payment of purchases in a trust until the transaction is completed.
It’s a peer-to-peer payment solution, that protects against payment fraud, non-payment and the hassle of chasing payments, for both large- and small-ticket items. Today, most escrow services are secure online portals but can be used to protect buyers and sellers trading through online marketplaces, traditional classifieds, or those who simply want additional protection when trading with people they don’t really know.
How does escrow work?
Say John is buying Jenna’s laptop. They would both agree on the terms of the trade including the price. John transfers the money for the laptop into a trusted escrow account. Only once Jenna delivers the computer to John and he is completely satisfied that it is what she promised in her advert, are the funds released to Jenna. Likewise, if Jenna does not deliver on her sale promise, the escrow service simply does not release the funds until the dispute is settled between the buyer and the seller. This leaves no opportunity for anyone to run away with the money or take possession of the sale item without paying for it.
The benefits of escrow services include:
- They protect both the buyer and the seller in any deal, trade or transaction
- With a wide range of applications, escrow services can be used for buying and selling both products and services. Even the renting of property and the selling of businesses can safely be facilitated by escrow services
- The fee charged for escrow services is much less than the risk and costs involved in being scammed
Which is the right escow service for me?
There have been several escrow services introduced to the SA market this year but the most recent is ProtectPay (www.protectpay.co.za) from Paycorp, one of the leading independent payments solution providers in emerging markets.
ProtectPay offers users a simple five step solution to secure trading:
- Both the buyer and seller set up a free account at www.protectpay.co.za
- After mutually agreeing to use ProtectPay, a transaction is loaded and the transaction fee terms are agreed – the fee can be paid by either buyer or seller or split 50/50
- The buyer transfers funds to the ProtectPay escrow account for secure-holding, and the seller is made aware that funds have been received
- The buyer confirms receipt of goods or services and notifies ProtectPay to release the funds to the seller
- The funds are paid to seller
Besides guaranteeing payment once the terms of the transaction are met, ProtectPay also allows parties to raise a transaction dispute and holds the funds until the dispute is resolved.
Be vigilant when trading in any marketplace
In 2013, South Africans lost more than R2.2bn from internet fraud and phishing attacks alone, according to the South African Banking Risk Information Centre (SABRIC). The more aware consumers are of the risks they face, the more secure their online assets and shopping experience will be. Vigilance is essential and an escrow service is the key to safe trading, whether online or off.