Websites like OLX and Gumtree have changed how we search for and make purchases. These marketplaces might have opened up the range of goods and services available to us, but they’ve also created some degree of risk. How do you really know that the lounge suite you’ve got your eye on is unused? Or how can you guarantee that that second hand Toyota Corolla is worth its advertised price? You don’t. This is where escrow services come in – to protect both the buyer and seller from the risk of a phoney sale.
An escrow service acts as an intermediary between buyers and sellers
An escrow is a bond or deed kept by a third party until an agreed contract is fulfilled between two other parties. Applied to an online context, the third party would be the escrow service. They’d hold the buyer’s payment funds until the seller has made good on the contract – i.e. the buyer is happy with the seller’s goods. It also helps protect the seller from non-payment by the buyer and reduces the risk of payment fraud. How it works is simple: both buyer and seller sign up for free to an e-escrow service, and then agree on how the escrow service fee will be split between the two parties. The buyer puts forward their funds and then inspects the goods. If the buyer is happy, the funds are released to the seller.
How Does It Work? Learn here
Online marketplaces have been around since the twentieth century
The first online marketplace in South Africa – Bid or Buy – emerged in 1999 to help buyers and sellers find each other. While initial contact and negotiations might take place online, the final exchange of goods for money usually takes place offline. Online shopping, slightly different from online marketplaces, is the online equivalent of shopping by going into DionWired to buy a TV, rather than finding one through the classifieds section of a newspaper or through OLX. A buyer purchases goods off a retailer’s website, pays through an online portal and is then dispatched said goods. Sometimes buyers and sellers meet face-to-face to trade too. Placing funds in escrow is far safer than carrying cash in these instances.
South Africans are doing more shopping online – but payment security is a huge deciding factor in whether they’ll do so
Gumtree, launched in South Africa in 2005, gets around 3 to 5 million unique views a month, according to BusinessTech – showing just how often consumers are taking to these online marketplaces to shop. As consumers are embracing innovative ways to buy the things they’re after, they’re becoming shrewder about the security of paying for their goods through online payment portals. A study by market research firm Ipsos, cited in IT News Africa, found that 67% of South Africans said that the concerns about the security of online payments is a main reason for choosing not to shop online. While the study examined insights into online shopping, the findings highlight just how important payment security is to South African consumers. It also demonstrates how crucial payment security tools such as escrow services are for protecting buyers and sellers from fraud.
Escrow services make trading in both online and offline marketplaces easier and safer. Whether you’re buying or selling cars, home furniture or electronics, or looking to pay a contractor for renovating your house, escrow services are opening up possibilities for the way people buy and sell.
For more information on how an escrow service can protect you from fraud, download the ProtectPay brochure.