The risk decreasing of obligations default: Escrow payment service.
2009-02-23   

One of the problems in business between the buyer and the seller, who do not know each other, is mistrust of each other in execution of obligations properly. The seller always wishes to secure itself against risk of non-payments by payment in advance; the buyer does not wish to pay till the moment when obligations of the seller will be executed properly. Escrow payment service helps in this problem. The escrow payment service is reservation of payment sum on the account of the 3rd party (bank or other company) and remitting of this money to Seller as soon as Buyer receives goods and check conformity of the goods to the documents from the Seller (technical specification to the contract).

Example with Internet Escrow Services (Escrow.com) can help understand more clearly this matter. This company makes escrow payment service in electronic commerce. Escrow.com reduces the potential risk of fraud by acting as a trusted third party that collects, holds and disburses funds according to Buyer and Seller instructions.

Escrow payment service is well-suited for items purchased on auction sites, automobiles, motorcycles, domain names, jewelry, specialized computer equipment, and other high-ticket items.

Buyers receive and inspect the merchandise before the Seller is paid. Sellers receive their money if the Buyer accepts the merchandise.

Advantages of Sellers:

• Knowledge that Buyer's funds are verified and held before merchandise is shipped;
• Access to new markets and customers;
• Fewer bad debts;
• Accelerated transaction times;
• Access to customer service 5 days a week;
• Ability to check order status anytime online;
• Streamlined distribution;
• Transaction detail maintained for 7 years;
• Proactive sequencing of deals.

Advantages of Buyers:

• Opportunity to inspect merchandise before payment is released to Seller;
• Faster processing of orders;
• Lower procurement costs;
• Access to customer service 5 days a week;
• Ability to check order status anytime online;
• Goods released for shipment earlier;
• Access to new suppliers;
• Transaction detail maintained for 7 years.

Andrew Getko

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