Online Escrow Service Brings Security to Cross-Borders Trade

In today’s world, calling any business exchange “e-commerce” is almost redundant, says Andrew Sokol, General Manager, Emerging Markets at Escrow.com. Virtually everything involves e-commerce, even when it doesn’t quite look that way. It’s easy to pin the moniker on a transaction when an SME in Dublin, with a few touches on a tablet or smartphone, sets up a deal with a trading partner in Dubai. Likewise, anything bought via Alibaba, Amazon or eBay gets the e-commerce tag. But what about when you’re just shopping at your corner market? You swipe your card. The data might go halfway across the country and back again, to deliver the message that you and your milk, bread, and bananas are good to go. So, though you might not think of it that way, this too, says Sokol, is e-commerce.

One thing is clear:  whether it involves an approval from a distant bank, or getting goods from one side of the planet to the other, commerce the e-way is remarkably easy.

But you might want to add an asterisk to that last sentence, according to Sokol—because in international trade, “easy” doesn’t always mean secure.

“Any time you make a shipment to somebody without first getting payment, we consider that in our minds a gift until you get paid,” says Sokol. “And, as a buyer, if you pay first, then that’s a donation until you get the items, inspect them, and make sure they’re what you want.”

Escrow.com was created, in a sense, to erase that asterisk and make the “easy” transaction an uber-secure one.

“What we developed is a true online escrow service,” explains Sokol.

Here’s how it works. Both sides of the transaction agree to terms. The buyer then sends the funds to escrow.com, which acts as a trusted third party.

Escrow.com verifies that the funds are in its possession, then instructs the seller to ship the goods.

The buyer verifies that they got what they ordered, and Escrow.com releases the money to the seller.

“If, for whatever reason, the seller never ships, the buyer gets his money back. So we remove that risk from the buyer side,” says Sokol. “We also remove the risk that the seller’s going to get paid, because if the seller sends the hypothetical thousand blue widgets, the buyer’s going to open up the boxes and verify they got what they ordered, which instructs us to make the payment.”

But what if one of the parties says the other didn’t adhere to the agreement—and the other disagrees?

Sokol says that Escrow.com has rules and regulations in place to ensure the transaction’s integrity. “If there’s a dispute, it follows a path, and if they can’t come to an agreement, it automatically goes to arbitration. And whatever the arbitrator decides at that time is how we’re going to dole out the funds.”

Considering how vital it is to international trade to safeguard transactions between parties with continents between them, you might assume that Escrow.com is one of many players offering similar services. But Sokol says his company has no competitors at all. “We are the only fully licensed online escrow service in the United States.”

While PayPal isn’t an escrow service, we wondered if its services might compete, at least on some level. Sokol says there’s no comparison.  “PayPal doesn’t hold the payments until the parties are satisfied. You’ve also got to be careful of the rules that PayPal has. And PayPal also has very small transaction limits. You can’t do a $20,000 sale on PayPal. You could do a $99 million sale on Escrow.com, if you so choose.”

Still, we wondered, wouldn’t a letter of credit from a bank work as well? Again, Sokol rejected the notion that banks are direct competition for the service. “The inherent problem, all the letters of credit are very good when they’re available, but they’re not available to everybody,” says Sokol.

Escrow.com is part of the National Export Initiative, a program put in place by the Obama administration, designed to help shrink the United States’ trade deficit.

“Companies like FedEx, PNC Bank, UPS, DHL, and other very large companies are part of this program, and we’ve partnered with many of them,” says Sokol.

About half of Escrow.com’s business is cross-border, and most of its customers are SMEs. Fees for its services are sliding scale, with the smallest transactions costing the most: 3.25 percent. Transactions above $25,000US pay only 0.89 percent, making it a very cost-effective way of ensuring security.

 

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This story originally appeared on Webport Global.