The Escrow Payment is a service through which a third party works as an economic liaison between a sales person and a buyer.
In other words, when the buyer purchases a product or service, the money is held in deposit by a third party, neutral, who guarantees the payment to the provider, but only when the provider has completed their part of the deal.
The clearest example is the model we use at our Workana platform. When you hire a freelancer, you pay for the service, but the system will not release that payment until you’ve been delivered the work as agreed. Then, both parties will be covered –the freelancer will get duly paid, and you will get your job done.
What is the Escrow for?
One of the main challenges of e-business was to grant contract fulfillment and being paid for a service. Escrow is a very effective way to increase the reliability of both parties and make sure that payments and deliveries will be made in time, openly and with no risk of fraud.
Platforms such as Workana operate with Escrow between clients and freelancers, but there are many e-commerce business which are also familiar with it. That is to say, they only release the payment to the service provider when the client lets them know the product has been properly received.
Actually, Escrow payment as a trusteeship to grant that both parties will fulfill their commitment has existed for much longer than e-commerce, but it was used for trading or deals that involved a very important amount of money, mostly real estate.
Is there a cost for the Escrow?
Escrow is a service and, like such, it’s subject to the payment of commissions or memberships. At Workana, this service is included in our commission on projects.
Other platforms or e-commerce may have some extra cost, either for the service provider or for the client.
To reed more about it: How is the commission calculated at Workana?
Which are the disadvantages of Escrow?
As such, it shouldn’t have any disadvantage, but that depends entirely on the terms and conditions of the company or entity providing the service.
It is important to know which criteria will be applied by the third party withholding the money to release the payment, regardless of which side will pay for the commission.
Almost every reliable platform working with Escrow payments counts on clear legal conditions to operate, and most importantly, has a good reputation.
This article may be helpful: Billing methods for projects by country
Learn more about Escrow
- What Is Escrow? – From WNExactly
- Software Escrow Fundamentals – from EscrowTech
- What you need to know about the Software escrow release process– from Info to Go
- E-Commerce Platforms; How Feelium Smart Contracts And Escrow accounts Can Optimize The Industry – From Feelium
- Software Escrow explained in 2 minutes – From Escrow Europe