Online transactions can be risky — can Escrow.com help you protect yourself in the online marketplace?
How to avoid online fraud? The rise of sharing economy platforms and peer to peer online marketplaces has created an entirely new digital industry that hundreds of thousands of Australians use every day.
While traditional online marketplaces such as eBay have existed for decades, new digital marketplaces such as Airtasker, Designcrowd, or Foodbomb have opened digital doors to entrepreneurially-minded Australians from all industries.
These new platforms allow Australians to advertise and provide virtually any service online, from professional services, to catering, and even furniture assembly. The growing online marketplace and sharing economy is growing rapidly and is expected to exceed $335 billion in value internationally by 2025.
As the value delivered by peer to peer marketplaces increases, however, so too does the rate at which fraud occurs on them. Peer to peer marketplaces provide users with the ability to market and provide services in a decentralized manner, but often lack robust payment processes, leaving many users unpaid and out of pocket. So how to avoid online fraud?
Escrow platforms provide users with an added layer of security in digital markets, functioning as an impartial third party to ensure that transactions aren’t completed until all parties fulfil their side of a bargain.
Escrow.com is one of the oldest and largest escrow platforms online, and functions as an intermediary for buyers and sellers on virtually any marketplace, protecting users from bad actors and fraud.
What is Escrow.com?
Founded in 1999, Escrow.com is a privately held escrow platform based in San Francisco, California. Escrow.com is the largest escrow platform online today and has protected over $4.5 billion USD worth of transactions, using a robust counterparty risk minimization strategy that protects both buyers and sellers.
Escrow provides a relatively straightforward service — it functions as a third-party platform that holds and regulates funds on behalf of parties participating in a transaction. Funds for the transaction are held in a secure Escrow.com account, which is only released when approved by the Escrow.com auditing process.
The use cases of Escrow.com are similarly simple. Individuals operating in virtually any online marketplace can use Escrow.com to ensure that the obligations of both parties are met before any funds are released.
Freelancers, for example, are able to use Escrow.com to ensure that clients or employers possess the necessary funds to pay for services and ensure that they are paid for their work once it is complete and delivered.
Traditional escrow services can be costly and time-consuming — Escrow.com is designed specifically for the online environment and integrates with a broad spectrum of existing online marketplaces. eBay’s vehicle sales platform, eBay Motors, integrated the Escrow.com platform into payment services in 2019, providing traders with an added layer of protection when purchasing vehicles.
How Does Escrow.com Work?
Escrow.com is how to avoid online fraud. It is designed to minimise the risk and collects funds from buyers when the terms of a transaction are set out, then releases the funds to sellers when these terms are fulfilled.
So how to avoid online fraud? Getting started with Escrow.com is simple. A webform provides users with the ability to select whether they are buying, selling, or brokering a transaction, then allows users to specify the type of transaction. These transactions can include:
- Domain names
- Motor vehicles
- Contracted services
- Milestone transactions
- General merchandise
After selecting the type of transaction, the user selects the total cost and currency. Both buyer and seller, after registering with Escrow.com, agree to the terms outlined in the transaction. The buyer subsequently submits the payment for the service or product, which is placed in a secure escrow account managed by Escrow.com.
Once the payment is secured by Escrow.com, the seller is notified that the funds have been secured. This step provides digital marketplace users with an added layer of assurance that the buyer possesses the capital to execute a transaction, significantly reducing counterparty risk.
The seller then renders the service or ships the product detailed in the transaction to the buyer and provides evidence to the Escrow.com platform. The buyer is then provided with a specific amount of time in which to inspect the services or product provided. Once the transaction is complete, Escrow.com releases the funds to the seller’s account.
Importantly, Escrow.com provides professional escrow officers. Rather than leave funds and escrow management in the hands of automated systems, Escrow.com places control over escrow accounts in the hands of real humans, ensuring that transactions are executed in a transparent manner.
Escrow.com Fees and Payment Options
Escrow.com accepts a wide variety of payment options, including wire transfers, credit and debit cards, PayPal, and even checks and money orders — Escrow.com services provided to Australian users, however, can only be paid for via wire transfer.
While the Escrow.com platform isn’t free, the fee structure offers several tiers of functionality depending on the requirements of users.
Transactions under $5,000 AUD are subject to a 3.25 percent fee for standard service. Concierge transactions, which provided a greater level of supervision, are charged at 6.5 percent. All payments made through Escrow.com are subject to a 3.05 percent payment processing fee.
Standard transactions in excess of $5,000 and under $25,000 are subject to a $162.50 fee, plus 0.26 percent of any amount over $5,000. Concierge services in the same tier are charged at $325, plus 0.52 percent of any amount over $5,000.
Lastly, any transactions in excess of $25,000 are charged at a rate of 0.89 percent for standard services and 1.78 percent for concierge services. Wire transfer payments in and out of Australia are subject to a $25 fee. These fees are likely to be tax deductible.
Escrow.com For Australian Businesses
Escrow.com provides Australian businesses with a significant security advantage in the rapidly growing digital marketplace.
While concierge-tier services for smaller transactions can incur fees of over 9 percent, Escrow.com services provide Australian digital freelancers and buyers in the peer to peer marketplace with an added layer of protection that ensures they’ll get what they pay for — or get paid for the work they deliver.
Doing business online can get complicated — in addition to managing counterparty risks, it’s important that you know how to avoid online fraud. You need to ensure your online transactions or business operations are also tax-effective. If you’re working on an online marketplace, reach out to Fullstack today for detailed guidance and advice.