|
Role of intermediary is extremely important in any buy-sell transaction.
Traditionally, banks have played this role, and are still considered
most reliable option in export import trade.
However, on-line world brings fresh challenges that traditional
paper-based systems find hard to adopt. The anonymous world of Internet
demands more proactive role for the intermediary than mere checking
or exchanging papers.
Necessity, as they say, is the mother of invention. Though, 'escrow
service' is not exactly an 'invention' (it's been around for hundreds
of years) - its on-line avatar is certainly an innovation that overcame
many shortcomings of traditional payment options in on-line environment.
Besides being inexpensive, escrow offers extra safeguards for both
buyer and seller that traditional payment options do not provide.
As a result, on-line escrow service has become extremely popular
among Internet users, specially those using on-line auctions.
What is Escrow Service ?
Origin of the word is French 'escroue' or 'escroe' - which means
strip of parchment. Dictionary meaning of escrow is 'Money, property,
a deed, or a bond put into the custody of a third party for delivery
to a grantee only after the fulfillment of the conditions specified'
In on-line environment, an escrow service acts as a third party
or intermediary for buyers and sellers who have reached an agreement
on an item for sale. The escrow service will hold the payment in
trust until the buyer inspects and accepts the merchandise. Once
the buyer is satisfied, the escrow service will release the payment
to the seller.
So, online escrow services provide a third-party intermediary to
ensure buyers and sellers fulfill business agreements. Instead of
paying a seller directly, buyers pay an escrow company, which then
shuttles the payment to the seller - only after the buyer receives
and approves the goods
How on-line escrow service works:
Here is a step by step description of how escrow service works
-
Step 1 Buyer and seller meet over
Internet, typically in an auction site, where seller has put
up his/her product for sale.
-
Step 2 Buyer decides to buy seller's
item, places his/her bid
-
Step 3 Seller accepts buyer's
bid. Both agree to terms of the transaction including the price
of the item and shipping costs.
-
Step 4 Buyer sends the agreed
amount to the escrow service
-
Step 5 Escrow informs seller payment
is received in full
-
Step 6 Seller ships the merchandise
to buyer
-
Step 7 Buyer receives the merchandise
and inspects quality
-
Step 8 Buyer approves the merchandise
and informs the escrow
-
Step 9 Escrow then pays the seller
after deducting its commission
We shall discuss how escrow safeguards both buyer and seller in
next issue.
Happy and Safe Surfing
Dr. Amit K Chatterjee
Related Links:
Source:
FAIDA
- Newsletter on Business Opportunties from India and Abroad
Vol: 4, Issue 22
; Jan 29' 2004
Author :
Dr. Amit K. Chatterjee
(Amit worked in blue-chip Indian and MNCs for 15 years in various
capacities like Research and Information Analysis, Market Development,
MIS, R&D Information Systems etc. before starting his e-commerce
venture in 1997. The views expressed in this columns are of
his own. He may be reached at amit@infobanc.com
) |
|
