Payment safety is one of the most important prerequisites for success in international trade. You can’t afford to risk your business by taking your chances with contractors. To reduce the chance of fraud, a lot of businesses use an escrow service, especially when dealing with new partners.
An escrow service is a trusted intermediary that holds on to buyer’s funds and releases them only once the seller has completed its part of the transaction. That way both parties get what they need without stress or guesswork.
Whether you want to use escrow services for all of your transactions or not is totally up to you. However, an escrow is absolutely essential in the following cases:
- You are working with a new, previously unknown partner;
- You are just starting your business and your savings are at risk with limited cash flow;
- The amount to be paid is large.
When selecting an escrow service for your operation, you need to vet all services carefully. Here’s a list of things to pay extra attention to:
1. Accreditation, reliability, insurance
It should go without saying that the escrow service you’ll be using needs to be fully licensed and accredited. Inspect all of the information available and make sure the company you are dealing with is legitimate.
Also pay attention to where the company is based and licensed. Some countries are very rigorous about the business licenses they grant, which is good for everyone using that service.
2. Ease of use
If the escrow service has a confusing web interface and you don’t know at what stage you are right now, you won’t be able to use it properly. This part is pretty straightforward – you need to understand how it works.
With a digital escrow, you also have the added benefit of being able to do everything online, no need to submit physical documents to a bank. This is especially useful during the current Covid-19 pandemic, as many regions of the world are living with movement restrictions.
This is particularly important when dealing with international transactions, as quick and flexible payment options are key to closing deals faster. The ability to make payments in your local currency and using local methods like PayNow in Singapore, FPX in Malaysia or PromptPay in Thailand to make real time payment is a huge advantage.
Deciding which party pays the service’s fees should also always be a choice of the user, whether the buyer pays, the seller, or if they’ll split it.
4. Niche focus
There are escrow services for real estate, for buying and selling websites, for cross-border import/export, for general purposes and beyond, so make sure you pick one that’s aligned with your industry. Niche expertise matters because the escrow will be aware of your industry challenges and can address them easily. Moreover, niche expertise is often a sign of reliability.
For instance, if you need payments escrow for operating on import/export cross-border trade, then Tazapay should be your go-to service. Generalists might be harder to deal with as they may not completely understand your business needs.
This is essential when selecting any business partner or service, and escrow is no exception. Try the service’s customer support before a crisis situation arises to see how fast and relevant the responses are.
Communication matters, and if you have a competent representative who replies quickly, the value of the escrow service goes up.
6. Reviews and reputation vs cost
Established payment solutions, like Letters of Credit or working with a lawyer, take a large cut from each transaction and typically only make sense if you are transferring a really large amount of money in a non-industry specific transaction.
On the other hand, there are newer niche services that are just as reliable but don’t charge a premium for their brand name.
Shop around and use price calculators to find an escrow service that offers a pricing model best suited to your needs.
7. Look for perks
Look for additional features that will make managing your payments even easier. For example, services such as partner background checks, e-Commerce integrations, partnerships with additional services and modern payment methods integration can all help to streamline your financial operations further.
If you operate on import/export marketplaces then you need to minimize your chances of being exposed to fraud. That is why a properly selected escrow service is a major factor in your business success.
If you want a consultation on available escrow options, Asian marketplace risk minimization, partner background checks, and other similar services – get in touch with us!