Disadvantages of Escrow Service and Payments in Nigeria
In recent times, escrow payment services have become popular as respite to the long suffered online payment scams and frauds that characterize Nigeria.
But, in this case of escrow payments, does the widely known believe that “everything that has an advantage also has a disadvantage” apply?
Well, I will be using this post to highlight some of the real disadvantages that using escrow services can have on both the buyer, the seller and even the escrow company (if it is not certified). Before I proceed, let us have some background knowledge of escrow payments.
Ecommerce in Nigeria, estimated at $13 billion by the London based Economist Intelligence Unit (EIU), is a vital sector that, if properly harnessed, can create more means of livelihood for individuals and massive jobs for youths, enhance Market Access and sales for SME’s, boost economic development, reduce poverty and help in achieving some other Sustainable Development Goals (SDGs).
Unfortunately, the progress of ecommerce in Nigeria is being hampered by several factors, one of which is distrust caused by the activities of fraudsters and scammers who pose online as genuine sellers or buyers.
It is very common to have situations where buyers pay for goods and services online only to wake up to the realization that they have been scammed.
Same applies to unsuspecting sellers who sell their goods/services and end up either incurring losses or getting out rightly defrauded.
To solve the mistrust between buyers and sellers and to drastically reduce incidences of online fraud, escrow payment arrangements have proved beneficial.
Escrow payments are such that a buyer, instead of paying to the seller directly, agrees to an arrangement with the seller and pays the money to a mutually trusted third party (escrow company/agency) who holds the money and releases it to the seller when it has been confirmed that the buyer has received the goods/services.
Genuine escrow companies have unique and effective ways of protecting the sellers too and settling disputes that may arise.
Escrow payment can be used for the purchase of virtually any kind of product/service, be it physical products like a pair of shoes, piece of furniture, electronics, car, land or real estate; virtual products like software, ebooks, digital images, music files, secret keys/access codes; or services like hiring someone to do web design, create music/video/graphic content, etc.
As fraudsters generally shy away from escrow arrangements, it has been shown that insisting on escrow payment is one effective way to know if a seller is genuine.
For a small fee, usually not more than 5 per cent of the transaction value, trusted online escrow companies can be engaged to protect both the buyer and seller and help boost ecommerce in Nigeria.
However, care must be taken to only use online escrow services that are certified by the International Financial and Escrow Services Accreditation Board, the official body that not only regulates against fake online escrow services but provides $2 billion insurance access to clients of certified escrow companies.