The conventional means of money transfer in case of overseas payments through banking channels has now been replaced by escrow process. This is because transferring money through escrow is more straightforward and requires less paperwork. It has further been simplified by start-ups providing escrow services online. This makes escrow a popular choice for importers and exporters all around the world.
The escrow process is a channel through which transactions occur between a buyer and a seller. This service is provided by a trusted third party which facilitates this whole process. It accepts payment from the buyer and notifies the seller about it. The seller is then required to release the shipment, and after due verification that the goods have been shipped, the third party transfers the payment to the seller. Hence, the escrow account acts as a safety valve for both parties and eliminates the risk for them.
Let us dive deeper into the benefits of escrow account.
- An escrow account can be customized as per the requirements of both parties. All the nitty-gritty of the transaction is decided beforehand in the agreement.
- With the evolution of digital escrow services, the whole process has been simplified further. You can transact across continents just with the click of a button. This also allows for tracking the transaction progress by the buyer and the seller raising the safety quotient further.
- In most cases, the escrow payments are spread across intervals and not paid in a lump sum. This eases the stress of the buyer.
- There are specific deals that have some special requirements. These requirements can be incorporated in agreements made through escrow channels. For instance, in the case of mergers and acquisitions, share-purchase transactions, etc.
- Escrow accounts are very popular in case of investment or lending. Many companies borrow from outside and seek private investors. Escrow services are being used by investors to finance any project of their choice.
- There are agreements benefiting the buyers over the sellers in the form of Delivered Duty Paid Agreements. Delivered duty paid means the seller is responsible for bearing the cost of transportation of goods and other risks until the shipment reaches the buyer. Such an agreement is very popular among buyers and can be executed through escrow.
- Escrow services can be availed more cheaply and are less complex than a letter of credit from a bank. This is why these are preferred over banks nowadays.
We need to understand that the success of this mode of payment relies on the fact that the third party providing escrow services is trustworthy and ethical and is up to no fraud. Therefore, be careful while choosing one. A Singapore-based company, Tazapay, which provides digital escrow services at very competitive rates, is one to go for.