Escrow Service in Nigeria: How Escrow Payment Works
Let us look into escrow service in Nigeria.
Firstly, what is an escrow?
An escrow is a system of transaction between two or more parties that involves a trusted intermediary. The role of the intermediary is to reduce risk associated with the transaction payment.
In most cases, not all, the parties are usually just two – transferor (the party that offers product/service, e.g a vendor or seller) and transferee (the party to whom the product/service is offered e.g buyer).
For convenience, we shall just use seller (in place of transferor) and buyer (in place of transferee).
So, an escrow is an arrangement between a buyer and a seller where the payment from the buyer has to go to a middle man before being released to the seller by the middle man if some pre-agreed conditions guiding the transaction have been met.
Transactions and payments in which escrow is used are referred to as escrow transactions or escrow payments.
How Escrow Payment Works
In everyday conversation, the term escrow is commonly replaced with “escrow payment” or “escrow transaction”.
Whereas in an ordinary transaction (without an escrow), the buyer pays directly to the seller for particular product/service, in an escrow transaction, the buyer first makes the payment to the EscrowLock before it gets to the seller.
Typically, an escrow payment will involve:
- Two or more parties conducting a transaction
- Agreement by the transacting parties guiding the transaction, and
- An escrow company like EscrowLock to act as trusted third party to lock the payments until certain conditions in the transaction agreement is met.
Escrow Service in Nigeria
Incidences of fake online buyers and sellers have plagued Nigeria for a very long time.
It is not uncommon to hear of cases where a buyer pays for goods and services online and end up receiving neither the goods/service or the payment as the seller goes MIA (Missing In Action).
This issue also affects genuine sellers too since countless numbers have reported being scammed.
The mistrust between online buyers and sellers in Nigeria necessitates the need for escrow service in the country.
However, care must be taken when one decides to engage any online escrow service in order not fall victim of illegal escrow companies that are unregistered.
EscrowLock Escrow Service has launched in Nigeria to provide legitimate, legal escrow payment services to buyers and sellers in order to drastically cut down online payment fraud in the country.
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.
Correct answer: True