Partnering up with international businesses, expanding to overseas markets, finding vendors or B2B buyers abroad – these have now become the norm for most small, medium, and large enterprises. With the opening up of trade policies in most countries and with increased internet access, international trade is opening up new avenues and a huge potential for business development and growth. Such cross-border trade, however, is not without its own challenges and risks. Payment constraints and hurdles are some of the most concerning among these as they could well impede the profitability of your business.
Most international businesses are now discovering the advantages of using escrow platforms when it comes to cross-border trade. Escrow platforms have emerged as the leading solution to plug the gap in payment discrepancies, delays, and failure in matters of international trade. Let us take a look at what an international escrow service is and understand the benefits and risks that it has to offer.
What is Escrow?
An escrow platform is a third-party payment system that helps facilitate trade and payment between a vendor and a buyer. In simple terms, after a trade agreement is reached between the two parties, the seller deposits the full amount in an escrow account. This is proof of intent and ability to pay the seller. When the vendor fulfills the sales obligations and ships out the goods as agreed upon, the escrow service releases payment to the vendor. The payment is released upon receiving proof of shipment by the seller. The escrow fee is usually a small amount and is paid by either party or by both.
Escrow Services – A World of Benefits
One of the greatest benefits of using an international escrow service is security. The buyer deposits the entire transaction amount to show a clear intent and ability to pay. This payment cannot be stopped or retracted by the buyer once the goods are dispatched. Similarly, the vendor does not get paid unless there is clear proof of dispatch of the goods as specified in the trade deal. This mitigates the risks taken by the vendor in an open account trade. This safety aspect comes sharply into focus in light of the COVID-19 pandemic during which many businesses are suffering financial hardships.
The escrow platform is a third-party service provider and works strictly under the guidelines of international trade laws and the agreement reached by the two parties. Another advantage is that it is not as cumbersome or expensive as a letter of credit facility, nor as long drawn as an international bank transfer. In fact, many international banks offer Letter of Credit facility only on high-value transactions but escrow accounts may be set up for any trade or business deal. Most online escrow platforms such as Tazapay set up escrow accounts within a short time and carry out due diligence. What is more, is that these online escrow services come with robust and transparent digital platforms that make payment services easy.
What to look out for?
While the benefits of using an escrow service are immense, there are also a few things to look out for. You must ensure that the escrow platform you choose to use is trustworthy and reliable. Tazapay, for example, is licensed and regulated by the Monetary Authority of Singapore (MAS) and powered by Rapyd. This makes your funds secure and safeguarded by the banking rules and regulations of Singapore. Finding a reliable escrow can bring a great deal of security to your funds.
Most escrow accounts do not help in finding business partners overseas or in negotiating trade agreements. This could be facilitated by banks in certain instances but it is beyond the purview of escrow services.
So we see that escrow services can greatly help overseas business partnerships and trade deals. In fact, escrow services can be the most inexpensive and secure way to manage an international business. That is if you do your bit and partner with a secure and robust online escrow platform.