Standard Bank launches digitized Escrow service in South Africa
Standard Bank has launched a digitized Escrow solution, an online service that has been designed to protect individuals from risks associated with buying or selling goods or services from unknown individuals. The bank is the first one in South Africa to launch a digitized Escrow solution, available on its public website.
Traditional Escrow accounts were designed to provide an additional layer of security to buyers and sellers involved in a direct transaction such as a car, luxury items, home renovations, and more. Escrow allows for a third-party, in this case Standard Bank, to collect the buyer’s money, which is then held in a bank managed account until all specified requirements and conditions agreed to between both parties are met.
With the rise of the sharing economy, where individuals are increasingly purchasing goods or rendering services from one another instead of shops or businesses, the need to safeguard against risks such as potential fraud becomes heightened. This is especially true for transactions taking place in any online marketplace or social media platform, even more so given the change of consumer purchasing habits spurred by COVID-19. Statistics released by SABRIC show that a total of R278,5 million was lost to digital fraud in 2019, up from R262.9 million in 2018.
''As it is ultimately a transaction between strangers, the process can expose buyers and sellers to fraud without any recourse,'' explains Kuben Chetty, Head of Client Solutions, at Standard Bank. ''This is where Escrow becomes valuable - it can be applied to both online and offline purchases and brings peace of mind to both parties by ensuring the transaction is safe and secure.''
Prompted by the need to improve security of payments in the offline and online environment, Standard Bank is leveraging its investment in TradeSafe, a FinTech with a digital escrow platform, to provide increased safety to individuals in a non-face-to-face, online environment.
In the past, the Escrow process was cumbersome and costly, but the digital revolution has greatly improved the time it takes to turn it around and, therefore, drastically reducing the cost of the service to the benefit of the users of the solution and effectively is a self-service process orchestrated and managed by the users themselves.
Mr Chetty says, ''Clients can open an Escrow account in just a few clicks however the buyer will have to be a Standard Bank client and fund the proceeds of the transaction from their Standard Bank transactional account using our digital banking channels. Non-Standard Bank clients will only be able to perform the role of seller however can become a Standard Bank client within 10 minutes by digitally opening a Standard Bank MyMo account.''
''A client who is purchasing a vehicle from a third party, for example, can register a Standard Bank Escrow profile quickly by providing some simple information (ID number, email address, contact and banking details). The client then creates a transaction and specifies the terms and conditions. After inviting the seller of the vehicle, that individual can either accept the terms or re-negotiate. Once both parties are happy, the buyer can deposit the funds for the transaction into the Standard Bank Escrow account, that is independent of both parties. The funds are safeguarded and only released upon successful completion of the transaction, as agreed by both parties.''
There is a fee for facilitating the escrow transaction and this fee can be covered by either the buyer or seller, alternatively there is an option to take on a 50/50 split between both parties. This is the type of terms negotiated ahead of accepting the transaction.
''Standard Bank’s Escrow solution was developed with the safety of clients in mind and the current introductory version will continue to evolve as clients provide us with their valuable feedback. It is critical that we do all that we can to ensure consumers remain secure when they are transacting,'' concludes Chetty.