What Are the Best Online Escrow Services?
Here Are Six Escrow Services Worth Exploring
Buying a small business and managing ongoing financial transactions can be complicated, so it’s a great idea to streamline wherever possible. Choosing online services to handle the storage of due diligence materials and get documents notarized can save you time and often money.
The same is true for escrow services. This article will explain some of the primary uses for escrow accounts, explore the advantages of using an online service, and review some of the best online escrow services in today’s market.
Escrow: A Quick Review
If you have a mortgage on your home, you are already familiar with escrow. An escrow account allows homeowners to make fractional monthly payments toward their property tax and homeowner’s insurance instead of saving to pay for them each year in a lump sum. Sometimes the lender may approve an additional loan to be paid out of escrow for a home improvement not negotiated during the closing.
Escrow is also where the buyer’s good faith money goes until the real estate deal is complete. And that is escrow’s primary purpose – it’s a secure third-party platform where money can safely change hands between buyers and sellers.
Although people typically think of escrow in relation to real estate transactions, online escrow services have become popular with the rise of e-commerce businesses, particularly online auction platforms like eBay. Keeping money in escrow until a buyer receives the items they bid on helps to protect them from fraud; the escrow service will not release funds to the seller until they have successfully met the terms of the deal, typically called the “inspection period.”
Escrow services can protect buyers, sellers, and brokers in various online transactions, including the sale of art, jewelry, domain names, and vehicles. You can also use them to make fractional investor, influencer, and affiliate payments. Finally, escrow services protect businesses that need to tie up money in a transaction which may take months to complete. Business acquisitions are the obvious example, but an escrow account can help to protect any transaction that takes time to execute.
For instance, suppose you own an e-commerce business that designs specialty board games. You may use an escrow service to hold money destined for the offshore manufacturer who makes the games. That way, you won’t risk losing a deposit should the deal fail, and the manufacturer knows the funds will be available once they have met the terms of the agreement.
Using an escrow service adds a crucial layer of trust – the seller knows they will be paid; the buyer knows they will be protected against fraud.
What to Look for in an Online Escrow Service?
Not all online escrow services are created equally. Here are some of the questions you should ask yourself when selecting one that’s best for your needs:
- Will the deposits be safe? At a minimum, the online escrow service should be covered up to the $250,000 guaranteed by the FDIC/NCUA (National Credit Union Association). Because the deposits may exceed this baseline, you should check and see if the escrow service also provides extended assistance.
- Will I earn a competitive return on the deposit? Tying up money for months, even years, can be costly when ordinary bank interest rates are high. That’s why you should investigate the cost of using the service – i.e., its ongoing fee structure – and how the service plans to optimize your rate of return.
- Does the company have a strong reputation? The purpose of using an online escrow service is to mitigate risk and build trust. Choosing a highly regarded platform in the industry goes a long way toward the latter.
- Is the platform intuitive for all parties to use? You probably have dozens of business-related apps and services. Anything that provides a poor user experience can be a nuisance for you and the people you do business with.
The Best Online Escrow Services
This fintech platform is used by top e-commerce platforms like eBay, GoDaddy, and Shopify, giving it a solid reputation that will help with business partner trust. In fact, purports to be “the most trusted, licensed online escrow service in the world.”
has several solutions for different client needs: Escrow Pay, Escrow Offer, and Escrow API.
Buyers can determine their fees using a calculator on the website. Fees to buyers start at $10, or 3.25%, up to the first $5,000 payment. On amounts over $25,000, the fee percentage rate is 0.89%.
Trustap
Trustap is an online escrow service that allows buyers and sellers to make secure financial transactions face-to-face and online.
Founded in Ireland, Trustap works in 135 countries worldwide and has offices in the United States. It is still a young company but has won considerable accolades.
Compatible across all platforms, Trustap has partnered with Stripe to guarantee that funds held in escrow for sellers will be secure. Although it promises transparency, the website does not mention a fee structure.
Safe Escrow
This escrow platform offers “best-of-breed technology” so that title agents can have “secure and affordable funding management” while maintaining complete control over the process. In other words, Safe Escrow is geared toward title agents, even though it offers escrow services that are not related to real estate.
Safe Escrow simplifies underwriter audits and will process monthly and daily bank reconciliations. It allows title agents to print checks locally from funding they receive elsewhere and to make last-minute changes at closing.
The fee structure and other financial details are unclear – interested parties are advised to schedule a platform demo.
Safefunds
Safefunds handles buyer-seller transactions, multi-payer transactions, auction sales, broker transactions, and item verification services.
They have a transparent fee schedule, starting at $38 per transaction under $1,800. Unlike some platforms, this fee is deducted from the amount the seller pays – it isn’t passed on to the buyer. Broker transactions start at $300.
Safefunds claims “to be constantly monitoring the status of major financial institutions” to ensure that funds entrusted to them are safe. Their staff members are bonded and insured to provide an extra layer of security against fraud.
Paylax
Paylax is a German fintech company that offers “a fully-fledged payment system tailored to online marketplaces” where “users can make payments directly…in a secure and legally compliant manner.” This platform places the burden for proving fraud on the buyer, who cannot release funds from escrow until the seller gives the okay.
Its all-in-one platform holds funds in escrow for up to 365 days and has national and international payment options. However, the website specifies that this platform only works with European companies; the bank that provides the payment infrastructure for Paylax is located in the Netherlands.
Their price list dashboard provides a specific rundown of the fees Paylax charges, but prospective customers are encouraged to contact the support team to get a better idea of their actual costs
Tazapay
Based in Singapore, Tazapay offers transparent international payments between buyer and seller. It allows you to transfer money into the escrow account via a local bank, credit card, or non-card APMs.
Tazapay works with e-commerce, SaaS, service providers, and import/export services. Unlike other platforms, it specifies in its FAQ which customers are considered high-risk and has a long list of industries and nations it will not serve.
The website does a better job than most detailing escrow service fees and includes helpful videos explaining how they handle the escrow process. You can install plugins that let buyers pay through Shopify, Woo Commerce, and Odoo and integrate Tazapay Escrow into your platform.
Tazapay also offers a buyer protection plan.
Some Final Observations
It’s important to carefully vet online escrow service platforms, as some fail to provide financial information on their websites. Always have a customer support person walk you through the fine print before demonstrating their platform's popular UI (user interface) and UX (user experience) features. And as with any online business transaction, the potential for fraud exists. (Check out this article for great tips for safely conducting business online.)
Some additional questions to ask a potential escrow service:
- How do you protect the safety of large transactions?
- What financial institutions do you do business with?
- Who pays the fees (if not specified on the website)?
- Can you handle international payments, and how?
You can gather other valuable information from reviewing the websites, such as where the service operates. If you are a U.S. based business, you may not be able to use an online escrow service that only does business in Africa or the Eurozone. Similarly, you may want to use a service primarily geared toward escrow transactions, as opposed to one with a menu of other services, like crowdsourcing or fintech development.
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