ESCROW SERVICES
The payment delays have raised questions about escrow services operated by e-commerce platforms like Qoo10.
An escrow service is a way to facilitate secure transactions by having a third party hold the funds until certain obligations are met, such as when an item is received.
E-commerce platforms often act as escrow agents for online purchases. In the event a transaction is unsuccessful, the platform or escrow agent will facilitate the fund transfer to the right party.
“It protects the seller from non-payment by the buyer and it protects the buyer from defective goods or goods not as advertised,” explained Professor Thompson Teo, a member of the Department of Analytics and Operations at the National University of Singapore’s Business School.
“Escrow services also help to mediate if there is a dispute over a transaction.”
One disadvantage for sellers is that they must abide by the terms of the e-commerce platform, which may change over time, said Prof Teo. There could also be additional fees or delays to payments.
Mr Toh, the Qoo10 vendor who is owed about S$13,800, said he hopes for more regulations to be put in place for e-commerce platforms.
He pointed out, for instance, that there is currently no rule on how long an e-commerce platform can hold the payments due to its sellers.
According to Mr Toh, Qoo10 used to allow his business to withdraw payments from its sales weekly. However, the time his money was held in escrow later lengthened to weeks and then months.
“As a seller, we are unable to do anything because it’s just what they say,” he added, expressing worries about what platforms might do with the funds while they are held in escrow.
“The transaction that is going through the platform on a daily basis is very big. It’s in millions,”
