The Full Wiki

Internet escrow: Wikis


Note: Many of our articles have direct quotes from sources you can cite, within the Wikipedia article! This article doesn't yet, but we're working on it! See more info or our list of citable articles.


From Wikipedia, the free encyclopedia

Escrow services are intended to ensure security by acting as a middle-man in transactions where the two parties do not trust each other. Rather than sending money or goods directly to the other party (which is insecure, as one or other party must send their item first, at the risk that the other party may not then send theirs), party #1 sends their items X (usually money), to the escrow service, which holds them until the party #1 receives item Y,

the service sends X on to party #2. If either party fails to deliver their part of the deal, X will be held at the escrow service and eventually returned to them.



Internet Escrow has been around since the beginning of internet auctions and commerce. It was one of the many developments that allowed for trust to be established in the online sphere. [1]


As with traditional escrow, Internet escrow works by placing money in the control of an independent and licensed third party in order to protect both buyer and seller in a transaction. When both parties verify the transaction has been completed per terms set, the monies are released. If at any point there is a dispute between the parties in the transaction, the process moves along to dispute resolution. The outcome of the dispute resolution process will decide what happens to money in escrow. With the growth of both business and individual commerce on the web traditional escrow companies have been supplanted by new technologies. provides escrow services to online buyers and sellers since Dec. 1999. [2] Another entry in this area is This site combines transaction negotiation, escrow, and dispute resolution in a single package, with all activity using an electronic signature system for verification. In the EU, the Payment Services Directive which commences on 1 November 2009, has allowed for the first time the introduction of properly licensed and regulated low-cost internet escrow services such as in the UK.

Online Escrow Fraud

Bogus escrow methods have been employed online. In an effort to persuade a wary Internet auction participant, the perpetrator will propose the use of a third-party escrow service. The victim is unaware the perpetrator has actually created an escrow site that closely resembles a legitimate escrow service. The victim sends payment to the phony escrow company and receives nothing in return. Alternatively, the victim sends merchandise to the subject and waits for his/her payment through the escrow site which is never received because it is illegitimate. [3]

Licensed Escrow Companies

The only way to avoid escrow fraud is to use a licensed escrow company. These companies are regulated by state authorities and are required to have bonds that ensure customers can recoup money lost in the escrow process.

The only way to be certain an online escrow company is licensed is to see where they claim to be licensed and check with that government authority. Usually, there will be an online database of companies that can be searched by going to the licensing institution's official website.


  1. ^ eBay Community : Letter
  2. ^ Escrow isn't just for real estate
  3. ^ Internet Crime Complaint Center (IC3) | Internet Crime Schemes


Got something to say? Make a comment.
Your name
Your email address