With the country under lockdown, an escrow service makes sense as people increasingly turn to private purchases to save costs and also want to sell goods privately to raise cash.
While escrow services have traditionally been reserved for larger transactions, Standard Bank is now offering you a digistised escrow solution so that you can transact safely when buying or selling items privately.
Escrow means to place your money in custody or trust until a specific condition has been fulfilled. Traditionally 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.
In this case, Standard Bank collects 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 country under lockdown, this service makes sense as people increasingly turn to private purchases to save costs and also want to sell goods privately to raise cash.
And had Kayla Steenkamp known about the service a few weeks ago, she wouldn’t have been duped into parting with R4,500 for an exercise bicycle that never arrived. Steenkamp Told Money she decided to buy an exercise bicycle when the lockdown was extended.
Steenkamp, a frequent shopper on Takealot and Superbalist, said she was comfortable with an online transaction after her Google search produced Econo Sports in a sponsored advert.
“I found a bicycle that fitted my requirements and Marlene Chambers called me back. She said the company was based in Welkom but would be able to ship it to me in Cape Town.”
Chambers emailed her an invoice requesting proof of payment before the bicycle would be delivered. However, once payment was made, Steenkamp was told that the bicycle would be delivered within three to five working days.
After a week, she called Marlene to query but her calls and emails were not returned.
On investigation she found the company listed on Facebook, with a prominent post warning people that “Marlene” is unlawfully trading under their company name.
“We have tried to make contact with this lady numerous times, via phone calls, WhatsApp and emails, but she does not answer and has blocked us on WhatsApp,” the post reads.
Econo Sports further states that they and previous clients have reported the case to the police and urged consumers to thoroughly investigate a website and page before ordering and paying over any money “as there are a lot of scammers out there preying on innocent people”.
Holding your money in trust
Kuben Chetty, head of client solutions at Standard Bank says the need to safeguard against risks such as potential fraud becomes heightened particularly given the change of consumer purchasing habits spurred by Covid-19. Statistics released by Sabric, the SA Banking Risk Information Centre, show that a total of R278.5m was lost to digital fraud in 2019, up from R262.9m in 2018.
“As it is ultimately a transaction between strangers, the process can expose buyers and sellers to fraud without any recourse,” Chetty says. Standard Bank is leveraging its investment in TradeSafe, a digital escrow platform to provide clients with the escrow service.
How it works
Standard Bank clients can open an escrow account using online or cellphone banking. You would use funds from your Standard Bank transactional account to fund a purchase, but the money goes into your escrow account and remains there until you inform the bank that you have received the goods or services you paid for.
The person you are buying goods or services from does not have to be a Standard Bank account holder.
Non-Standard Bank clients wanting to use the escrow service as a buyer are encouraged to digitally open a Standard Bank MyMo account, a low-cost account with a R4.95 monthly fee.
When you register an escrow purchase, you also specify the terms and conditions of the purchase. The seller can either accept the terms or renegotiate. Once you are both happy, you deposit the funds, which are released when the transaction has been completed. Fees for using the escrow service are calculated as a percentage of your transaction, with a minimum fee of R115.
What the other banks offer
Bongiwe Gangeni, deputy chief executive of retail and business at Absa says although Absa does have an escrow facility to cater for purchases of property, business, vehicles and software, it is only available through attorneys.
“The attorney acts as the escrow agent between the buyer and seller. A monthly channel cost (attorney’s expense), a fee for each transaction and usually an administration fee that the attorney agrees with the parties apply,” he explains.
Nedbank clients can use an escrow service at a flat fee of R5 per transaction, to purchase goods and services on the bank’s recently launched Avo app. Services that are available on the Avo app and that can be paid for using the escrow service include home services, such as plumbing or electrical work as well as purchases of physical goods such as appliances.
FNB does not currently offer an escrow service to retail clients.
Tips to safely transact online
The popular online classified site, Gumtree offers the following advice:
If you are buying:
- Do market research. If a price sounds too good to be true, it probably is a scam.
- Don’t hand out personal information such as your ID Number, or your home address.
- Arrange to meet in a public space to view the item before you pay over any money.
- Try to get details other than a cell phone number so that you are able to track the seller if you have a problem.
If you are selling:
- Take photos of any items that you are selling as proof of the condition they’re in when being sold.
- Even if you do receive proof of payment, wait a few days for the funds to clear before handing over or shipping the item you have sold.
- Arrange to meet in a public space and take someone with you as a safety precaution.