[116720] in Cypherpunks
Escrow Service Protects Buyers and Sellers on Net
daemon@ATHENA.MIT.EDU (AMP)
Thu Aug 19 00:56:54 1999
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Date: Wed, 18 Aug 1999 23:43:47 -0500
From: AMP <amp@pobox.com>
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To: Cypherpunks <cypherpunks@cyberpass.net>
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Reply-To: AMP <amp@pobox.com>
This or similar things have been discussed on this list over the past
few years I've been on it, but I figured I'd pass it along. The writer
is almost talking here about reputation capital. -amp
Date: Wed, 18 Aug 1999 15:52:49 EDT
From: TELECOM Digest Editor <ptownson@telecom-digest.org>
Subject: Escrow Service Protects Buyers and Sellers on Net
Since the beginning days of e-commerce, merchants have been suspicious
of netizens, and netizens suspicious of merchants. Many are the horror
stories we've heard from netizens who attempted to make purchases on
the net only to find their checkbook cleaned out either because of
dishonesty by the merchant or a lack of security in his network conn-
ection. By now, everyone knows the problems amazon.com had with this
a couple months ago. There are guys who set up bogus storefronts with
their only intention being to collect credit card numbers, passwords
and personal identities. There are honest merchants on the net who
have an 'all sales final' policy and while they do ship out the merch-
andise ordered, it may take a long time to arrive and not be of very
good quality. The netizen of course is then stuck with it.
Let's flip the coin over: merchants on the net have plenty of horror
stories also. Credit card fraud on the net is a familiar story. A
merchant accepts a card, sends the merchandise then gets a chargeback
a month or two months later with no way to collect from his customer.
Some netizens cheat and claim they never got the merchandise. Merchants
rightfully are scared to send out merchandise 'on approval' since so
many folks -- netizens and others -- would just never get around to
paying. But in the defense of netizens, they also want to be able to
see, examine, touch and use the merchandise before buying it, to make
sure it is as advertised and will meet their needs.
So what is the solution? I have found something I think might work and
I recommend its review by merchants and netizens: an inexpensive,
licensed, reputable *escrow service* for the net. An escrow service is
a service which holds money in trust pending actions by the various
parties involved. One that operates on the net is called i-Escrow,
and it is a *bonded*, *licensed* (in the state of California) agency
registered with the Department of Corporations. Its purpose is to act
as intermediary between buyer and seller on the internet for persons
or companies which wish to use its reasonably-priced, inexpensive
services.
Let's say you have something for sale. You describe the item on your
website, and include with it a 'Buy It' .gif which is linked to your
file at i-Escrow.com ... a buyer clicks that link and is taken to the
i-Escrow.com site. If they have previously used the service they will
simply login and identify the purchase they wish to make. If they have
not used i-Escrow.com before, they will need to register and give
satisfactory identification about themselves, their credit card, etc.
Likewise, a first time seller needs to identify him/herself to the
satisfaction of i-Escrow.com and the escrow agency reserves the right
to periodically audit, using their own internal procedures, any site
offering things for sale via escrow to be sure all is honest.
The escrow agency will not accept sites that offer illegal services,
memberships in 'adult' web sites, etc. They will not accept any
merchant who has an 'all sales final' policy or a merchant who
refuses to allow his merchandise to be examined by a netizen in his
own residence or office for at least two days.
So let's say you as seller have registered the item(s) with i-Escrow
and have links on your site for each item pointing to your file at
the agency. A buyer clicks on the link. As noted above, the netizen
registers, which can be done on line, by fax, or telephone as desired,
providing credit card number, submitting a wire transfer or whatever.
*The merchant never sees this credit card information at all*. Once
the buyer has registered, and tendered payment to be held in escrow,
the agency sends email to the seller advising that satisfactory
payment has been received, and giving a 'ship to' address. The agency
does address verification on credit cards, and works with the netizen
regards alternative shipping addresses, etc.
The merchant does not know how it was paid for, and has no reason to
care. Based on the agency's 'sales authorization' or approval to
complete the sale, the merchant ships the merchandise. i-Escrow.com
has specific guidelines the merchant must follow: The shipment must
go out promptly (it is hoped the netizen will have what he purchased
the very next business day via a courier service); it must be very
secure in its packaging; it must be fully insured against damages,
however the escrow service pays the insurance costs as part of the
deal.
The best part: *on receipt of the merchandise, the netizen has two
complete days -- starting with the day after the merchandise is
receieved -- to examine the stuff*. After two days, assuming no
complaints, the agency sends payment in the form of its own trust
account check to the merchant, less its fees, which are about the
same as what the merchant would pay for credit card service anyway.
The netizen can, if he wishes, and he must do so to protect his
rights, login to the escrow service and *cancel the payment* if he
intends to return the merchandise. He has the aforementioned two
days to do this. If the netizen cancels the transaction within two
days he need give no reason for doing so, but he does have the
obligation to return the merchandise in the same condition in which
it was received and by the same manner of delivery; i.e. prompt
return within a day or two, fully insured, carefully packaged, etc.
Just as the merchant is paid two days after delivery lacking any
orders to the contrary from the buyer, the netizen gets a refund
two or three days after the merchandise has been returned and the
seller gets a chance to inspect it.
This does not have to a 'merchant' or 'internet storefront' versus
'customer' kind of situation. It works perfectly well for any buyer
and seller on the net. Seller registers with escrow, links buyer to
escrow; escrow collects payment in a method satisfactory to itself;
advises seller to ship; later remits proceeds to seller. Buyer never
has to worry about:
1) Seller got my credit card/checking account info. Seller never
sees it. He is paid by escrow's client trust fund.
2) Seller has nothing for sale, just wants my money. Seller will
not get your money until you authorize its release or default
on saying anything for two days after receipt. If he ships
nothing, he gets nothing. It all times out and you get money
refunded.
Ditto the seller and his concerns: if I send it to them to look
at, will I ever get my money? What if this is a fraud credit card?
Its not his concern any longer. He gets paid in cash.
I strongly suggest buyers and sellers on the net look at the services
of i-Escrow.com and see how it might benefit them. For sales up to
about $50, the fee charged is $2.95 and from there up to a few
hundred dollars, the rate is six percent, which is deducted from the
sales proceeds remitted to the seller. Considering the fee includes
full insurance on the shipment, credit card approval services and
negotiations between seller and buyer as needed, its not a bad deal.
The peace of mind given to both seller and buyer via the internet
is worth the few extra dollars. Both sides realize they will get what
they want from the deal.
Since there is no monthly fee, no setup charge, nothing due except
the fee taken on each transaction, merchants may want to add i-Escrow
on their site to show their honest intentions. Netizens would do well
when making a purchase from someone on the net to insist, 'lets
handle the sale through an escrow for the protection of us both.'
And imagine an internet merchant who says, 'yes, you can examine this
merchandise in your home for two days before I get paid'. How very
revolutionary, eh!
Yours for better internet e-commerce, and do look at http://i-Escrow.com
to see if it can help you. It might help me, more on that in the
next message.
PAT
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