What is escrow?
What does escrow mean?
Escrow is a financial arrangement where a third party, known as an escrow agent, holds and regulates payment of funds or assets between two parties involved in a transaction. The escrow agent ensures that the terms and conditions agreed upon by both parties are met before the funds or assets are released.
You can think of escrow as a "no man's land" for money, until the deal is complete.
In a normal transaction, money goes to the seller and a product/service goes to the buyer then its all over. But in some cases, especially with high value items, there needs to be a delay in the payment process while all of the promised nature of the product/service is verified.
During that delay, the buyer has to provide the money to prove they're serious about buying, but the seller shouldn't get the money until everything is checked out. The money, therefore, is set aside for a while and belongs to neither person.
During that time, an escrow agent (e.g Lipasafe) holds onto the money with promise to give it to the seller if everything checks out, or to give it back to the buyer if the product/service is not what was promised. While the escrow agent holds on to the money, it is said to be in escrow.
How Lipasafe works
Here's how the typical Lipasafe escrow transaction goes:
- Buyer and Seller agree to terms
- Buyer submits payment to a digital escrow account with MPESA
- Seller delivers goods or service to buyer
- Buyer inspects and approves the product/service
- If buyer approves, they release payment to seller
- If buyer does not approve, they can dispute the transaction and enter Dispute Resolution
Lipasafe provides an impenetrable layer of security for both the buyer and the seller in peer to peer and B2C transactions. Our escrow process helps prevent fraud and promotes a smoother, more secure exchange of goods or services.
Last updated on 17th December 2023