Escrow Services In South Africa

If you’ve ever tried to buy or sell something through the classifieds, you’ll know that the process is fraught with fraud and worse, potential danger. In the old days it was the classifieds in the newspaper, today it’s websites like OLX or Gumtree.

I recently did a spring clean and have been trying to sell a bunch of things I no longer need. I advertised them on OLX and Gumtree and can confidently say it has been a most unpleasant experience trying to sell them. So much so, in fact, that I am tempted to rather throw away the smaller items than have to deal with this admin and stress.

Challenges Of Transacting

There are so many people trying to rip you off. I’m very aware and not desperate so if I detect anything suspicious I just tell them the item has been sold and they leave me alone. But even legitimate transactions require one of the parties to take on a degree of risk. This is applies especially when it is a large amount of money that needs to be transferred or the seller and buyer are in different cities. There was a camera lens that I wanted but the seller was in Pretoria and there was no way I would deposit the money before receiving the lens and she was not keen to send the lens before receiving payment. I’m sure this sort of stalemate prevents many transactions from taking place.

I recall being introduced to a service called, This Is Me, which aims to verify a person’s identity online. But it’s not that I don’t believe the person is who they say they are, I just don’t know if they are honest or not. Because really, let’s be frank, if they don’t send me the item after I have paid for it, what can I do? Even if I know who they are and have their address, etc., what options do I have? Call the police? I don’t think so.

Escrow Services

I believe the only solution is cheap, trustworthy and simple escrow services. Escrow services have been used to facilitate transactions between parties since the dawn of time. And we are already using types of escrow services, for example AirBnB. Apart from linking accommodation providers with accommodation seekers, AirBnB looks after the transaction so that both parties know they are protected in the event that there is a problem with the transaction. I’ve had 3 separate sets of friends get ripped off because the booked and paid for accommodation in Cape Town through advertisements they found in classifieds, only to find when they arrived that the accommodation did not even exist. Websites like AirBnB prevent that from happening and you know you will get your money back if there is a problem.

Interesting Reading: 5 Disadvantages Of Using AirBnB

Shepherd

Gumtree is obviously aware that these risks can prevent a lot of people from using their service and I noticed that they were recommending people use a service called Shepherd. So I checked out the website and it looked legit, plus they are affiliated with Standard Bank which gave me added peace of mind. I proposed using Shepherd to the person in Pretoria that was selling the camera lens I wanted (on OLX actually, but Shepherd handles any transaction). She agreed and I now have the lens and she has the money. The process is relatively simple and transparent.

The seller registers on Shepherd and creates the ‘sale’. The seller then sends the sale to the buyer by email. The buyer then registers on Shepherd and pays for the product by credit card. Shepherd then sends a courier to collect the parcel from the seller and deliver it to the buyer. The buyer checks they are happy with the product and Shepherd then releases the funds to the seller. The process is very transparent, you can log into the Shepherd website and see the status of your transaction at any time. It even allows you to track the courier delivering your parcel too. If the buyer is not happy with the item, the transaction is reversed at no additional charge.

The cost is about 4% of the transaction plus the courier fee. Usually the seller pays the transaction fee and the buyer pays the courier fee. For my transaction it cost us R250 in commission and courier fees on a R3,500 camera lens. I thought that was a reasonable price for the convenience and risk mitigation. Obviously not all transactions will be appropriate through the Shepherd platform. The commission could become prohibitive on very high value transactions, but again, reducing the risk on a high value transaction is worth more. Very small transactions will not make sense either as the fees may be near to the price of the actual item. But for many transactions, Shepherd is the perfect solution.

FlipSell

I see there is a new classifieds website with a built-in escrow service, called FlipSell. It only provides escrow services for things that are bought and sold on its site. In contrast, any two people can do a transaction using the Shepherd escrow service, even if the item has never been advertised anywhere. FlipSell also has higher fees, in addition to the courier charge they add a commission fee of 8% of the transaction value which is double what Shepherd charges. FlipSell does allow EFT payments which Shepherd does not and FlipSell does not seem to have a minimum commission while Shepherd has a minimum fee of R30.

TradeSafe

I also found another escrow service, called TradeSafe. This is an independent service which any 2 parties can use to facilitate a transaction. The fees are much lower, starting at 1.5% and reducing depending on the size of the transaction. The minimum fee is R100. But this service does not get involved in the delivery of the item, the parties must arrange everything themselves. TradeSafe simply waits for the go-ahead from each party and then it releases the funds. This means TradeSafe can be used for transactions that do not involve physical product. For instance, if you wanted to book accommodation, and they wanted you to pay the full amount up front, you could place it in escrow with TradeSafe and when you check in and are happy you release the funds.

I found Shepherd to be a great way to filter potential scammers. I had a few enquiries for items I was selling that seemed legit, but just to be sure I told them I wanted to do the transaction through Shepherd and I never heard from them again. I will definitely be using an escrow service when buying or selling online in the future.

Have you used one of these escrow services? Was your experience good or bad? Let us know in the comments below.