Escrow.my - The Creation
 

Hi all,

I plan to start an online escrow service just for domain sales. I'd like to hear your comments on the escrow service you expect to receive be it in the areas of security, payment logistics etc.

From time to time I'll post queries here as I go along putting this service together.

1. Would you prefer to have the domain transfer operate like

a) escrow.com (where seller pushes domain directly to buyer, buyer confirms receipt and authorizes payment), or

b) Moniker (where seller pushes domain to Moniker escrow, Moniker then verifies and pushes the domain to the buyer. Payment released (without the buyer's authorization?)). I haven't used Moniker's escrow before. I'm just describing it from what I've read in the forum. So please correct me if I'm wrong.

To answer your question, I think it would make more sense to have a domain escrow service that actually takes control of the domain in their own escrow account and secures funds from the buyer before carrying out the transaction. Basically how Sedo handles domain escrow.

Originally Posted by fish

To answer your question, I think it would make more sense to have a domain escrow service that actually takes control of the domain in their own escrow account and secures funds from the buyer before carrying out the transaction. Basically how Sedo handles domain escrow.

This method would require me to register an account with all the registrars, so that the seller can push the domain into my account in the same registrar. This could delay the escrow process if I don't have an account with the registrar yet.

I'm alright with this if buyers and sellers feel more comfortable with this method.

Edit:
Also there could be some ccTld domains that I won't be able to accept into escrow account due to the ccTld's rules. What then should be done for these types of names?

I think the first & foremost thing is establishing trust among users. Establishing your credibility.

Originally Posted by PowerUp

This method would require me to register an account with all the registrars, so that the seller can push the domain into my account in the same registrar. This could delay the escrow process if I don't have an account with the registrar yet. I'm alright with this if buyers and sellers feel more comfortable with this method. Edit: Also there could be some ccTld domains that I won't be able to accept into escrow account due to the ccTld's rules. What then should be done for these types of names?

nope you just have to get them to transfer to your register. then you would have to include the transfer fees in your fess thus making one register you need to be registered with you may even be able to strike a deal with the register as you will be bringing them customers in a sence if the clients of yours stick with that register.

Originally Posted by vnix.ca

nope you just have to get them to transfer to your register. then you would have to include the transfer fees in your fess thus making one register you need to be registered with you may even be able to strike a deal with the register as you will be bringing them customers in a sence if the clients of yours stick with that register.

Thank you for the suggestion. I'll keep this in my mind.


Does anyone know how escrow.com or other escrow services prevent chargebacks or credit card fraud, check fraud, cashier order fraud, ACH fraud and bank wire transfer fraud?

Paypal's chargeback policy doesn't favor the online merchant. As it is now, Paypal will not be one of the method of accepting payment.

Paypal, however could be offered as a withdrawal method. This brings me to another question. What kind of records am I required by law to keep when processing payments? If I am required to keep the name of the payee, then Paypal is out as well.

Hi PowerUp,

I actually looked into setting up a domain name escrow service awhile back(ultimately chose not to proceed with the project), so I may be able to answer a few questions.

As for fraud, bank wires are as safe as it gets and this would be the recommended funding method if you're low on cash and can't handle fraud/chargebacks. I strongly wouldn't recommend accepting checks, money orders, or ACH. I learnt a valuable lesson about this myself a couple months back when I went to cash a $15900 USD check... I live in Canada and because the check was so large (and from a different country), the bank outright refused to cash it. They sent it off to collections and it was a full month before I got the money in my account. I'm sure Escrow has some kind of favorable treatment with banks and doesn't have this kind of stuff happen to them, but this could lead to serious problems with an escrow service if such happened to you. This might also be the reason why Escrow has a limit on the size of checks (to avoid triggering a collections requirement).

There is no way to prevent credit card fraud. The best you can do is to require people to fax in a form signing that they authorize their card to be charged including their credit card and a piece of ID (like Escrow does). Telephone verification is also recommended. There is credit card software on the market which can help detect credit card fraud. Credit card numbers are basically assigned based on certain factors (see the math behind credit cards here: http://www.thetaoofmakingmoney.com/2007/04/12/324.html ). Not allowing certain countries (it's not discrimination -- it's common sense when it comes to credit cards!) is also recommended. Data on who it is suggested to exclude is readily available via google.

If you do choose to accept credit cards, make sure you choose a good credit card processor. Some credit card processors like say Authorize.net seem to offer a very low rate (but hit you with HUGE chargeback fees if chargebacks are filed). Consider opening a merchant account at your bank. Depending on your bank, rates may be subject to transaction volume and might not be a better alternative than many of the solutions available online.

As for record keeping, I would recommend checking with a lawyer, as this is a very serious matter and not one you'll want to take lightly. Operating an escrow service may also require an escrow license, depending on where you reside. If you're unsure about whether a license is required or not, do make sure to inquire about it as the consequences of running an unlicensed escrow service are very serious in some places. Due to the sheer volume of dollars that will be coming in and going out, I'd recommend keeping as much information about transactions as possible -- your business model is a prime candidate for auditing.

Wish you all the best with it :)

Originally Posted by PowerUp

Thank you for the suggestion. I'll keep this in my mind. Does anyone know how escrow.com or other escrow services prevent chargebacks or credit card fraud, check fraud, cashier order fraud, ACH fraud and bank wire transfer fraud? Paypal's chargeback policy doesn't favor the online merchant. As it is now, Paypal will not be one of the method of accepting payment. Paypal, however could be offered as a withdrawal method. This brings me to another question. What kind of records am I required by law to keep when processing payments? If I am required to keep the name of the payee, then Paypal is out as well.

Originally Posted by Reece

Hi PowerUp, I actually looked into setting up a domain name escrow service awhile back(ultimately chose not to proceed with the project), so I may be able to answer a few questions. As for fraud, bank wires are as safe as it gets and this would be the recommended funding method if you're low on cash and can't handle fraud/chargebacks. I strongly wouldn't recommend accepting checks, money orders, or ACH. I learnt a valuable lesson about this myself a couple months back when I went to cash a $15900 USD check... I live in Canada and because the check was so large (and from a different country), the bank outright refused to cash it. They sent it off to collections and it was a full month before I got the money in my account. I'm sure Escrow has some kind of favorable treatment with banks and doesn't have this kind of stuff happen to them, but this could lead to serious problems with an escrow service if such happened to you. This might also be the reason why Escrow has a limit on the size of checks (to avoid triggering a collections requirement). There is no way to prevent credit card fraud. The best you can do is to require people to fax in a form signing that they authorize their card to be charged including their credit card and a piece of ID (like Escrow does). Telephone verification is also recommended. There is credit card software on the market which can help detect credit card fraud. Credit card numbers are basically assigned based on certain factors (see the math behind credit cards here: http://www.thetaoofmakingmoney.com/2007/04/12/324.html ). Not allowing certain countries (it's not discrimination -- it's common sense when it comes to credit cards!) is also recommended. Data on who it is suggested to exclude is readily available via google. If you do choose to accept credit cards, make sure you choose a good credit card processor. Some credit card processors like say Authorize.net seem to offer a very low rate (but hit you with HUGE chargeback fees if chargebacks are filed). Consider opening a merchant account at your bank. Depending on your bank, rates may be subject to transaction volume and might not be a better alternative than many of the solutions available online. As for record keeping, I would recommend checking with a lawyer, as this is a very serious matter and not one you'll want to take lightly. Operating an escrow service may also require an escrow license, depending on where you reside. If you're unsure about whether a license is required or not, do make sure to inquire about it as the consequences of running an unlicensed escrow service are very serious in some places. Due to the sheer volume of dollars that will be coming in and going out, I'd recommend keeping as much information about transactions as possible -- your business model is a prime candidate for auditing. Wish you all the best with it :)

Thank you for your insights and research.

I have done some research on my own.

I now understand why SEDO takes 2 months to pay the domain seller. Whatever the payment method (yes... even bank wire transfers), when you see the money in the bank account, then the payment is CLEARED. It doesn't mean the money belongs to you. It just simply means there's enough funds in the payer's account to be debited and credited into your account. It could take up to 2 months before you can claim the money is yours. This is after the payer has done his bank reconciliation. This is when the payment is HONORED.

I've inquired a couple of companies in my country providing escrow service and as to the best of their knowledge, there is no special licenses to obtain.

As for credit cards, I'm in a dilemma here. I want to provide my service for a very low fee, but the cc charges would wipe out almost all my fee. Master and Visa too have a clause similar to Paypal that prohibits surcharging customers who pays by credit cards.

If I choose not to accept Paypal, credit cards, checks, ACH and the likes and only accept bank wire transfer, how much business am I going to lose?

How do I prevent the seller from retrieving back the domain after it is pushed to the buyer and I've released the money? Would it be wise to hold the money for a certain period before releasing it?

How can the seller retrieve back the name if it's already transferred to your account?