The Uses of Escrow for Online Businesses

Most people are arguably familiar with financial escrow. When you want to withhold payments, such as in a dispute but want to make it clear the issue is not to delay payment, putting the money into escrow is a clear way of showing you’re able to pay but have issues you wish to resolve first.

In other cases, it can be used to hold money, documents and important assets that are of interest to more than one party involved with each other. For instance, it’s useful in mergers and acquisitions, holding the relevant sensitive data until the new management has been established.

Going digital

However, in this digital age, escrow can be used for so much more. When operating a website, it is crucial in storing WHOIS data as per the instructions of the Internet Corporation of Assigned Names and Numbers – the body responsible for overseeing domain names.

Likewise, it can protect the software valuable to running the website or any other operations you depend on. In these cases, it stores the source code as this is the one aspect you don’t have access to as a licence holder (not a product owner).

When deemed necessary, a third party escrow agency can distribute the code to you, quickly and efficiently giving you greater control over such crucial services.

Layers of protection

As can be seen, the service is highly useful as a layer of protection. First of all it encourages the provider to keep their end of any bargain and not push their luck and neglect legal duties but, at the same time, it ensures a quick resolution and distribution of materials should this ever arise. This double-layer of safety makes any software much more reliable in the long-run, as well as from a simple risk perspective.

Of course, it’s easy to tell when money is in a safe holding but, when it comes to digital data and codes how do you know it’s correct? Since you can’t access it yourself yet, you need to use an efficient escrow company who offer verification services.

In these instances, the agency will essentially test the code and script, building the program up and reporting you on its findings. If it’s not correct, then you can take this up with the provider and, if it is right, you have instructions on how to utilise the code should you ever need to. Again, one should look at this from a risk perspective where it’s a win-win scenario.

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