Removing the biggest risks in online transactions – settlement and fulfilment

Llewellyn Morkel of tells Biznews’s Alec Hogg how the newly launched product removed the biggest risk in online transations – the risk for buyers of getting what they paid for; and the risk of sellers in actually receiving the cash. Its applications are widely applicable in this age of online banking.

This special podcast is brought to you by Llewellyn Morkel is with me in the studio. Llewellyn, what attracted you to the technology space? 

I studied a market degree at the Rand Afrikaans University and after that; we did a programming and software course with CS Holdings. In that, I combined the two to do creative software and IT products, which we launch, build, and develop.

Then you went into a start-up and it focuses on a particular area. I’ve been involved in the Internet pretty much since it started here in South Africa and one of the problems in the Internet is that you can’t buy and sell products as easily as you might be able to. That’s an area, which you’ve also seen as an opportunity.

Correct. The question is always ‘who pays first’. Do you pay the person you’re buying from first, or do they deliver first? That’s the area where fraud happens on the Internet, when you pay somebody and they run away without giving you the goods or you deliver the product and never get paid for it. In that, we decided to build an escrow-based payment.

What does escrow mean?

The word ‘escrow’ means ‘to keep in trust’, so we accept payment from a buyer. We deliver a guarantee to the seller and the seller would then deliver the product. Once the buyer is happy, the buyer releases the funds and the seller is paid.

That eliminates the case where the product distributors don’t get their money or in fact, the person who pays not actually getting the product.

It really does eliminate the entire risk. You get what you paid for, but you also pay for what you get.

How bad is it? How bad is the fraud on the Internet in this field?

We’ve seen several statistics. The big online traders will tell you that it’s never been as bad as it is today. It’s increasing. As the economy becomes tougher, people defraud more. It’s just one of those things. It doesn’t only happen on the Internet though, and e-escrow’s not built only for Internet transactions. It is an online platform, which allows you to pay via an escrow payment system. It can be used offline in a normal business set-up as well, where a business would take an order and, instead of just accepting a deposit, the deposit goes into escrow and the business gets a guarantee. They can then deliver against the deposit.

Let me ask you about a very practical example we have here at Biznews. We have an option where people can, instead of sending out a press release and hoping that it’s published, they can guarantee that their press release will be published provided it meets editorial standards on Biznews. We don’t want to publish it and then hope that we get the money. They also, don’t want us to take the money first and then perhaps, it isn’t published. Is there an application here, for e-escrow?

That’s an excellent example – exactly where it comes in. Whomever wants their editorial published would pay the money into an escrow account. We would provide you with a guarantee that the payment has been received and once you’ve delivered and the customer is happy, the payment is released to you.

It makes sense and everybody feels a lot more comfortable with that. What other applications are there?

We’ve integrated with a number of websites such as service delivery websites where a product is sent to a consumer and that makes the perfect sense. After that, we go into business where businesses would use it, exactly in the way you just said – to facilitate payment. Our long-term aim is to do international cross-border transactions. The biggest element stopping cross-border transactions is trust. One company in Nigeria would not trust a company in South Africa with their money before the South African company has delivered. Once again, who pays first? Who makes the first move? We would like to implement international African-wide, cross-border escrow.

What got you into this? What got you thinking about it? It sounds like a simple application. I think most people would understand that. It must be a pretty complex thing to put together.

It was complex. It’s been a year-and-a-half of development, research, and getting all the right aspects of an escrow business and a ‘payments-accepting business’ into place. What got us into it is just that there are so many people and so many businesses losing money. Either way – either not being paid or getting poor services and getting poor quality. We’d like to be the trusted third party. We’re the trusted third party in that, to resolve those issues.

Llewellyn, just help me out here. Let’s say, I see a photograph of something that Verimark wants to sell to me. I’ll use them as an example because everybody knows they sell the stuff through television. I then get the product and it’s not up to scratch. If I make sure that I pay them via e-escrow, I don’t actually pay them until I’m happy/satisfied that the product is what I thought I was buying.

Exactly. You have one of two options. You can either hold the payment and have them fix whatever the problem was, or you can return that product at your own cost, and get a full refund.

How big is this internationally?

Internationally, it’s based on a company called and has done…I think their last figures were more $4bn worth of transactions – just in the U.S. – securing transactions there. They’ve now started going into Europe, etcetera. The escrow payment service is becoming the new de facto way of payment. Instead of buying something via a website and presenting your credit card details, you would pay it through e-escrow and you’d trust the third party. We take the risk. Instead of somebody else seeing your credit card details, we take that and we pay the money over to them.

It makes a lot of sense in many respects but I guess you still have to educate a lot of companies as well as consumers, who are currently dealing on a straight credit card basis.

Correct. That’s probably the biggest portion of our job – education. Escrow as a payment system is very easy to understand, but it’s not currently the norm. We need to help people understand what the value is in keeping control of their money, up until they’ve received the product or service that they requested. I would like to give an example of home renovations, where you have builders coming on and builders usually require upfront deposits. In escrow, you are able to manage the deposit via milestone-based payments. Therefore, you pay for deliverables, and that changes the entire ballgame. Suddenly, you demand quality and you demand that somebody delivers before they receive their money.

It makes a lot of sense – having done some renovations and had some nightmarish conclusions. Help us. I have a builder. He’s coming to the house. He’s going to be doing some renovations. He wants a 50 percent deposit upfront. How do I even find out about e-escrow? Where do the two of us meet? Do we just go to your website and ‘hey presto’?

Exactly. In an offline environment, you would still use the website to do the transaction between the two offline parties. One of the parties would start the transaction. They would detail the terms and conditions of the transaction. When it is a milestone-based payment, they would set up and agree their milestones’ due dates, deliverable payments, and the amount of payment linked to a milestone. They’ll agree to all of that upfront. Press ‘submit’ and that basically, signs it on behalf of the two of them. From there on, we accept payment from the person who is building. In terms of every milestone, we guarantee a milestone so we also protect the builder (the other party) in this. We guarantee that we’ve received payment. They’re not going to build an entire wall and then find out they’ve run out of money or ‘we’re not getting paid for our job’. It really works both ways.

Llewellyn Morkel is the man behind e-escrow and this special podcast was brought to you by