What is Escrow Payment (Protected Payment)?
An escrow holds the buyer's payment with a neutral third party until the supplier delivers as agreed — eliminating advance payment fraud in B2B trade. VyaparSethu calls this "Protected Payment".
Escrow is a financial arrangement where the buyer's payment is held by a neutral third party (escrow agent) until both parties fulfil their contractual obligations. In B2B trade, the escrow is released to the supplier only after the buyer confirms delivery and quality.
Advance payment fraud is one of the biggest risks in Indian B2B sourcing. A buyer pays 50–100% advance; the supplier disappears, delays, or delivers inferior goods. Escrow eliminates this risk — suppliers can only receive money after delivering.
In VyaparSethu's Protected Payment system (powered by Razorpay + nodal account), funds flow: Buyer pays → funds held in nodal account → supplier ships + uploads delivery proof → buyer confirms receipt → funds released to supplier. Disputes are handled by VyaparSethu's resolution team.
Escrow also benefits suppliers: a buyer who has already deposited into escrow is a committed buyer. It eliminates "ghost orders" where a buyer gets a quote, places an order verbally, then disappears — because the payment is already locked in.
RBI regulations require escrow/payment aggregator services to use a nodal bank account (not held by the platform). VyaparSethu uses Razorpay's regulated payment infrastructure, ensuring funds are legally held and FEMA-compliant.
Frequently Asked Questions
What is escrow in simple terms?
Escrow means a neutral party holds the buyer's money until the supplier delivers. The supplier can't take the money without delivering; the buyer can't take it back once committed to a deal.
Is escrow safe for B2B transactions in India?
Yes, when provided by an RBI-regulated payment aggregator using a nodal bank account. VyaparSethu uses Razorpay's regulated infrastructure for all Protected Payments.
What happens if there is a dispute in escrow?
VyaparSethu's resolution team reviews delivery proof, quality photos, and communication. Funds are released to the correct party based on the evidence. Unresolved disputes escalate to legal arbitration.
How much does Protected Payment cost?
VyaparSethu charges a small platform commission (typically 1–2%) on completed deals. There is no additional escrow fee beyond this commission.
Related Terms
What is a Purchase Order (PO)?
A Purchase Order is a legally binding commercial document a buyer issues to a supplier confirming the agreed product, quantity, price, delivery date, and payment terms.
What is RFQ (Request for Quotation)?
A Request for Quotation is a formal document a buyer sends to suppliers asking for price, lead time, and terms — the first step in any B2B procurement. On VyaparSethu it's called a "Requirement".
What is Trade Credit?
An arrangement where a supplier allows the buyer to pay 30–90 days after receiving goods — the most common form of short-term business financing in India.
Put this knowledge to work
Post a Requirement — verified suppliers quote with proper GST invoices, HSN codes, and Protected Payment on every deal.