Escrow
Escrow is a security mechanism in payment transactions: a neutral third party — the escrow agent — holds the buyer's payment until an agreed condition is met. Only then is the amount released to the seller. This protects both parties: the buyer does not pay without receiving the service, and the seller has the guarantee that the money is available.
On marketplaces, escrow is particularly used for services and high-value goods: trade services, freelancer projects, used car sales, or real estate transactions. Release occurs after delivery, acceptance, or expiration of a return period.
In Switzerland, escrow is regulatory sensitive: anyone holding funds on a trust account on a commercial basis may fall under banking regulation (60-day rule according to the Banking Ordinance, BankV). For SME marketplaces, the combination of delayed payout and split payment via a regulated PSP is the practical alternative to classic escrow.
Escrow examples
A buyer commissions a craftsman via a marketplace. The amount is held in escrow until the buyer has accepted the work.
A freelancer marketplace holds the client's payment until the project has been delivered and approved by the client.
A PSP offers delayed payout: the payment is processed immediately, but the payout to the seller is only triggered after shipping confirmation — an escrow-like function without regulatory overhead.
Escrow FAQ
What is Escrow?
Escrow is a trustee model in which a neutral third party holds the payment until a condition is met — e.g. delivery or acceptance. This protects buyer and seller alike.
Is escrow regulated in Switzerland?
Yes, anyone who holds funds in escrow accounts on a commercial basis may fall under banking regulation. The 60-day rule of the BankO is relevant here. SME marketplaces are better off using Delayed Payout via a regulated PSP.
What is the difference between escrow and split payment?
Split Payment splits the amount immediately. Escrow holds the entire amount back until a condition is met. Escrow provides stronger protection for services and high-priced goods, but is regulatorily more complex.
When is Escrow worth it?
For services (acceptance required), high-priced goods (risk minimization), used goods (condition check), and project work (milestone payments). For standard goods with shipping tracking, Delayed Payout is usually sufficient.
