Businesses normally use current accounts due to the high level of flexibility they offer. This account is different from a savings account as it does not charge interests on deposits. In lieu of this, the account holder receives a high level of liquidity. Therefore, one can withdraw money from a current account anytime. Depending on the amount of your transactions, an NEFT (National Electronic Funds Transfer) or an RTGS (Real-Time Gross Settlement) can be carried out. Funds are transferred directly to and from the current account with these methods.
Although this process offers ease, it is not necessarily safe to transact through current accounts. Problems like discrepancies in the decided value of a transaction between two or more parties can always occur. Ultimately, one may have to resort to legal action for resolving these issues.
In India, it is mandatory for companies such as online marketplaces to open nodal accounts for buyers and sellers using their portals. So if someone wishes to buy a book on Amazon and pay through a debit card, the money is held in a nodal account for a set time period. Within this period, one can raise queries to Amazon in case of any problems with the purchase. If the problem turns out to be genuine, Amazon releases the payment back to the buyer (refund) , and the seller retrieves the faulty product. However, if Amazon fails to determine whether the query/concern is genuine, the buyer would have to stick with the product.
Escrow too is a type of account offered by banks and independent escrow service providers. These accounts are versatile and flexible – they are fit for a variety of use-cases. However, due to the lack of accessibility to traditional escrow, people are mostly unaware of this transaction solution.
These agreement-based accounts are opened for particular purposes with specific parties. Deposits in an escrow cannot be used for any purpose besides that particular purpose. A neutral third party owns and manages the escrow vault. This party makes sure that funds are released only when all the transacting parties are satisfied with the outcome of the transaction.
Traditionally, escrows too are limiting. It is difficult to keep track of multiple escrow accounts opened with different parties, along with keeping track of different balance amounts in different accounts. Digital escrow account services, however, are a panacea.
Digital escrows operate on a master account + virtual account model. Users can create multiple virtual accounts on the portals of digital escrow companies. An unlimited number of virtual escrow accounts can be opened through their portal, or through API integrations. Besides this, one can carry out innumerable transactions quickly and securely.
With digital escrow, one can hold transactions using any medium and for any good/service. You can buy shares, gold bullions, used cars, land, a house, carry out exports, buy source codes, sell services – the list goes on. Due to digitization, escrows have overridden the problems they usually harbor. Each account has its limitations – for escrows it was their specificity. However, this has changed considerably today.
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