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Time to Transact

In the B2B world, there are many different ways that buyers can pay sellers to complete a transaction. And with the constant upgrade in technology there are more and more ways that this can occur, including using a Bank Transfer, Factor, Credit Card (or PayPal), Commercial Letters of Credit, and Escrow. However, Escrow has consistently proven to be a top choice for many businesses, and this blog will help explain why.

What are different B2B Payment Options?

Bank Transfer

  1. Seller A will send an authorization request to Buyer B through an ACH (Automated Clearing House) form.
  2. Buyer B’s bank will then authorize the request.
  3. The funds from Buyer B will then be transferred to an ACH processor bank and then released to the Seller A’s bank.

*The allows for business to occur internationally or over long distances. The money is handled by the banks.


  1. Seller A will sell its accounts receivable (invoice) from a deal with Buyer B to a third party company (a Factor) at a discount. This means that while Seller A will lose a percentage of their profit, it will improve its working capital/cash flow.
  2. This “Factor” then owns the invoice, meaning that Buyer B is responsible for making payment to the Factor rather than Seller A.

*This allows foreign companies to transact without a letter of credit.

Credit Card/PayPal

  1. Buyer B purchases goods/services from Seller A on credit. (This is like how a person uses their credit card to buy a pair of jeans in a store.)

Commercial Letters of Credit

  1. Buyer A presents documents at a physical bank.
  2. Bank approves credit risk of the buyer. Bank issues and forwards the credit to Seller A’s bank.
  3. Seller A’s bank authenticates the credit and forwards the credit to Seller A. Thus the buyer’s bank will finance the payment of the goods.

*The is often used to facilitate International Trade.


  1. Buyer B makes a deal with Seller A and deposits payment into a holding bank account (escrow service) via a wire transfer.
  2. Seller A sends the goods to Buyer B.
  3. When Buyer B receives and approves the goods, the bank (or escrow service) releases the funds to Seller A.

*This means that the finances are regulated and held by a third party.

How do companies select Escrow services?

When selecting a specific EaaS clients consider financial stability, experience, risk, user experience, and fees. It’s important to look over these specifics so that clients can receive the most efficient (and safest) transaction method to make that part of their job easier.

Takeaway: Why is Escrow the “mechanism of choice” for marketplaces? (Some companies who use it are GoDaddy, eBay, Upwork, etc.)

Escrow as a service provides protection against fraud, as funds are held by a third party and only released upon approval and delivery of items purchased. Clients are also provided with additional revenue opportunity, and can expand their networks and form new business relationships. Additionally, the buyer has to only make one payment at one time and the seller gets one payment from one EaaS. Thus, the simplicity and ensured security of escrow makes it the go-to for most marketplaces these days.