Escrow Services, Work Tracking Systems and Payment Guarantees
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Any business transaction that involves the exchange of money, goods and/or services requires a certain degree of trust between the parties. When you buy or sell something at a store, the trust problem is mostly negated, because the buyer and seller each put up their end of the bargain at the same time. But when it comes to services, the situation gets more tricky. It takes time to perform a service for someone, and this sets up an essential tension: should the client pay in advance and trust that the provider will do the work, or should the provider do the work first and trust that the client will pay? Either way, the issue is trust.
This essential problem is manageable for projects where you deal with local providers, and there are even industry conventions that have been developed over time. For example, it is normal when you hire a plumber for him/her to do the work up front before payment is made; in contrast, it’s common to provide a retainer to a lawyer in advance before services are performed. In these cases, the trust issue is minimized by dealing with the individual face to face, and the relative ease with which you can pursue legal action or other recourse if the other person doesn’t live up to their end of the bargain.
The trust situation is much more of an obstacle for the users of online freelancing sites, specifically because of a lack of this sort of personal interaction and physical proximity. How can a freelancer trust he will be paid by a client who is a complete stranger that he knows only by a site ID or an email address? How can a client trust a freelancer to do work when he is similarly a stranger and might be located half-way across the world?
Freelancing marketplaces understand how important this issue is, and implement mechanisms to help reduce the distrust factor. Some of these are passive mechanisms aimed at increasing trust by increasing familiarity and making a user’s past history available for inspection; this is usually done via a feedback system. But the better sites go beyond this to implementing specific mechanisms to directly reduce the chances of a client or freelancer getting stiffed.
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Last Site Update: December 13, 2011
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