Bridging Trade Trust Gap in Africa: Digital Escrow Empowers SMBs to Thrive

According to PYMNTS, Intra-African trade experiences an annual loss of approximately $5 billion. Terence Naidu, founder and CEO of Truzo, a digital escrow service focused on Africa, highlights that the lack of trust among traders has been a major hindrance to the growth of cross-border trade in the region, along with the high trade costs associated with operating in a fragmented market. Naidu emphasized the importance of trust, stating, «If you don’t know people well, you don’t trust them,» as small businesses in Africa are hesitant to engage in trade with counterparts from other countries. To address this trade trust deficit, Naidu believes that leveraging digital escrow platforms like Truzo can bridge the gap, fostering economic activity and enhancing intra-Africa trade.

Truzo’s digital escrow platform acts as a secure intermediary by holding the buyer’s funds in a digital wallet until the purchase agreement is fulfilled, thereby boosting confidence and security in transactions between buyers and sellers across the continent. Naidu points out that digital escrow services, such as Truzo, offer significant advantages over traditional letters of credit issued by banks, which are costly, involve extensive bureaucracy, and require several days for processing. Truzo’s digital alternative is more affordable, efficient, and can be easily accessed through the Truzo app or website, taking only a few minutes to set up.

While Truzo’s expansion to the United Kingdom, following approval by the U.K.’s Financial Conduct Authority, strengthens transaction safety and reliability between the U.K. and South Africa, Naidu acknowledges that the lack of regulatory framework across Africa remains a major challenge. The absence of regulation has allowed unapproved escrow service providers to emerge in different parts of the region, posing risks to users’ funds. Additionally, the lack of oversight opens doors to illicit financial activities. Naidu sees regulatory fragmentation as a significant concern that undermines the credibility of the entire industry.

Despite these challenges, the FCA approval has significantly enhanced Truzo’s credibility and positioned the company as the first Africa-focused digital escrow service with regulatory approval. Naidu expresses his aim to provide more innovation, simplify operations, and strengthen the robustness of Truzo’s services for their expanding client base.

In the United States, escrow is commonly used in real estate transactions. When a buyer and seller enter into a purchase agreement, they may choose to use an escrow service to facilitate the transaction. The buyer deposits the purchase funds into an escrow account, and the seller transfers the property deed to the escrow agent. The escrow agent verifies that all conditions of the sale are met, such as property inspections, title searches, and any other contingencies specified in the purchase agreement. Once all requirements are satisfied, the escrow agent disburses the funds to the seller, and the deed is transferred to the buyer. A bright example of an online escrow service in the US is PaySAFE, which focuses on facilitating transactions for large-ticket items such as vehicles, heavy machinery, and real estate. It offers buyer and seller protection, ensuring that funds are held securely until the agreed-upon conditions are met.

Other articles
80% of Millennials Embrace Mobile Wallets for Bill Payments
The Regulatory Implications of Payment Technologies in the Modern Era
US Open Banking Regulations Drive Bank-FinTech Collaboration
FedNow, the Highly Anticipated Federal Reserve Digital Payment System, Set to Launch in July
Google Wallet Enhances Digital Features for a Streamlined User Experience
Finding the Right Customer Data Balance in Fintech
JPMorgan Improves B2B Digital Marketplace
Why Niche Financial Services May Be Next Trend in Embedded Finance
Generative AI Enhances Embedded Finance, Driving Growth and Efficiency
Mastercard and Fabrick Form a Strategic Alliance to Accelerate Embedded Finance
Weavr and Visa Collaborate to Boost Embedded Finance for B2B SaaS Firms
Digital Euro May Seamlessly Integrate into European Payments
How Breaks Down the Benefits of Suptech
Embedded Finance: Currency Transformations 
Embedded Finance: What is Driving the Financial Boom