In the era of e-commerce, Indian marketplaces are witnessing unprecedented growth. With the likes of Amazon India, Flipkart, Meesho, IndiaMART, and others facilitating millions of transactions every day, India has become one of the most vibrant e-commerce economies globally. But with this growth comes an increase in online trade scams that can undermine consumer confidence and destabilize platforms. To fight these scams, increasing numbers of Indian marketplaces are resorting to a reliable financial instrument—escrow accounts.

Escrow services, which were initially a niche offering for premium transactions, are now being used on a large scale to infuse transparency and trust into the digital marketplace ecosystem. Escrow is emerging as a strategic cornerstone in India's e-commerce and B2B markets, not only to protect funds but to avoid disputes, hold parties to account, and increase customer satisfaction. In this blog, we discuss how Indian marketplaces are using escrow to combat online trade scams, the issues they encounter, and how platforms like Castler are transforming the situation.

The Escalation of Online Trade Scams in India

The boom of e-commerce platforms in India has unfortunately coincided with a sharp rise in fraud. From vendors sending counterfeit goods to customers filing chargeback frauds, the weaknesses in digital commerce are numerous and accelerating. As per a 2023 report by the Internet and Mobile Association of India (IAMAI), online shopping frauds that cost Indian consumers more than INR 4,000 crore every year are varied and include product non-delivery and false listings to payment scams and abuse of refunds.

Most of these cons are due to the fact that there is no regulation and authentication at key points in a transaction. The old model of money exchange directly from one party to another upon confirmation of purchase is risk-prone. Money, once exchanged, is hard to recover and the law's help can be ultra-costly and ultra-tedious.

What is Escrow and Why It Works

An escrow setup has a third-party intermediary that temporarily retains funds in a transaction until the terms agreed between the buyer and seller are fully fulfilled. Only after this will the payment be made. Such an arrangement facilitates diminishing the fraud risk, particularly where transactions have high stakes or large volumes and take place over the internet. Escrow delivers:

• Buyer Protection: Guarantees the payment from the buyer is made only when the product or service has been satisfactorily delivered.

• Seller Assurance: Ensures payment after they complete their obligation of the contract.

• Dispute Resolution: Arranges a formal procedure for handling any disputes.

How Indian Marketplaces are Implementing Escrow

A number of Indian platforms are now integrating escrow services into their transaction processes. For example, B2B platforms such as IndiaMART and TradeIndia typically involve transactions between companies that have never met before. Escrow accounts ensure that suppliers are paid only after goods are received and confirmed by the buyer.

Even in the services economy and gig sector, such as UrbanClap and Upwork India, platforms are looking to adopt escrow models to cover both freelancers and customers. Likewise, more recent C2C platforms within the refurbished products and resale goods category (i.e., OLX and Quikr) are now venturing into escrow partnerships in order to discourage payment scams and facilitate easier handovers.

These technologies are realizing that there can be no scalability without trust. Escrow is also being realized as a mechanism not only for financial protection but for business sustainability in the long run.

Role of RBI Guidelines in Facilitating Escrow Adoption

The Reserve Bank of India (RBI) has played a pivotal role in ensuring safe payment methods. Its growing focus on transparency, KYC standards, and accountability in fintech has indirectly promoted the use of escrow solutions. The 2021 RBI guidelines for payment aggregators necessitated such operators to utilize escrow accounts to safeguard customer funds, further mainstreaming this practice within the Indian financial landscape.

As online commerce keeps growing, RBI will most likely keep nudging towards more robust fund custody systems, placing escrow even more at the center of Indian online commerce.

Escrow in High-Risk Categories: Real Examples

• Luxury Goods: Websites selling high-priced items such as watches, designer clothing, and electronics increasingly use escrow to prevent fraud. With a strong possibility of counterfeit products, escrow releases payment only after verification of authenticity by the buyer.

• Real Estate & Rentals: Property marketplaces like MagicBricks and 99acres are looking at escrow options for earnest money deposit to avoid double-dealing and ghost listings.

• Automobiles: Used car purchase and sale through websites like CarDekho or Droom involves monetary risks. Escrow prevents the buyer from losing money on a faulty vehicle or dubious ownership.

• B2B Procurement: Larger marketplaces facilitating bulk trade or supply chain procurement use escrow to ensure contractual compliance and mitigate risk of payment defaults.

Castler: Empowering Marketplaces with Scalable Escrow Infrastructure

Castler, India's fastest-growing escrow account management solution, is driving this digital wave. Castler provides marketplaces with a plug-and-play, regulated, and scalable escrow solution that gets embedded within workflows. With support from 12+ leading banks and 6 SEBI-registered trustees, Castler facilitates full visibility, compliance, and control over money in every transaction.

Here's how Castler increases fraud protection for Indian marketplaces:

• Plug-and-Play Escrow Integration: Simple embed escrow within your payments architecture.

• Smart Signing of Agreement: Electronically sign tripartite agreements with stakeholders for transparency.

• Automated Reconciliation & Fund Flow: Real-time sub-account and ledger management.

• Role-Based Access: Multi-party controlled operations and visibility.

• Digital Onboarding & KYC: Fully compliant and rapid setup.

Regardless if it's an individual consumer on a resale site or a small business on a B2B platform, Castler's tech-first methodology makes escrow adoption feasible and streamlined.

Conclusion: Building Trust, One Transaction at a Time

As Indian e-commerce keeps rising, so does the threat environment. Marketplaces have a choice to make between reactive fraud management and proactive trust infrastructure. Escrow accounts provide the latter, and sites that use them are already benefiting from increased user trust, reduced disputes, and improved operational control.

Castler is leading the charge in this transition, consolidating banking, compliance, and technology into one escrow platform for easy financial trust. For Indian marketplaces wanting to scale securely and with sustainability, escrow is not merely a choice—it's a requirement.

To discover how Castler can assist your marketplace in reducing risk and increasing trust, check out Castler's Escrow Services or book a call with an expert today.