How escrow payments work on a service marketplace

Trust is the hardest thing to build on a new marketplace. Buyers worry about paying for work that never arrives, and sellers worry about delivering work that never gets paid. Escrow solves both: the buyer pays upfront, the platform holds the money, and the seller is paid once the work is approved.

The escrow flow, step by step

1. The buyer places an order and pays the full amount, or the first milestone.
2. The payment is held. The seller can see it is secured, which gives them the confidence to start.
3. The seller delivers through the platform, with files, messages or a delivery note.
4. The buyer approves, or asks for changes within an agreed window.
5. The money is released to the seller, minus your commission.
6. If the buyer goes silent, the payment is released automatically after a set number of days, so sellers are never left waiting.

Milestones for bigger jobs

Larger projects are split into milestones, each with its own amount and approval. Buyers only commit to the next step, and sellers are paid as they go. For services that take weeks, milestones are the difference between a platform people trust and one they avoid.

Disputes: the part that makes or breaks trust

Sometimes a buyer and a seller disagree. A fair dispute process usually works like this:

• Either side opens a dispute, which freezes the payout immediately.
• Both sides add their evidence. Messages, files and delivery notes are already on the platform.
• Your team decides from the admin panel: release the payment, refund it or split it.
• Everyone is notified, and every decision is logged.

Because messages and deliveries happen on the platform, disputes are decided on facts, not screenshots.

Where the money actually sits

A marketplace should not hold customers’ money in its own bank account. Payment providers built for marketplaces, such as Stripe Connect and PayPal, hold, split and pay out funds and take care of card security and much of the compliance work. Your platform decides when to release; the provider moves the money.

Rules on holding funds differ by country, so check with your payment provider and, where needed, a local adviser before launch. This article explains the product side, not legal advice.

Fees and timing

• Commission is usually a percentage taken when funds are released.
• Payment provider fees apply on top, so build them into your pricing.
• Payout schedules, instant, weekly or monthly, affect sellers’ cash flow, so make them clear from day one.

A real example

Diatitis connects people abroad with verified providers back home in Ghana, Cameroon and Côte d’Ivoire. Payments are held until the buyer approves the work, disputes freeze payouts, and providers are checked by a person before they can trade. For buyers paying from another country, that structure is what makes the platform usable at all.

Building a service marketplace? See what a custom marketplace includes, or read what a marketplace costs to build.