Settlement risk becomes more acute where transactions are taking place crossborder. Related to this risk is the requirement for speed in the e-commerce environment. Identity and credit checking need to happen at the moment of the transaction, not after the event. A means to authenticate trading counterparties, as described above, is a vital requirement for successful e-commerce. Treasurers and bankers are addressing these issues and solutions are beginning to emerge.
Online checks ensure the digital certificate is valid and current.
The Web Escrow accounts are another possible solution to the problem of settlement risk in e-commerce. Funds are paid into a neutral bank-held escrow account on agreement to trade and released by the bank to the supplier on proof of delivery of the goods. Escrow accounts can be particularly useful in the auction environment when parties are trading anonymously and may also offer a valuable transitional solution in the evolution of e-commerce. Traditional risk management tools can be migrated to the internet environment. What changes is the timing, since risk management decisions will become very much a part of the transaction itself, rather than a post-transactional event.