What is deposited or secured payment?

In brief

• The customer secures the payment before the work starts.
• The money is not necessarily paid out directly to the tradesperson.
• The payout follows the terms the parties have agreed.
• Larger projects can be split into milestones.
• In the event of a disagreement, a disputed amount can be withheld.
• Both parties should be able to submit documentation.
• Secured payment reduces the risk of non-payment and of imprudent advance payment.
• The arrangement is not a guarantee that the work will be free of defects.
• "Escrow" should only be used when the payment structure actually meets the requirements of such an arrangement.
• It must be clear who handles the money, when it is paid out and what happens in the event of a dispute.

How does secured payment work?

A typical process can look like this:

The exact process depends on the payment provider, the agreement between the parties and the terms of the service.

What does deposited payment mean?

In everyday usage, "deposited payment" often refers to money placed with a third party while an agreement is being carried out.

Example:

A customer is to pay 200,000 kr for a renovation. Instead of transferring the money directly to the tradesperson before the work starts, the amount is secured through a payment solution. The money is then paid out when agreed parts of the work have been completed.

In legal terms, "deposit" (deponering) can also mean something more specific.

Norges Bank (the Norwegian central bank) describes deposit in debt relationships (deponering i gjeldsforhold) as an arrangement where a debtor who is unable to complete a payment can, in certain cases, transfer money or financial instruments to Norges Bank in order to be released from the debt. This is something different from payment through an ordinary marketplace. Read more at Norges Bank.

When the word "deposited" is used about a commercial payment solution, the terms should therefore explain exactly how the money is handled.

What does secured payment mean?

Secured payment is a broader and more practical term.

It can mean that:

Secured payment does not have to be legal escrow. What matters is what the payment solution actually does, which rules apply and who has control over the money.

What is escrow?

Escrow is an English term that usually describes an arrangement where an independent third party holds money or other assets until agreed conditions are met.

Three parties are normally involved:

The escrow agent pays out the money when the conditions of the agreement are met.

Internationally, the arrangement is used for, among other things:

Escrow has a precise legal meaning. A payment solution that merely delays the payout is therefore not necessarily an escrow service.

Stripe, for example, states explicitly that Stripe does not offer escrow services or escrow accounts. Stripe Connect can support delayed or manually controlled payouts, but this is not automatically legal escrow. See Stripe's documentation on manual payouts.

The difference between escrow and secured payment

The most important difference lies in the legal and technical structure.

A solution can offer many of the same practical benefits as escrow without being a formal escrow service. In that case, "secured payment" is usually the more accurate term.

Is a card reservation the same as secured payment?

Not necessarily.

With a card reservation, the payment provider normally checks that the amount is available and reserves it temporarily. The customer cannot freely use the amount for as long as the reservation applies.

Card reservations have a limited duration, however. They are therefore not always suitable for renovations or other jobs that last several weeks or months.

For longer projects, it may be necessary to:

It should be made clear whether the customer has only authorised the card, or whether the payment has actually been completed and secured.

Why is direct advance payment risky?

With direct advance payment, the customer transfers money to the service provider before the work has been delivered.

This can create risk if:

A limited advance for specially ordered materials can be reasonable. But the customer should normally be cautious about paying for the whole project directly in advance.

With secured payment, the tradesperson can receive confirmation that the money exists, without the full amount necessarily being paid out directly before the work has been done.

Benefits for the customer

The customer avoids full direct advance payment

The money is not necessarily sent straight to the service provider's ordinary bank account before the work starts.

Payment can follow progress

For larger projects, the payment can be split into milestones. The customer then does not pay for the whole project as if everything were already finished.

The customer gets better documentation

The payment, the work description and the payouts can be linked together in a single process.

Disputed amounts can be withheld

If a disagreement arises, the disputed amount can be withheld in accordance with the terms while the parties submit documentation.

The risk from disreputable operators is reduced

Secured payment can make it harder for a service provider to demand the full amount directly before any work has been done.

The final inspection matters

When the final payment has not already been sent directly, the customer has a better basis for checking the work and documentation before the last payout.

Benefits for the service provider

Secured payment is not only a benefit for the customer.

The provider knows the customer can pay

Before the work starts, the service provider can receive confirmation that the customer has secured the agreed amount.

Lower risk of unpaid invoices

The provider reduces the risk of completing the work and later discovering that the customer cannot or will not pay.

Less need for debt collection

When the payment is already secured, the need for payment reminders and debt collection processes can be reduced.

Better cash flow planning

Clear milestones make it easier to plan when the different parts of the payment become available.

More professional project delivery

The scope of work, milestones and payment must be clarified more clearly before the start. This can reduce misunderstandings for both parties.

Documentation also protects the tradesperson

If the customer claims that work has not been done, photos, change orders, messages and other documentation can show what has actually been delivered.

Secured payment with milestones

For large projects, the whole payment should not be treated as one single payout.

Instead, the project can be split into concrete milestones.

Example of a bathroom renovation:

Each milestone should have:

Avoid milestones that only follow dates.

"Payout on 1 October" says nothing about how much work should have been done.

"Payout when the pipework is finished and documented before the walls are closed up" gives a better checkpoint.

What happens if the customer does not approve the work?

The customer should not be able to stop payment without explaining why. At the same time, the service provider should not be paid a disputed amount without the customer's objection being handled according to the agreed terms.

A good process can be:

The Norwegian Consumer Council (Forbrukerrådet) states that in the event of defects, a customer can withhold as much as it will cost to have the fault or defect remedied. The amount withheld should therefore be proportionate to the problem. Read more at Forbrukerrådet.

What documentation should the parties submit?

In the event of a disagreement, the following may be relevant:

The more clearly the job is documented before the start, the easier it becomes to assess a later disagreement.

Can the customer get all the money back?

Not automatically.

The outcome depends on, among other things:

If 90 percent of the work has been done correctly, it is not necessarily reasonable to withhold 100 percent of the payment.

The undisputed part can normally be separated from the disputed part. This gives a more balanced outcome for both parties.

Can the tradesperson get paid even if the customer complains?

Yes, it can be right to pay out the part of the payment that is not genuinely in dispute.

Example:

The customer and the tradesperson have agreed a price of 200,000 kr. The customer believes a fault will cost around 20,000 kr to fix. The rest of the work is finished and accepted.

In that case, it can be more proportionate to withhold the disputed amount than the whole payment.

The specific assessment depends on the agreement, the documentation and the applicable rules.

Is secured payment a guarantee of quality?

No.

Secured payment is first and foremost a way of handling the money. It does not guarantee that:

Secured payment works best together with:

Who can handle the money?

Payment services are a regulated activity.

The Financial Supervisory Authority of Norway (Finanstilsynet) states that a key question is whether the business has control over other people's money in connection with payment transactions. Businesses that offer regulated payment services may need a licence as a bank, payment institution or e-money institution.

Payment institutions that receive customer funds must safeguard them in accordance with the applicable rules. Finanstilsynet describes that the funds can be safeguarded, among other ways, by being kept separate and identified or through a guarantee from a bank or insurance company. Read more about payment institutions at Finanstilsynet.

A marketplace can also work with an external payment provider that handles the payment flow itself.

For the customer, it should be clear:

What should the terms say?

Before you use secured payment, the terms should explain:

Who the parties are

It must be clear who is the customer, the service provider, the marketplace and the payment provider.

When the payment is made

It should state whether the amount is only reserved, or whether the payment is actually charged.

How long the money can be held

Payment solutions can have technical and regulatory time limits. This is particularly important for long construction projects.

When the money is paid out

The payout terms should be tied to a date, milestone, approval or other clear event.

What happens if the customer does not respond

The terms should describe deadlines and any automatic payout. The customer must be given a reasonable opportunity to check the work.

What happens in the event of a disagreement

It should state:

Fees

The customer and the service provider should know who pays:

Cancellation and refunds

It should be explained how unused funds are handled if the project is cancelled or terminated.

Bankruptcy or closed account

The terms should explain what happens if a party can no longer receive payment, or if an account is restricted by the payment provider.

How does secured payment work at Fikso?

Fikso is built to make buying and selling services safer.

The basic process is:

This gives the customer better control over the advance payment, while the service provider gains greater assurance that the customer has money available for the job.

The specific rules for payout, deadlines, disagreements and any refunds follow Fikso's current user and payment terms.

Example: Secured payment for a renovation

A customer is renovating a flat for 300,000 kr.

Without secured payment

The tradesperson asks for 150,000 kr before starting. The customer transfers the money directly.

If the business is delayed, abandons the project or goes bankrupt, the customer may have trouble reclaiming the money.

With secured payment

The parties agree on the following milestones:

The customer secures the payment through the payment solution. The tradesperson therefore knows that the money for the project has been set aside.

If a disagreement arises over finishing work with an estimated value of 25,000 kr, this amount can be handled separately from the part of the work that both parties agree on.

The example is illustrative. The payment plan must be adapted to the project and the terms of the payment solution.

What must the customer check?

Before securing a larger amount, the customer should check:

The customer should never transfer money to a private account if the agreement has been made with a business, unless there is a clear and legitimate explanation through the agreed payment solution.

What must the service provider check?

The service provider should check:

The tradesperson should not start additional work unless the change and the payment have been documented.

The most common misunderstandings

"The money sits in Fikso's ordinary account"

A proper payment solution should explain which payment provider handles the money and how the payment flow is organised. Customer funds should not be described as the marketplace's free money.

"Escrow and delayed payout are the same thing"

No. Delayed payout can provide escrow-like functionality, but it is not necessarily legal escrow.

"The customer can always stop the whole payment"

No. Withholding should normally be tied to a specific claim and a proportionate amount.

"The tradesperson can get the money as soon as the work is claimed to be finished"

Not necessarily. The payout should follow the agreed inspection, documentation and applicable terms.

"Secured payment replaces the contract"

No. The payment solution does not automatically know what "finished bathroom" or "correctly completed work" means. This must be described in the contract.

"A payment dispute settles all legal questions"

No. An internal assessment of the documentation can handle the payout under the platform's terms, but the parties' statutory rights and external complaint options remain.

Frequently asked questions about secured payment

Conclusion: Secured payment gives both parties security

Secured payment solves a fundamental problem in the services market:

The customer does not want to pay the full amount before the work has been delivered. The service provider does not want to work without knowing whether the customer can pay.

By securing the payment before the start and holding the payout until agreed conditions are met, the risk can be shared more evenly.

The customer gets:

The service provider gets:

Secured payment works best when combined with a detailed contract, clear milestones, written changes and good documentation.

Nor is it the name of the solution that determines how safe it is. What matters is who handles the money, how the funds are safeguarded, when they can be paid out and what happens if the parties disagree.

Method and sources

The article is based on publicly available information about payment services, safeguarding of customer funds, consumer rights and technical payment solutions. The specific legal assessment of a payment model depends on the agreements and the technical structure.

Sources used as a basis: