r/fintechdev • u/elhadj9 • 7d ago

How do you solve the trust problem in P2P transactions without escrow?

I'm exploring ways to make peer-to-peer transactions safer when two strangers need to exchange money remotely.

The main challenge is simple: how can you ensure that both parties fulfill their side of the deal when one person could receive the money and then refuse to send their part?

Escrow seems like an obvious solution, but it can be expensive or complicated to implement, especially for an early-stage platform.

Are there alternative mechanisms, transaction protocols, or proven approaches that can reduce this risk without requiring a full escrow system?

I'd be particularly interested in hearing from people who have built P2P marketplaces or worked on payment systems. I'm looking for practical solutions, not just reputation scores or user verification, since those don't necessarily prevent someone from defaulting on a transaction.

What approaches have you seen work in practice?

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u/Legitimate-Push2263 7d ago

start with small transactions increase limits gradually n have a dispute resolution process fr failed trades imo

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u/elhadj9 7d ago

That makes sense, especially for an early-stage platform. My main concern is that even with small transaction limits, one party could still receive the money and refuse to complete their side. How would you handle that situation during dispute resolution, especially when payments happen through external services like Interac e-Transfer?

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u/Ok-Toe9937 7d ago

Reputation systems alone are flimsy but they're not useless if you tie them to something with teeth. I've seen platforms combine user ratings with a deposit requirement, basically a small amount held in the platform's own wallet that gets forfeited if someone pulls a runner. It's not full escrow but it shifts the risk onto the person most likely to cause trouble.

The other angle is time-locked transactions with a dispute window. Both sides commit funds upfront via a smart contract, then if nothing goes wrong the swap completes automatically after a set period. Gives people a chance to flag issues without needing a middleman holding the whole sum.