A third party is a person or entity that helps facilitate some action, such as a transaction, but is not one of the main players involved. Mediators, mortgage brokers, and job agencies are a few examples of third parties.
Say a customer buys something from an online store. Although the shop cannot accept advanced cash online, other transaction methods, such as credit card payments, are accepted. The online shop uses a credit card processing service to handle such types of transactions. Therefore, the person or agency providing the processing service in this context is referred to as the third party.
The third-party payment processor receives the buyers' payment details once they finish the online checkout procedure. The payment processor contacts the credit cardholders' issuing banks to confirm or verify the transaction. If accepted, the deal is finished, and the business gets paid.
Although the third-party payment processor isn't one of the main parties, such as the buyer and seller, the transaction is nevertheless completed without their help. However, things may be different in the case of the Pay on Delivery or Cash on Delivery approach. Likewise, there can be different third parties involved in different types of services in various fields.
How do third parties operate?
Various businesses, such as the real estate market, e-commerce, and finance, are served by third parties. When the objectivity or competence of a third party is required to facilitate a transaction, they are frequently called upon.
Here is another illustration: imagine a business engages a third-party employment service to find skilled workers. The employer and the prospective employee are the main players in this "employment transaction". The employment agency is a middleman who is a facilitator of the "transaction" of hiring a qualified worker.
The company will pay the agency a portion of the candidate's starting salary if the applicant is hired. The commission and/or contingency fee charged by the employment agency is to be paid only when the recommended candidate is hired.
Pricing Model of Third Parties
Third parties employ a variety of pricing models to generate revenue, such as:
The third party receives payment depending on whether the client purchases or sells a product, such as in trading stocks. The payment might also be based on achieving a specific goal, like a collection agency collecting money from customers that owe money.
Depending on the number of hours the third party works, a fee is accrued.
The customer pays a set sum for certain goods or services.
Third-Party Applications in Various Sectors
Various sectors and fields of expertise use third-party services. Typical examples include the followings:
Some businesses might employ a collection agency to get in touch with clients on their behalf to recover past-due payments.
Many restaurants collaborate with third party delivery services to fulfil customers' food orders at their homes.
Employment agencies facilitate the introduction of jobs to suitable candidates on behalf of employers. However, the candidates are hired only after the final decision by the employer.
People or organisations specialising in insurance brokerage services assist clients in finding the best insurance policy and insurer.
These monetary experts purchase and sell securities orders for their customers. Investment brokers may also provide advisory services to their clients, advising them to buy particular financial products.
Some businesses may contract with a third-party logistics company to handle business activities, such as shipping and warehousing.
They serve as neutral third-party to assist two parties in reaching a resolution.
They guide borrowers through the loan procedure and also connect them with mortgage lenders.
They make card transactions between businesses and customers easier.
Real Estate Firm
In the real estate sector, the third party holds important documents, money or other valuables in the trust of each party involved until the conditions established by both parties (property seller and buyer) are met.
Advantages of Third Parties
Disadvantages of Third Parties