Quick Guide on Safest International Trade Payment Methods

Quick Guide on Safest International Trade Payment Methods

Buyers and exporters in international trade are all dependent on fewer utilities composed of many risks and threats. But, this does not limit a transaction from one end-point to another. Global trading is all about transparent sales patterns for buyers and providing ease of international trade payment methods.

The goal of a successful international trade is to get paid efficiently for every export sale without any hassle. While the goal is always considered significant in processing valuable goods and services, the proper payment method serves an integral role in optimizing the trade. Let’s build a focus on choosing the safest and reliable payment methods for international trade. 

Exploring Safest Payment Methods in International Trade 

If you see your buyer as trustworthy, still your business needs the safest transaction method to get full and on-time payment. There can be multiple risky situations for you to handle in the trade process. Integrating the secure payment method is advisable to all importers and exporters in the worldwide B2B marketplace

Here are some options to consider while you choose to trade with the concerned party.  

International Trade Payment Methods

Cash-in-Advance 

The term itself is precise in context. Not a hard and fast rule for importers to understand. The first step to secure payment is to request a receipt of payment before transporting goods to the buyer. This ensures that both parties in trading will undergo a fraudulent-free process. 

Even exporters can take maximum advantage of the method while foreign buyers will remain in specific threats. In this way, recommended practice is to select the option if it is feasible for your industry to bear resulting circumstances – loss of a sale to another enterprise due to the least attractive method. 

Letter of Credit (LCs)

Another relevant payment term often used in the worldwide B2B marketplace. LCs is a contract moderated by a bank, mainly. Foreign buyer has to submit its payment to the bank, which is processed until all the sales contract terms and conditions are met. 

LCs is also a secure way of transacting the amount in international trade between exporter and buyer. The exporter uses it when it is quite challenging to obtain reliable credit information from the buyer. The payment method for the exporter is still a trustworthy option since a regulatory authority is involved.

One of the cons of LCs is mostly viewed in trading is its cost. Although the method is secure and recommended in trading, it is still costly to the most. Regardless, LCs gives benefit to the parties in terms of pushing off the risk of payment to buyer’s bank. 

Documentary Collections 

Well, this is another leading payment method in international trade. The exporter first delivers the shipment, and then the buyer can receive its documents upon payment when specific instructions and shipment details are duly provided to the bank. 

These documents are then transferred to the buyer’s bank in a foreign country. After the preceding step, the buyer has to pay the invoice to the bank for receiving and gaining ownership of the documents. 

Do you understand why the payment method is referred to as “safest”? The bank plays a critical role in providing ownership to the buyer when all the payments are cleared. In this way, it is an attractive method for buyers to deal with while being inexpensive as well as compared to LCs. However, the chief drawback is linked with numerous participants involved in the process that makes the method complex and infeasible sometimes. 

Open Account 

While we were discussing clearance before shipping, an open account is subjected to delivering goods before payment is due. In this process, the buyer is given the advantage of paying against the shipment within 30 to 90 days of delivery.

Worldwide B2B marketplace aspires to introduce attractive methods through which more buyers can reach diverse suppliers. Foreign buyers often request the exporters to adopt open account terms. This can be a win-win situation in the trading process and might be your achievement to gain more sales. 

There is a higher level of risk for exporters in undergoing open account terms in sales. However, you can satisfy if exporters learn about Trade Credit Insurance (TCI).

Conclusion 

Payment methods are not limited to the highlighted ones – you can still find many more methods in the spectrum that are covered internationally. 

Tom Spiggle
ADMINISTRATOR
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