Internet has added a new dimension in
international business - not just in marketing or
product promotion, but in other areas also - like
payment processing. As an Internet savvy export import
professional - you now enjoy more options to pay or
collect payment from overseas customers.
We review here all payment options - traditional
and new ones, with emphasis on new payment options
like escrow, paypal, credit card etc.
As an exporter, you should review the new options
and adapt yourself accordingly as your buyers from
more advanced countries may demand new payment options
for convenience and ease of use. Failure to adapt
yourself means loss of potential customers and gifting
an edge to your technologically advanced competitors
at home or abroad.
The basic structure of Internet-based new payment
systems remains same as that of traditional ones,
i.e. buyer <=> intermediary <=> seller.
However, as you will see in this article, the role
of intermediary has undergone sea change to adapt
itself to special requirements of on-line environment.
Role of Intermediary in International
Payment
A reliable intermediary is essential for any secure
payment system - specially so when buyer and seller
are from different countries - separated by thousands
of miles.
Traditionally, banks have played this role of reliable
intermediary. Though they still are the most important
intermediary in International business - new entities
are entering the intermediary field.
Apart from establishing its credibility as neutral
referee - the intermediary, in on-line environment,
has to ensure safe and secure transaction. As a result,
technology plays a very important role for this new
generation intermediaries.
Methods of Payment
Buyer's comfort is an essential pre-condition for
any international transaction. The buyer has to be
satisfied that ordered products have been delivered
before payment is released. The intermediary has to
safeguard interests of both buyer and seller.
Most export sales agreements stipulate, in some manner,
that certain collection documents must be submitted
in advance by the exporter to the buyer or its bank
in order to generate payment once the goods have been
received. The main documents include commercial invoices
(the exporter's bill of sale), consular invoices (required
by some foreign countries), certificates of origin
(attesting to the origin of the exported goods), import
licences (some countries require importers to obtain
these), inspection certificates (health or sanitary
certificates are required by many countries for animals,
animal products, plants, and other agricultural products),
and dock and insurance receipts.
Payment Options in International Business
- Letter of Credit (L/c)
- Escrow
- Paypal
- Credit Cards
- Payment in Advance with Order
- Payment Prior to Shipment / Partial Payment
- D/A (Delivery against Acceptance)
- Funds Collection via Banks
- Documentary Collections
- Wire Transfer / TT (Telegraphic Transfer)
- M/T (Mail Transfer) Bank Draft / Cashier's
Check
- Open Account Credit
- Goods Shipped "On Consignment
- Counter trade (Barter, Counter purchase
and Offset) etc.
