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.
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