International payment methods
Set of instruments used to settle international commercial transactions, from transfers to documentary credits.
International payment methods
International payment methods are the instruments and techniques used to settle transactions between buyers and sellers located in different countries. The choice of payment method is a strategic element of commercial negotiation.
Safety ladder
From the least secure to the most secure for the seller: simple transfer (Open Account), documentary remittance (D/P or D/A), stand-by letter of credit (SBLC), irrevocable documentary credit and payment in advance (Cash in Advance).
Selection criteria
The choice depends on the trust between the partners, the country risk, the transaction amount, the frequency of trading, the negotiating power and the costs of the instrument.
Complementary instruments
- Stand-by letter of credit (SBLC): payment guarantee in the event of default, more flexible than traditional documentary credit
- International factoring: transfer of export receivables to a factor for immediate collection
- Forfaitage: repurchase without recourse of medium/long term debts
Best practices
Adapt the payment method to the level of risk of each customer and each market. Secure initial transactions with a documentary credit, then move to less expensive instruments as trust is established.