AQ India’s active participation in global trade means businesses must be aware of secure and efficient payment methods to facilitate transactions. Here’s a look at the top five payment methods used in international trade by Indian businesses, highlighting their advantages and ideal use cases.
1. SWIFT Transfers
SWIFT transfers are a widely accepted form of cross-border payment, facilitated through the Society for Worldwide Interbank Financial Telecommunication network. These transfers are quick and secure, making them ideal for substantial international transactions. While SWIFT fees can be high, they provide a reliable way for Indian businesses to conduct cross-border payments efficiently.
2. Documentary Collection
Documentary collections are commonly used for international payments when trust between trading partners is established. In this method, banks act as intermediaries but do not guarantee payment. Instead, they collect and remit payment based on documents such as bills of lading. It is less secure than letters of credit but offers lower fees, making it suitable for trusted clients or lower-value transactions. Know more about Payment Methods for International Trade here.
3. Letters of Credit
Letters of Credit (LCs) are a financial instrument that offers security in cross-border transactions. This method requires banks to guarantee payment, ensuring sellers are paid once shipment conditions are met. LCs are widely used by Indian businesses dealing with high-value exports or unfamiliar clients, reducing the risk of non-payment.
4. International Credit Cards
International credit cards can offer a quick and convenient way to settle smaller payments, especially for digital services or subscriptions. For businesses purchasing software, equipment, or other online services, credit cards are a preferred option. However, credit card transaction fees may make this less attractive for larger transactions, where bank transfers would be more economical.
5. Trade Finance Platforms
Modern trade finance platforms provide a streamlined solution for managing payments, offering real-time tracking, and reducing paperwork. These digital platforms offer secure payments through online interfaces that enable businesses to transfer funds with ease. They are particularly useful for companies handling high volumes of transactions across multiple countries
