Online Payment Modes for International Trade

By Annapoorna


Updated on: Apr 21st, 2022


3 min read

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Exporters should provide their clients with appealing terms of sale accompanied by proper payment mechanisms to thrive in today’s global economy and compete against foreign firms. Receiving payment on time is the aim of every transaction. Therefore, firms should carefully select an online payment mode to reduce payment risk while still meeting buyers’ expectations.

Key Points of Online Payment Modes for International Trade

  • International trade is fraught with dangers, including uncertainty regarding the timing of payments between the exporter (seller) and the importer (foreign buyer).
  • Exporters prefer to get paid as soon as possible, usually as soon as an order is placed or before the products are delivered to the importer.
  • Importers want to obtain the items as fast as feasible while deferring payment as long as possible, preferably until the commodities are resold sufficiently to pay the exporter.

Different Online Payment Modes for International Trade


Using cash-in-advance payment agreements, an exporter can avoid credit risk since payment is paid before ownership of the products is transferred. Wire transfers and online credit cards are the most commonly used options for international sales. Escrow services as online payment modes are becoming an increasingly popular option for small export transactions.

Letters of Credit

Letters of Credit (LCs) are among the most secure payment modes accessible to international traders. An LC is a promise made by a bank on behalf of the buyer to pay the exporter if the terms and conditions specified in the LC are met. An LC is beneficial when getting reliable credit information about a foreign buyer is difficult. An LC also protects the customer because no payment is required until the items are delivered as promised.

Documentary Collections

A documentary collection (D/C) is an online transaction in which the exporter delegates the collection of payment for a sale to its bank. The buyer’s bank delivers the necessary paperwork to the importer’s bank and instructions to release the documents to the buyer. D/Cs are more tempting to buyers than other online payment modes since there is no verification requirement and fairly limited remedy in the event of nonpayment.

Open Account

An open account transaction is a sale in which the products are sent and delivered before payment is due. This online payment mode is one of the most favourable methods for the importer in cash flow and cost. International buyers frequently demand exporters for open account terms because of their various benefits.


The overseas distributor receives, handles, and sells goods on behalf of the exporter, who retains ownership of the goods until they are sold. Appropriate insurance should be in place to safeguard committed items in transit or under the hands of a foreign distributor and decrease the risk of nonpayment. 

Payment is made to the exporter only after the things have been sold to the final customer by the foreign distributor. The key to success in consignment exporting is to collaborate with a reputable international distributor or third-party logistics provider. The items are in the hands of an independent distributor or agency of a foreign nation.

About the Author

I preach the words, “Learning never exhausts the mind.” An aspiring CA and a passionate content writer having 4+ years of hands-on experience in deciphering jargon in Indian GST, Income Tax, off late also into the much larger Indian finance ecosystem, I love curating content in various forms to the interest of tax professionals, and enterprises, both big and small. While not writing, you can catch me singing Shāstriya Sangeetha and tuning my violin ;). Read more


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