The security of trading funds is an issue of great concern to both buyers and sellers. Different buyers and sellers in different regions have their own payment preferences. And currently in international trade, the main ones used more frequently are international wire transfers, letters of credit, Western Union and PayPal. Let's take a look at the advantages and disadvantages of the four payment methods by comparing them in terms of credit basis, handling fee, capital occupation, flexibility and collection time.

Through the above table, we can see that wire transfer, Western Union and Paypal are all based on the commercial credit of the buyer and seller, while L/Cs are based on bank credit. Although they have an advantage in terms of creditworthiness, this also makes L/Cs relatively inflexible and take a longer period of time for the funds to be taken up.

From the point of view of commission, wire transfer has the lowest commission, and the time of arrival is usually around 3-5 days, unlike Western Union and Paypal, which are instant. However, considering the amount of commission, TT payment is usually used for large orders, which is not as fast as instant arrival, but the commission is low, while Western Union and Paypal are mostly used for small orders or payment of sample fees.

The above comparison gives us an understanding of the characteristics of the four payment methods.

International Telegraphic Transfer (T/T for short)

This method of operation is very simple and can be divided into pre-T/T, and post-T/T.

Before T/T is, after the contract is signed, first pay a part of the deposit, generally 30%, production is completed, notice of payment, pay the balance, and then delivery, delivery of a full set of documents. However, the former T/T is a little less common and more common in Europe and the USA. This is because the customer in Europe and the USA is in a very reputable environment and trusts others very much himself.

The most common is post-T/T, where the deposit is received, production is arranged, the goods are shipped, the customer receives a copy of the documents and pays the balance; the seller receives the balance and sends the full set of documents.

Wire transfers are subject to a commission, usually the buyer and seller bear the commission of their respective national banks, usually around US$50.

Letter of Credit (L/C)

Letter of Credit (L/C). It is a written guarantee issued by the issuing bank to the beneficiary at the request and at the direction of the applicant (buyer) containing a certain amount of money to be paid within a certain period of time on the basis of conforming documents.

The general process of the letter of credit payment method is as follows:

1)The buyer and seller agree to use the letter of credit method of trade.

2)The buyer submits an application to the local bank (also called the issuing bank), fills in an application for the issuance of a letter of credit in accordance with the contract, and deposits a credit deposit or provides other guarantees and asks the issuing bank to open the letter of credit. The credit margin is determined by the issuing bank according to the business situation of the enterprise, and then according to the creditworthiness to determine the proportion of the enterprise shall pay the margin, the better the credit of the enterprise to pay the margin proportion is less, generally equal to the amount of the letter of credit to be opened.

3)The issuing bank will issue a letter of credit to the seller according to the contents of the application and send it to the seller's local branch or agent bank (also called the notifying bank). Once the letter of credit has been issued, it becomes an agreement independent of the sale contract.

4)The notifying bank verifies that the seal or seal is correct and delivers the letter of credit to the seller.

5)After reviewing the letter of credit and the contract, the exporter will pay for the goods according to the contract and obtain the freight documents, issue a bill of exchange and send it to the bank authorized by the issuing bank (negotiating bank) for negotiation during the validity of the letter of credit. The negotiating bank is mostly the exporting bank, and the notifying bank is sometimes also the negotiating bank.

6)After the negotiating bank has examined the terms of the letter of credit, the amount of the bill of exchange, less interest, is advanced to the exporter. This process is also known as a charge.

7)The negotiating bank sends the bill of exchange and shipping documents to the issuing bank (or its designated paying bank) for claim, often on the basis of less than the deposit paid.

8)The issuing bank (or its designated payment bank) check the documents are correct, payment to the negotiating bank.

9)The issuing bank notifies the importing party to pay for the bill of exchange.

10)The importing party payment and obtain freight documents, with this to the carrier to pick up the goods.

Western Union

Western Union is a real-time money transfer service that works in nearly 200 countries around the world, ensuring that money reaches the recipient from the sender within minutes.

From a security point of view, every Western Union transfer is secured by a tight electronic security system, with a monitoring code and a password of your choice to ensure the safety of your funds.

In China, the Agricultural Bank of China is the sole agent bank for Western Union business.

The process of Western Union remittance is as follows:

1. Fill in the Remittance Issuing Order

2. Turn over the Remittance Issuance Slip, the money and other information stipulated by the Foreign Exchange Bureau to the operator and take the first copy of the Remittance Issuance Slip and the operation password.

3. The operation password will be informed to the payee.

4. After receiving the notification of receipt, the recipient will go to the relevant agent Western Union outlet for collection procedures.

5. Fill in the Remittance Receipt Form.

6. After verifying the payee's identity information and password, the bank will hand over the remittance to the payee.

PayPal

PayPal is also a real-time payment tool. It is a wholly-owned subsidiary of eBay Inc. Paypal uses existing banking and credit card systems to provide secure, convenient online payments to users in 190 countries around the world through advanced network technology and cyber security prevention techniques.

The process of PayPal (Paypal) is as follows:

1. The payer applies for a Paypal account with an email address and provides bank card information to transfer the amount from the bank card to the Paypal account.

2. Submit the payee's email account number in the Paypal account.

3. Paypal sends an email to the payee notifying him/her that there is a pending collection or transfer of funds.

4. On acceptance by the recipient, the relevant amount is transferred to the recipient's account.

5. If the recipient does not have a Paypal account, then they will first need to register an account and then they can either transfer the money they have obtained into a cheque and send it to a specified location or transfer it into a bank account.

Through the above introduction, I believe that all suppliers and friends have a good understanding of the four payment methods. If you have any other questions during the operation process, please feel free to consult the relevant details by private message.