Payment Mechanisms on International Trading

Any Import or Export entails commercial transaction and payment. Normally international transactions are made using USD as the currency, however in many cases of transactions with Europe, the Euro Dollar is used as the currency too.

Below are example of two export transactions, there are however several types and the nature of the business determines the payment terms.

Advance Payment

The exporter may request an advance payment before executing the order especially when dealing with a new customer. This method normally continues until mutual trust is built between the exporter and the customer.

Letters of Credit

The exporter may request the customer provide a letter of credit to be opened before shipping the goods. The Exporter can check seek a credit worthiness rating from the customer’s bank to be able to ascertain the authenticity and credibility of the Customer.

It is essential to determine what types of payment methods work best when setting up your ecommerce store as this will maximize revenue opportunities.

Credit and Debit Cards

Payments via cards are one of the most widely used and popular methods and provide a global solution as payment acceptance via cards merchants can reach out to an international market.
Credit cards are simple to use and secure. The customer just has to enter the card number, expiry date, and CVV, which has been introduced as a precautionary measure. The CVV helps detect fraud by comparing customer details and the CVV number.
Coming to debit cards, they can be considered the next popular method for eCommerce payments. The difference between credit and debit card is with a debit card you only pay with the money that is already in the bank account, whereas with a credit card, the spent amount is billed, and payments are made at the end of the billing period.

Bank Transfers

Customers enrolled in an internet banking facility can do a bank transfer to pay for online purchases. It is one of the most secure methods of payment as the customer needs to be authenticated and approved by the customer’s internet banking credentials before a purchase happens. It assures customers that they funds are safely used. It is a simple way of paying for online purchases and does not require the customer to have a card for payment purposes.

E-Wallets

E-wallet is one of the upcoming trends and is becoming extremely popular. E-Wallets require a sign up from merchants as well as customers. After creating an e-wallet account and linking it to the bank account they can withdraw or deposit funds. Customers are required to submit their information only once for purchases. This advance and instant payment method can be integrated with mobile wallets using smart technology like Near Field Communications (NFC) devices.

Direct Deposit

Direct deposits are when customers instruct their banks to pull funds out of their accounts to complete online payments. Customers set up a payment schedule with their banks indicating when the funds should be pulled. A direct deposit is a common payment method for subscription-type services such as online classes or purchases made with high prices.

References

https://blog.paymentwall.com/guides/types-of-payment-methods-for-ecommerce
https://www.lyra.com/in/payment-methods/