I am Ratul Sharma, and I am an international exporter.
I started my journey by making organic soaps and other bathing essentials at home and selling them in my locality.
But, after staying in the organic field for two years, I realized that the market is expanding, and ‘Made in India’ is becoming more vocal and global.
Though I went global with my business, payment was a tangent where I struggled. If you also aspire to be a successful international exporter and want help with payment-related issues, keep reading because it might solve your cross-border payments.
India is one of the leading exporters globally and has a significant contribution to the GDP. Therefore, if you are trying to go global, remember that your inward remittance is a resourceful asset for the nation.
For instance, you are an international exporter who deals with handwoven sarees and handicrafts, and your significant customer base lies in Canada and the United States.
You earn over $5000 – $10000 a month by exporting your goods. But, when you receive your international payment via an online payment processor, you end up losing 5% – 7% over the inward remittance (at times more based on the currency and amount).
This blog is all about how you can:
- Flush the monetary worries.
- Choosing the right payment solution
- What are all things to consider before relying on a cross-border payment solution?
- The best cross-border payment solutions
Top Payment methods for International Trade
To begin with, let us first understand the types of payment methods used in the world of international trade and how they operate. The different kinds of payment methods are as follows:
Cash in Advance Payment
As the name suggests, cash-in-advance is when the payee sends the payment before the consignment export happens. Here, the exporter can avoid credit risk because payment is received before the ownership of the goods is transferred.
With technological and internet advancements, cash-in-advance is not a welcomed option by the buyers because of three reasons:
- What if the goods are tampered with or are quality compromised?
- Unfavorable cash flow
- Due to trust deficit, many don’t prefer to pay at the initial stage. What if the goods never get dispatched?
Open Account Payment
In this payment method, the payment is processed once the buyer gets the goods from the exporter. Here the payment is made as agreed on the credit period. The credit period can be – 30 days, 60 days, 90 days, and the days following with a minimum gap of 30 days between the days.
Though this gap accounts for activities like dispatching goods, production, shipping, and many other things, it could be taxing for the exporter as it acts as a burden in terms of working capital.
Nonetheless, the exporter may pick this payment option if the importer is a strong player with considerable volume potential in the future. If you have a long and mutual connection with the customer, or if the quantity of money at stake is low, you can export.
Letter of Credit Payment
This cross-border payment technique is regarded as one of the best, most secure, and adaptable payment methods for those engaged in international trade.
Here, the banks of both parties are engaged, with the payee/respective buyer’s bank issuing a formal promise to the seller, known as a ‘Letter of Credit.’
The assurance offered to the exporter is that the buyer will complete the money within the agreed-upon deadline and under the agreed-upon terms and conditions.
It is a secure payment method as it protects the importer since the documents required to trigger payment provide evidence that goods have been shipped as agreed.
Tip – Always have the paperwork written by a professional because a tiny inaccuracy might result in the exporter not receiving money. Even the smallest dots and strokes matter, so it’s best to be safe than sorry.
Document Against Acceptance
In this payment procedure, the buyer is only obligated to make the payment after a specific time has passed. The buyer/importer accepts the time draft and promises to pay in papers against acceptance.
Once this acceptance is received, then only the bank can release the documents to the buyer.
Online Payment Processor
It’s the digital era, and e-payment is in vogue because it is easy, convenient, quick, secure, and transparent.
Payment processors act as a secure bridge between the payee’s and recipient’s bank to facilitate a safe and quick payment. They also check with the bank for credibility and whether there are enough funds to support the transaction.
But, not all payment processors can be trusted because there are multiples of them in the fintech market, and not all offer certain essentials.
Therefore, these are the best payment methods that Indian traders can use for international exporters.
What are the Payment Issues when trading Internationally?
Even though payment looks easy, it isn’t. People who bother about their expenses and savings always take care of their payment process because cross-border payments can turn out to be a pricey deal.
Therefore, the following are the payment issues an exporter can face:
Foreign Exchange Rate
It is always a concern because forex is a trillion-dollar economy where the payment processors and other finance-related tangents such as – wire transfers, banks, and different modes charge a pricey fare for the foreign inward remittance.
For instance, you are getting $15,000 for a consignment. Now, imagine giving over 6% of your payment to the tool or method you used. Hurtful, right?
Therefore, always look for this pricey hiccup as this could create a hole in your pocket.
Tracking the Payment
It isn’t always easy to have a transparent tracking mechanism for your payments. It majorly depends upon the payment method you opt to facilitate the cross-border payment.
It won’t be easy to map the payment via document against acceptance, whereas using a decent payment processor can help you track your payments.
Always BEWARE of any additional charges incurred on your payment.
Like the foreign exchange rate, this also depends on the payment method/tool used for the transaction. Also, it could vary depending upon the currency and the amount.
If you have too much to spend then, don’t bother. If not then continue to read.
Are you into a fraud trap?
As the world is mobilizing itself with the latest technologies in the digital world, fraudsters are also upgrading themselves with technology at a more back-end level by mapping the possible loopholes so that they can enter the bubble to bust the security.
Therefore, always check whether your payment solution is compliant, secure, and supports authentication before the payment. Also, check for the types of authentication it offers.
These are the possible payment-related issues that an international trader can face.
Top 3 Cross-Border Payment Solutions
Don’t worry. I won’t leave you hanging without giving apt solutions.
The following are the best and top 3 cross border payment solutions that one can use for their international trade:
PingPong payments are one of the decent, legitimate, secure, and transparent cross-border payment solutions. But why PingPong when it’s not even renowned in the fintech industry?
PingPong acts as a virtual monetary window in the foreign land, and this feature helps an outsider to enter the foreign bubble as their citizen to receive payments in their local currencies.
Let me clear the dilemma for you. One should consider PingPong payments because:
- They offer free sign-up and zero monthly/yearly maintenance fees.
- PingPong supports payments in – USD, GBP, EUR, JPY, AUD, and CAD.
- They give a real-time exchange rate, which is beneficial for you to withdraw your fundings at a profitable market rate.
- PingPong payments provide their customers with a free digital Foreign Inward Remittance Certificate (FIRC). It means no more standing in bank queues.
- They offer highly competitive foreign exchange rates. While other cross-border payment processors charge over 4% – 6% forex (depending on currency and region), PingPong offers 1% forex. Isn’t this transaction fee better than other?
- Zero hidden charges.
- Under a single dashboard, you can manage multiple currencies and even keep a check over the expenses. It supports transparency.
- It is licensed and registered with the Reserve Bank of India (RBI), and they are licensed with other renowned financial institutions in the foreign land they operate.
- Apart from online sellers and traders, PingPong also provides a safe monetary passage for freelancers, service providers, and Amazon sellers.
- Knowledgeable and responsive customer service. No bots, but think tanks with practical solutions.
- They offer fast and secure payments. PingPong’s transfer time is 1-2 business days, which means bidding adieu to the buffer.
- You can quickly pay your VAT and GST without currency conversion.
Therefore, if you want to receive your online seller payments efficiently and cost-effectively, consider PingPong at the priority level. Cross-border transactions can be hard and tricky on your pocket, but PingPong could help you normalize the monetary turbulence.
This US-based international payment system has been in the fintech industry for over a decade, with over 4 million customers in over 200 countries and the ability to accept cross-border payments in over 150 currencies.
It is a shelter for freelancers and merchants, with mobile-friendly Android and iOS that allows users to withdraw cash, review transaction history, and instantaneously check account balances and currencies.
This international payment processor is also one of the reliable payment solutions in the fintech market. Payoneer helps in:
- Paying VAT
- Receive a digital Foreign Inward Remittance Certificate (FIRC) after every cross-border payment.
- Payoneer allows easy integration for the online marketplaces.
- Assist with recurring payments.
It is a cross-border payment system headquartered in the United Kingdom that provides a secure online for receiving and transmitting payments across borders.
It is a viable choice for independent contractors, commoners, sellers, and e-commerce businesses.
The following are Wise’s advantages:
- This British payment option accepts over 750 different currencies.
- Low transaction and currency rates
- Connect your account to numerous online marketplaces.
- Assists in the creation of bills for the client.
- Assist you in keeping track of your payment processes.
Business takes no time to go global. And when your business hits the international deck, the payment becomes an issue.
But, if you have a well-informed and comparable set of potential cross-border payment solutions, none can stop you from opening a beneficial door to savings.
There are multiple payment services available in the fintech industry that could help in receiving foreign currency, but are all legit?
Therefore, stay informed, be sorry free!