Best payment methods for international trade: A practical guide

Global trade in goods and services was projected to surpass $35 trillion in 2025¹. With so much money moving across borders every day, choosing the right method isn’t just about convenience — it can directly affect your cash flow, relationships with trading partners, and whether you get paid or not.

For businesses involved in international trade, the ‘best’ payment method usually depends on a range of factors, such as speed and cost, as well as the trust between parties and how much risk each side is willing to take on.

In this blog, we’ll explain how international trade payments work, the most common terms of payment and methods used globally, and some of the challenges traders face. There’s also an introduction to Wise Business: a service that importers and exporters in Australia can use to pay partners overseas faster with low, transparent fees.

Table of contents
Understanding international trade payments What payments look like for exporters/sellers What payments look like for importers/buyers Key payment terms Importance of choosing the right payment method Top payment methods for international trade Challenges Wise Business: Simplify international trade payments FAQs

Understanding international trade payments

Paying and getting paid across borders brings extra considerations that businesses need to navigate carefully. Unlike domestic transactions, there are more ‘moving parts’ with international trade payments typically involving:

• Two businesses operating under different systems (legal and regulatory)
• Multiple currencies and exchange rates
• Banks or payment intermediaries in more than one country
• Big time gaps between shipment and payment

For this reason, the two parties involved usually attempt to ‘trade off’ based on their best interests to come to an agreement on terms and payment methods that suits everyone.

What payments look like for exporters (sellers)

Exporters typically want clarity as it can be difficult and expensive to recover unpaid invoices after goods leave Australia. Exporters often look for:

• Payment security
• Clear proof of payment or bank confirmation
• Protection against buyer default or delays
• Managing cash flow gaps between shipment and receiving funds
• Staying competitive while maintaining ‘acceptable’ risk levels

What payments look like for importers (buyers)

Importers typically want control as paying too early can tie up cash flow or expose them to the risk of non-delivery. Importers usually look for:

• Payment after shipment or delivery
• Protection against non-delivery or receiving substandard goods
• Minimising payment fees and exchange rates
• Managing foreign exchange exposure

There are several types of transactions that allow both parties to balance these competing priorities: advance payments, letter of credit (LC), documentary collections, and open account. Payments for these agreements are generally facilitated through intermediaries — banks or payment service providers — that handle things like document verification and currency conversions.

Key terms of payment in international trade

Before we run through the different ways of payment in international trade, it’s useful to understand some of the common terms of payment. These are typically used globally, not just in Australia, so it’s a good primer for all forms of cross-border business.

• Cash in advance (CIA) - the importer pays before the goods are shipped.
• Sight payment - payment is due immediately after the documents have been presented or upon the sight of goods.
• Documents against acceptance (D/A) - the importer receives documents after accepting a bill of exchange, which is a formal promise to pay at a later date. This is a type of documentary collection (D/C) payment.
• Consignment - the exporter ships goods to the importer but only gets paid after the goods are sold to end customers. Until that point, the exporter retains ownership of the goods.
• Partial or milestone payments - when payment is split into stages, for example: a deposit before production, a portion at shipment, and final balance settled on delivery.
• Telegraphic transfer (TT) - an electronic bank-to-bank payment used for international transfers. Also known as a TT bank payment or wire transfer.
• Trade loan - a short-term working capital loan for import/export activities.

We’ll cover other important terms, like letters of credit, that double as payment methods later in the blog.

Importance of choosing the right payment method for international trade

The payment method obviously affects how money ‘moves’ after it’s been sent, but it can influence other aspects of the agreement and your business directly, including things like:

• Cash flow and working capital
• Pricing negotiations
• Supplier and buyer relationships
• Exposure to currency risk or non-payment

Smaller exporters might opt to accept higher risk methods to stay competitive, while large-volume traders might prefer the security of bank-backed payments. There isn’t a universal best scenario. It depends very much on the specific trade scenario.

Top payment methods for international trade

Now, let’s look at the most common payment methods and types used in international trade. These each have their own benefits and risks depending on factors like trust and the level of security required.

Letters of Credit (LC)

A letter of credit is an agreement where a buyer’s bank commits to paying a seller for goods or services, provided the seller meets the specific conditions set out in the agreement. These conditions are set out in a formal document and can include things like shipping methods, and quality or inspection requirements. The bank then releases the payment when the seller provides evidence that the agreed terms have been met.

LCs are very popular in international trade as they reduce risk for both parties, and are especially useful when working with new partners for the first time.

Wire transfers

Wire transfers are another mainstay of international trade payments, dating back 150+ years. These are direct electronic payments sent from a buyer’s bank to a seller’s bank using established banking networks like SWIFT. Wire is more common when two parties have some sort of relationship, and don’t need the ‘backstop’ of bank payment guarantees, like with LCs.

However, while wire transfers are quite straightforward, they typically involve higher fees and less transparency around exchange rates and intermediary charges.

Open account

An open account is a kind-off buy it now, pay later scheme for trade. It’s a credit transaction where the seller ships goods to the buyer before the payment is made, with the latter agreeing to settle the funds after a certain period, i.e. 30 or 60 days. This is clearly advantageous for the buyer and risky for the seller, so it’s very much dependent on trust, and is more common in long-term business relationships.

Documentary collection

A documentary collection (D/C) is a trade payment where the exporter’s bank forwards shipping documents to the importer’s bank, with instructions on when these documents can be released. With this arrangement, the importer usually has to either make a payment or formally agree to do so at a later date before receiving the documents needed to collect the goods.

D/Cs offer more control than open account terms but less security than letters of credit, so it’s a sort of ‘middle ground’ option.

Multi-currency accounts and digital platforms

Digital payment trends are now influencing international trade. For B2B transactions, digital wallets offer much-sought after convenience and speed.

Mutli-currency accounts are also allow businesses to send and receive dozens of currencies without having to rely on traditional international bank transfers, and the hassle of opening local accounts in different regions.

Business accounts for international payments tend to be more suitable for repeat transactions and reducing the costs of cross-border business payments.

Challenges involved when making international trade payments

As you can see, quite a few of these payment methods are unique to B2B trade and come with specific challenges that must be managed carefully.

Late or non-payment risk

One of the biggest risks in international trade is actually getting paid. The simplest payment methods like open accounts or post-shipment terms rely on mutual trust, as exporters have to cover all the shipping costs upfront and then wait weeks or months for payments.

The fact that buyers are overseas adds another layer of complexity in recovering funds due to different legal systems and regulations in play.

For this reason, the Australian government recommends researching and running credit checks on buyers beforehand².

Cash flow pressure

Importing and exporting is often a balancing act with finances as there are gaps between purchase and payments. These long payment windows can put pressure on cash flow. For example, exporters might need to pay suppliers and freight costs long before they receive funds from overseas customers. These risks are particularly acute during busy periods or when dealing with larger orders.

Currency exchange fluctuations

Currency exchange rates are very likely to fluctuate between shipment and invoicing/payment. This will affect how much money your business receives. For example, if you invoice a buyer in a foreign currency and the Australian dollar (AUD) moves lower before payment, your margins and profits can shrink.

Export Finance Australia, the Australian government’s export credit agency, states that currency fluctuations are a “normal” risk with international payments². However, you can manage volatility by using multi-currency accounts to convert at times that are more favourable, or using forex hedging tools to lock in fixed rates.

Managing financial risk

As international trade payments are fraught with risk, businesses use finance tools such as trade loans and shipping guarantees to protect against payment woes and keep goods moving. In addition to these tools, having a fast and secure way to send and receive international payments can be invaluable in controlling costs and reducing uncertainty, especially when trading across multiple currencies.

Wise Business: modernizing international trade payments

Managing the friction of multi-currency trade requires a balance between speed and financial oversight. Wise Business helps solve the complexities of cross-border transactions by providing local account details in major currencies like USD, EUR, and GBP, allowing you to receive payments from trading partners as if you had a local bank branch.

Expanding a business globally opens up exciting opportunities, but also new challenges like receiving payments across borders. Hidden foreign transaction fees and hefty currency conversions involved with international payments can eat into your profits and time.

Wise Business serves as a cost-effective solution where you can receive money from around the world at the speed and price of local payments.

Transform the way you receive payments with Wise Business:

• One-time fee of 65 AUD for local account details in 8+ currencies, including AUD, NZD, USD, and more—no recurring fees
• One account to hold, send, and convert money with no hidden fees or exchange rate markups
• Create and send professional invoices directly to your customers through Wise Business
• Create payment links to request money in specific currencies
• Seamlessly receive payments from customers, online sales, or PSPs like Stripe and Amazon.
• Wise is safe and secure - Trusted by 13 million people and counting

Sign up for the Wise Business account! 🚀

This general advice does not take into account your objectives, financial circumstances or needs and you should consider if it is appropriate for you.

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Payment in international trade FAQs

1. Which payment method is most favourable for an importer?
Importers often prefer open account or post-shipment payments, as these reduce the risks of long-distance business while better supporting day-to-day cash flow. Any terms that allow importers to receive goods before paying are the most favourable.

2. Can I use digital payment platforms for international trade?
Yes, digital platforms are used quite regularly for international trade payments, especially for small-to-medium-sized enterprises. Digital payments are particularly effective for setting up and managing repeat payments, and handling things like supplier settlements and multi-currency accounts.

3. Who pays the bank fees in international trade transactions?
This is dependent on the payment terms agreed for the transactions. The fees might be paid by the importer, or the exporter, or shared between the two parties. It’s important to clarify these obligations upfront to reduce the chances of disputes and short payments arising.

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Sources:

1. UN Trade & Development - December 2025 trade update
2. Export Business Gov - Export payment methods