The parties involved in the collection method include:
- Principal
- Remitting bank
- Collecting bank
- Drawee.
Compared with L/C, the collection method has lower cost. Compared to open account payments, collection payments are made faster. Collection is an international payment method that has the basic advantage of harmonizing safety and risks compared to the advanced method and the open account method, but it reduces costs compared to the method of securities credit, specifically:
- The open account: Safe for importers, but risky for exporters.
- Advance method: Safe for exporters, but risky for importers.
Meanwhile, by using a bank as an intermediary to collect money from buyers to sellers, collection methods can:
- Reducing risks for both importers and exporters.
- Limit the delay in receiving money for exporters and receiving goods for importers.
- Reduced transaction costs compared to documentary credits.
The following are the advantages of the collection payment method for each entity: importer, exporter, collecting bank and Remitting bank
| Entity | Exporter | Importer | Bank |
| Advantage | (1) The bank will on behalf of the enterprise monitor, remind payment, transfer money and report to the enterprise’s account when the importer makes payment.
(2) The exporter is assisted by the bank in controlling and controlling the commercial documents until payment. (3) The exporter may appoint a representative in the importing country to deal with it on its behalf in the event that the importer fails to pay or does not accept payment. |
(1) Less restrictions on buyers than L/C.
(2) Payment may be refused. (3) Can extend payment, accept payment until delivery is successful. (4) Lower cost than L/C. (5) The importer is entitled to check the documents at NHXT before making payment or accepting payment. |
(1) Trade finance credit extended.
(2) Strengthening relationship with correspondent banks, thus creating potential for reciprocal transactions. (3) Earning income from collection fees, foreign currency trading transactions and other related transactions. |
Above is our consultancy about this issue. If you need more detailed advice and answers as well as how to access this service, please contact directly the Deputy Director of Sales: Lawyer Nhat Nam via hotline: 0912.35.65.75, 0912.35.53.53 or call the free legal consultation hotline 1900.6575 or send a service request via email: lienheluathongbang@gmail.com
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