Currently, the international trade, trade between countries is very developed with the economic integration and commercialization. These deals are often of great value, so the payment also becomes complicated. To meet this actual demand, banks have launched the international payment method Telegraphic transfer to facilitate buyers and sellers, especially when these two objects are geographically distant and far away. direct payment is difficult. With the website timviec365.vn, learn about what is Telegraphic transfer?
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1. What is telegraphic transfer?
In international trade, international payment methods are an extremely important need to ensure the ultimate purpose of the buying and selling process. This international payment method Telegraphic transfer must be called Remittance, but merchants often use the name Telegraphic transfer due to longstanding trading practices.
When international trade develops, facilitating the form of intermediary payment through banks is formed and growing strongly. With its role, the bank always changes the payment method accordingly, meeting the needs of buying and selling, and Telegraphic transfer payment form was born as an inevitable in that development process.
Telegraphic transfer in the age when the internet was not yet developed. The bank, upon receiving the seller’s request, will write a letter asking the buyer’s bank to pay, which is called a mailing transfer. Currently, with the development of both internet and technology, the term mailing transfer no longer appears because the method of sending mail is no longer applicable. Instead, the seller’s bank sends the request via telex to the buyer’s bank asking for payment, so this is called a telephraphic transfer.
International payment method telephraphic transfer is an international payment method by wire transfer, which is one of the methods of payment by Remittance – by transfer.
Telephraphic transfer was born to overcome the risk of payment in international trade. This payment method is the most desired by the parties in the payment process because they limit the risks arising, can immediately receive money without capital retention.
The international payment method telephraphic transfer has many definitions to manifest. In which we can understand simply according to the implementation process as follows: upon receipt of a request from the seller’s bank and at the request of the buyer, the buyer’s bank will conduct a wire transfer to the bank. the seller’s goods from the buyer’s established account.
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2. What is the telegraphic transfer payment process?
Telegraphic transfer payments are made mainly between banks. The bank is the most important actor in the steps; Receive request from your customer and proceed to transfer money.
However, to ensure safe money transfer, before transferring money, the parties will have to deliver goods and deliver essential documents to each other. The bank participates as a money transmitter/receiver and collects money transfer service fees on behalf of the merchant. So what exactly is the process of making telegraphic transfer payments? Follow along below.
The telegraphic transfer payment method has the participation of 04 parties: the seller, the buyer and two banks representing the two parties. The process is done only in two horizontal and vertical lines, not diagonally. That is, all activities will be through their representative bank: the seller does not work directly with the buyer’s bank and vice versa.
Although the payment of the bank and the delivery and delivery of the documents between the seller and the buyer are not related to each other, but in reality, it is not. As the bank will receive requests from the party on its behalf to proceed with payment based on delivery timelines and documents, this can happen in the following ways:
The seller delivers the goods first => the buyer pays => the seller delivers the following documents
The seller delivers the goods and delivers the documents first => the buyer pays
Buyer pays => seller delivers and delivers the following set of documents
Based on the agreement on purchase and sale with specific conditions of items, price, geographical distance, transportation, means of transportation, the parties will choose the most suitable and convenient way.
To ensure that the buyer receives the goods and the seller is paid the right amount, usually the telegraphic transfer payment method is carried out according to the following steps:
– First, the Buyer goes to his representative bank to order money transfer to pay the seller or can send an online order.
– Next, the buyer’s bank sends a debit note to its own subject.
The buyer’s bank will transfer the money to the seller’s bank.
– The seller’s bank sends a credit note to the seller about the payment information.
– After receiving the money transfer, the seller proceeds to deliver the goods and goods documents for the buyer.
To make a money transfer, most banks will follow these 4 steps:
(1) Receive application for money transfer from their account holder;
(2) Check the money transfer file according to regulations;
(3) Make a wire transfer when the conditions are satisfied
(4) Accounting – Keep records of money transfers
The Bank must take these steps to ensure the correctness of its operations as well as the economic interests of its customers in order to minimize errors, avoid troubles and even liabilities later.
3. Telegraphic transfer payment method money transfer procedure
In order to notify and request for its representative bank to transfer money, the buyer will actively submit documents to the bank to provide necessary information about the shipment as well as the money transfer upon request. Records include:
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– Paper or proof of payment authorization of the buyer to the bank: can be sent directly on the bank or by internet, official email (email must be registered in advance to confirm the exact payer).
– The effective sale and purchase contract of the parties
– Business license
– Commercial invoice
– A manifest of goods to be or is being or has been purchased. In case of purchase, there must be a customs declaration of imported goods, however, the bank may allow the buyer to submit an additional declaration according to the time limit specified by the bank.
– Import permit (if any)
The above documents are required to be complete, especially when transferring money for the first time or changing money transfer partners. Subsequent payments can be made simpler by using basic paperwork already on file with the customer.
For sellers who receive money transfer, they will have the right to receive a money order invoice about the time of money transfer to store or use when there are cases.
4. What are the advantages and disadvantages of telegraphic transfer payment method?
This is a payment method born in a new era with the development of the internet and information technology, so it is by far the most effective version, best suited to the current state of international trade. The telegraphic transfer payment method has many advantages as follows:
What are the advantages and disadvantages of telegraphic transfer payment method?
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In negotiations, the telegraphic transfer payment method can be considered as a mutually beneficial choice. In terms of relative advantages for seller and buyer, it lies between deferred sales (in favor of the buyer) and letter of credit (in favor of the seller). As a result, sellers often prefer a buyer’s deferred sale offer.
– For the seller, using this method is not expensive, and the seller is helped by the bank to control and control the transport documents until payment is guaranteed. The benefit to the buyer is that there is no obligation to pay if the documents have not been checked.
– Easy and fast business process; Simple, low-cost goods documents save more than LC payment. This method is often applied in cases where there is a traditional, long-term, trusting business relationship.
– Convenience for capital movement of both buyers and sellers. The buyer does not have a deposit like LC payment and the seller gets paid immediately to cover the operation.
– Flexibility in money transfer: convenient prepayment for the seller to be assured of delivery, so there is no fear of risk and damage due to late payment by the buyer. If postpaid is favorable for the buyer to avoid damage when the seller delivers late or poor quality goods.
– The bank is only an intermediary to enjoy the fee procedure (commission) and is not bound at all in the telegraphic transfer method.
However, the rapidly developing market and trading activities have revealed the disadvantages of the telegraphic transfer payment method as follows:
– For the exporter there is a risk but the importer does not accept the goods sent by not receiving the documents. Importer credit risk, political risk in the importing country and the risk that the goods may be held by customs. The payment is too slow, from delivery to receipt of money sometimes takes several months to a year. The importer bears only one risk in the collection of documents that the goods sent may not be the same as stated on the invoice and bill of lading.
– This method requires trust, mutual trust (which often takes a long time to cooperate to know this) or often applies to relatively small costs.
– This method requires trust, mutual trust (which often requires a long cooperation time to know this) or often applies to relatively small costs related to insurance shipping costs. insurance or used in trade, transfer of capital, repatriation of investment profits, etc., but not applicable to large orders.
Because the telegraphic transfer payment method involves the full risk of either the buyer or the buyer on the selling side. The payment depends on the goodwill of the buyer, so it is risky when the seller has delivered the goods when making postpaid but the buyer has transferred money or delayed payment. The risk is on the buyer when prepayment or payment has been made but the seller delivers the goods late or does not deliver the goods.
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