Each country has a different currency. Due to these differences, international payment instruments are needed that can be used for business transactions between countries.
A means of payment that can be used for commercial transactions between two countries is usually formalized through a bilateral agreement.
However, there are also international currencies that are used and applied throughout the world, one of which is the US dollar (US$).
10+ International Payment Tools For Trade You Must Know
International payment instruments are used for various transactions between countries. Not only in trade relations between countries, international payment instruments can also be used between individuals. Let’s see what medium of exchange can be used in international transactions!
When you go abroad, you must exchange rupiah for the currency of the destination country. The exchange rate will also be adjusted to the currency value against the rupiah.
For example, to the United States, which uses the dollar currency with an exchange rate of $ 1 which is equivalent to Rp. 14,000. Furthermore, the dollars you have exchanged can be spent there.
A check is an unconditional order from the customer to the bank to transfer the amount of money specified in it.
Checks are validated with the signature or official stamp of the customer who issued the authorization.
This means of payment is usually carried out by traders between countries in large quantities.
3. Money order (money bill)
This payment instrument can be used for domestic and foreign transactions. Sending money via money order is easier.
The reason is that the sender and recipient of money do not need to have an account where they send it.
Confirmation of receipt of money will be made via a PIN code. In Indonesia, postal orders can be sent to the Indonesian police or several banks.
4. Bank transfer
Although a little risky, bank transfers are also an international means of payment used in many countries.
Bank transfer is an order for the automatic transfer of client funds to domestic and foreign banks.
There is no need to return the delivery control sheet to the beneficiary.
5. Letter of Credit
The concept is similar to a court order. The difference is, a letter of credit sends funds in installments.
This international transmission tool is quite safe for buying and selling transactions. The bank that is the means of delivery will continue to pay the buyer’s remaining payment.
If the buyer has not paid for the transaction, the remaining money will be owed to the bank.
Gold has become a medium of exchange that is often used by many countries in commercial transactions. Gold calculations will be changed based on weight and grade.
Payment of foreign transactions with gold is usually chosen so that its value does not decrease due to inflation in each country.
7. Credit card
Credit cards can be used for offline and online transactions at all overseas merchants. You don’t have to worry if the transaction is not in rupiah.
The transaction value will be changed automatically by the credit card issuing bank.
8. Foreign currency
This payment instrument is usually used by a country that transacts with other countries. Commonly used currency units are US dollars or USD.
However, Indonesia can use other currencies when transacting with neighboring countries.
9. Personal Compensation
This transaction can take place if you have partners from one country to another. Personal compensation is a cross-payment system between buyers and sellers. The use of this payment system requires a very high level of trust.
The simulation of personal compensation can be described through the transactions of two buyers and two traders from Indonesia and Malaysia.
For example, Budi from Indonesia bought a product from Toni in Malaysia for IDR 1,000,000. Then Tina from Malaysia bought products from Tuti in Indonesia for Rp. 1,000,000. Four parties trust each other, two parties residing in the same country can pay and receive money without having to make transfers abroad.
Along with the development of technology, digital wallets have sprung up in many countries. In Indonesia, you can use OVO, GoPay, DANA and LinkAja to make digital payments.
Well, there are several e-wallets that can actually be used for transactions in neighboring countries.
11. Escrow Account
Like a joint account that can be used by both parties who open it. This account is usually used by buyers and merchants who make two-way transactions.
When making a payment, one party only needs to deposit a certain amount of money into the account and the other party can withdraw it directly.
Those are some of the legal international payment instruments used to carry out commercial transactions, both for individuals and for countries. Has anyone tried it?