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TTQT Remittance
TTQT Remittance
TTQT Remittance
INTERNATIONAL TRADE
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INTERNATIONAL SETTLEMENTS
Group Member:
Vo Ngoc Hang
Mai Khanh Linh
Bui Van Yen
Duong Van Truong
In the current trend of globalization of the economy and international trade, the international
payment activities of commercial banks are a vital component in the process of concluding a
foreign trade agreement, relationships, increase its competitiveness. Business are always on the
especially true for Global Business as local preferences and payments may vary significantly
depending on the geography. Choosing the right payment method augments reach improves
The essay will explore the practical usage situation of Remittance, its benefits and shortcomings
for stakeholders. Since then, proposing solutions and recommendations in order to create
conditions for import-export enterprises in Vietnam to make better and more effective decisions.
him/her.”
(Kwai Wing Luk ,2011, International Trade Finance – A practical guide City university of Hong
Kong pres)
1.2. Parties
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Payer (buyer) or remitter (investor, overseas compatriots sending remittance home, person sending
expenditure abroad) a person who requires a bank to transfer a sum of money abroad.
Beneficiary: seller, lender, invested capital reciever, or someone who is assigned by the remitter.
Paying bank/Intermediary bank (Correspondent bank of the remitting bank): a bank in the
beneficiary’s country.
There are two types of Foreign Exchange Remittances as followings T/T Telegraphic Transfer
IN CASE M/T MAIL TRANSFER, Bank transfers money by sending a letter to its correspondent
bank in a foreign country to request payment for the beneficiary. This method is less expensive
than T/T settlement, but its disadvantage is that it takes longer, so easy to be affected by the
correspondent bank in a foreign country to pay for the beneficiary by telegraph. This method gets
money quickly, speedily, and promptly, so it is rarely affected by the fluctuations in foreign
exchange. Today, it is the cheapest, safest, promptest, and most accurate method of transfer
Advance remittance
The prepayment method in ensures that the supplier has the assurance that the importer have made
a partial payment before they ship the goods. For importer, making a prepayment ensures that
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importer can receive the goods and inspect their quality before making the final payment, thereby
Deferred remittance is that the imorter pays the exporter after receiving goods.
With this type of remittance, banks just play intermediate roles to remit money, and don't have
any responsibilities of supervising and speeding up the importer in payment. Thus, payment will
be depended on the importer's goodwill. The exporter can ensure his rights by negotiating to
Diagram of remittance
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Remittance process is as follows
(1) The exporter supplies goods or services together with full set of document to the importer to
(2) The remitter (importer) issues a money transfer order along with the necessary documents to
the bank requesting the transfer of funds abroad. The remittance order includes:
• Details of payment.
• Relerant documents.
(3) The remitting bank verifies the money transfer documents and debits the account of the
remitter.
(4) Based on the payment order from the customer, the remitting bank issues a payment instruction
(5) The bank of exporter credits the account of the remitting bank and reports the beneficiary's
account.
STAKEHOLDERS
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2.1. The situation of using international payment methods by import-export
enterprises in Vietnam
In recent years, the growth rate of IP methods at Vietnamese commercial banks has changed
a lot. Specifically, there are several main forms of payment: international remittance, trade finance
(mainly including L/C and collection) and border payment. From the two charts below, it can be
seen that international remittances and trade finance account for a high proportion. However, there
has been a marked change, while the share of trade finance decreased from 42% (2018) to 37%
(2019), the share of remittances increased slightly from 52% (2018) to 56 % (2019). Meanwhile,
the lowest percentage of payment methods is border payment, still at 6-7%. Most customers prefer
to use international money transfer because it is fast and convenient, especially with close partners.
International
Remittance
6% 7%
L/C and
Document
42% 52% 37% Cpllection
56%
Border
Payment
2018 2019
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2.2. The relationship between remittances and economic growth in Vietnam in the
period of international integration.
(Image sourch: World Bank)
Vietnam received nearly US$13.8 billion in
of 4.5 percent.
Thinh Nam Corp signed a contract to buy electronic components from Taiwan Semiconductor
Manufacturing c.o. Payment term of an international sales of goods contract as followed: 100%
contract value should bepaid by T/T through Changwha Commercial Bank LTD., Chungho
(1) Thinh Nam Corporation write a request to transfer the deposit to Changwha Commercial Bank
LTD.
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(2) The correspondent bank will check the solvency of Thinh Nam corporation, specifically check
if the foreign currency account of Thinh Nam corporation at the bank has enough money to pay.
(3) After sending payment order to the bank of Taiwan Semiconductor Manufacturing company,
the bank of Thinh Nam corporation will send debit not to Thinh Nam corporation.
(4) The bank of Taiwan Semiconductor Manufacturing will credit the Taiwan company’s account
(5) Taiwan company supplies goods or services together with full set of document to Thinh Nam
Benefits
For exporter
• The exporter guaranteed to have received the funds prior to the performance of the duty or
delivery.
• The exporter is not exposed to the risk of bad debt, meaning they don't need to hear about
For importer
• The importer can have greater control over their financial spending because they only have
• Some exporter may offer special offers, discounts or conditions to customers who pay in
Shortcomings
The exporter
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• After signing the contract,if the importer doesn’t make a payment, the exporter also at risk.
• In cases the importer cancels the contract, the exporter suffers a substantial loss.
• The exporter must undertake that they will complete the project or deliver the goods
requested after receiving the advance payment. Failure to meet deadlines or failure to meet
The importer
• If the exporter fails to deliver the goods or provide services after receiving the money in
advance, the importer may lose money and face difficulty in recovering the transferred
amount.
• The importer cannot refund money after prepayment, if not satisfied with the product or
service, they may have to accept and have no right to claim a refund.
Benefits:
Exporters:
• Increasing profitability and using the money to invest or pay down debt.
• Creates more time for exporters to complete the necessary procedures or documents to
Importer:
• Don’t need to pay immediately, use the money to pay other costs.
• Increase their accruals if they invest their late payments in other ways to make money.
• Shoppers can request an adjustment to their checkout if they are experiencing financial.
Shortcomings:
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The exporter:
• Can be difficult for exporters, especially if they need money urgently to pay other costs.
• Can cause limitations including late payment, high costs and risk of loss of funds.
The importer:
• Wait a certain amount of time before the money from the exporter.
• Pay higher interest charges if they have to borrow money to meet other payment needs
• Drawbacks: This method is quite slow, so it is easily affected by the exchange rate
fluctuations.
Compared to many traditional methods, the telegraphic transfer can be completed in any
place without going to a bank in person. Many service providers like banks and other financial
institutions can transfer money to anyone in any place you want but charge certain fees as well.
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• Rapid process to finish transferring
• Influenced less by the fluctuation of exchange rates and the international market
For many businesses, the telegraphic transfer is a good choice. But every coin has two sides. It
REMITTANCE
3.1. Recommendation
The choice of payment method depends on each specific situation and the transaction's objectives.
might be suitable. If the transaction requires payment in advance to ensure goods or service
capabilities and risk assessment when selecting the appropriate payment method.
Businesses also need to be wary of deals that are too attractive. In the process of negotiating and
implementing the contract, enterprises need to come up with strict terms to avoid being pressured
by partners. To avoid risks, when signing import and export contracts, domestic enterprises should
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apply T/T Remittance with confirmation and ask customers to pay at least 40-50% of the shipment
value in advance.
• Develop a clear money transfer schedule: For example, how much % in advance at what
• Agree on the time of money transfer to coincide with the time of delivery.
• Specify clearly about the means of money transfer, who will bear the cost of money
transfer?
• Both sender and receiver should agree on the terms and conditions of the transaction before
• Make sure the recipient account information is correct and verified before making the
transfer. Businesses need to learn enough information about partners, markets, export
policies, and actively participate in trade promotion activities such as market, survey, trade
fairs,…
• Check the exchange rate before transferring to avoid losing money due to foreign currency
• Make your account transfers as fast as possible to avoid time-limited transfers and
deadline-related fees.
• Monitor and check your transfers regularly to detect possible problems early.
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• Be careful when transacting via email. Businesses must pay special attention to the
recipient's address, especially letters sending important information of the transaction such
as a copy of the delivery documents and the account receiving money via wire transfer.
As well as wishing to contribute to the development of international trade, SHB bank has
improved the International Remittance Fee Package with more attractive incentives (SHB, 2021).
Businesses have the flexibility to choose 07 packages suitable for their needs with incentives
• Flexible line of credit: packages with remittance limit from 50,000 USD to 5,000,000 USD
• FREE money transfer and electricity fee when transferring money in the package.
One of the measures to help businesses improve efficiency in using international payment methods
is to combine international payment methods with several international trade finance products.
• T/T advance 40%, 60% T/T paid 15 days afters receiving goods or issuing drafts by the
• T/T advance 30%, the other 70% using the payment method of immediate L/C and non-
cancellation.
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• T/T advance 30% for the first pay, second L/C 30% immediate payment, third T/T deferred
Conclusion
In conclusion, remittances are one of the most important sources of foreign currency in
ensuring balance of payments, foreign currency reserves increase, stabilize exchange market and
financial market in Vietnam over nearly three decades. Despite its limitations, this study has
provided an overview of the factors influencing the choice of IP methods especially Remittance
by import-export businesses across Vietnam's territory. Timely gives some recommendations for
businesses to minimize the risks that are not present in the payment process. Hopefully, these
measure will be a valueble tool for Vietnam's import-export industry in general and Vietnam's
international payment services in particular in the near future, particularly in the context of
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[1] Dr. Nong Thi Nhu Mai (2023), International Settlements, Ho Chi Minh city.
[2] ICC (2013). Uniform Rules for Bank Payment Obligations – URBPO, Paris
[3] BIDV (2021) Joint Stock Commercial Bank for Investment and Development of Vietnam, BIDV
[4] Thuy, P. T. N. (2014) Risk management for international payments at Joint Stock Commercial
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