Both buyer and seller want the best deal and the least risk, and those pull in opposite directions. The payment method decides who carries the risk. A merchandiser needs to know all five to pick the right one. They sit on a risk spectrum: what's most secure for the seller is least attractive to the buyer, and vice versa.
The risk spectrum
International payment methods on a risk spectrum: cash-in-advance (most seller-secure), letter of credit, documentary collection, open account, and consignment (most buyer-secure).
Most seller-secure → most buyer-secure: Cash-in-advance → Letter of Credit → Documentary Collection → Open Account → Consignment.
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Methods of Payment in International Trade
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