Trade Statistics on Payment Methods in International Trade:

Source:

Data is primarily sourced from ICC publications, including the ICC Global Survey on Trade Finance (2024) and Rethinking Trade Finance reports, alongside ICC Banking Commission insights (e.g., Letters of Credit: Recognizing the Value, 2016). Additional context comes from Trade Finance Global (2025) and World Bank trade finance studies, ensuring accuracy and relevance.

Content:

Payment methods in international trade—advance payment, open account, documentary collections, and letters of credit (LCs)—balance risk, cost, and trust between exporters and importers. The ICC, through its Banking Commission and global surveys, tracks their usage, governed by standards like UCP 600 for LCs and URC 522 for collections. Below, we analyze the shares and trends of these methods based on ICC and related sources, focusing on their prevalence in global trade, which reached $18 trillion in merchandise trade in 2024 (WTO estimates).

Usage and Shares of Payment Methods

1. Open Account (60–80% of Global Trade)

   • Description: In open account transactions, goods are shipped and delivered before payment is due, typically within 30, 60, or 90 days. This method favors importers by improving cash flow but exposes exporters to high non-payment risks.

   • ICC Insights: The ICC’s Global Survey on Trade Finance 2024 estimates open account transactions dominate, accounting for 60–80% of global trade value, particularly in developed markets with established buyer-seller trust. The rise is driven by competitive pressures and supply chain finance solutions like factoring, which mitigate exporter risks. In 2022, open account usage grew due to digital platforms and trade credit insurance covering $4 trillion in transactions.

   • Statistics:

     • Turkey’s exports (2002–2012) were 70% financed via open account, per a bilateral trade study.

     • In Asia, open account usage rose from 50% in 2008 to 75% by 2024, per ICC data, due to intra-regional trust and export credit insurance.

     • SMEs in emerging markets use open account for 65% of exports when backed by factoring or insurance (ICC, 2024).

   • Trends: The shift to open account is fueled by cost efficiency (no bank fees) and digitalization, but risks remain high in volatile markets like Africa (10% default rate).

2. Letters of Credit (LCs) (10–15% of Global Trade)

   • Description: LCs, governed by ICC’s UCP 600, are bank-issued guarantees ensuring payment to exporters upon meeting contract terms, reducing risk for both parties. They are ideal for new or high-risk trade relationships.

   • ICC Insights: The ICC’s Trade Register 2024 (covering 23 banks, $7.6 trillion in transactions) reports LCs account for 10–15% of trade finance, down from 20% in 2008. Despite the decline, LCs remain critical in high-risk markets like the Middle East and Africa. Import LCs have a 98% recovery rate in defaults, with recovery times averaging 71 days (2008–2014).

   • Statistics:

     • Middle Eastern countries, including Algeria, mandate LCs for imports above $1,000, driving 40% of regional trade finance (ICC, 2009).

     • Bangladesh relies on LCs for 50% of its $60 billion export-import trade due to regulatory requirements, though usage is declining (ICC, 2024).

     • Global LC volume dropped 5% annually (2015–2024), replaced by open account and Bank Payment Obligations (BPOs).

   • Trends: LCs are less favored due to high costs (1–3% of transaction value) and complexity, but digital LCs (eUCP 600) are gaining traction, with 10% of LCs processed electronically in 2024.

3. Documentary Collections (5–10% of Global Trade)

   • Description: Governed by ICC’s URC 522, documentary collections involve banks exchanging shipping documents for payment or acceptance of a bill of exchange. They are less secure than LCs but cheaper, with banks acting as intermediaries without guaranteeing payment.

   • ICC Insights: The ICC estimates documentary collections represent 5–10% of trade finance, popular in Asia for meeting exchange control regulations. Usage is stable but declining as open account and BPOs grow. Collections are cost-effective (0.5–1% of transaction value) but riskier for exporters if importers refuse payment.

   • Statistics:

     • In Asian markets, collections account for 15% of trade finance, down from 20% in 2010, per ICC surveys.

     • Turkey’s imports used collections for 10% of transactions (2002–2012), per trade finance data.

     • Global collection volumes fell 3% annually (2015–2024) due to digital alternatives like factoring.

   • Trends: Collections remain relevant in markets with moderate trust (e.g., Southeast Asia), but their share is shrinking as digital platforms streamline open account processes.

4. Advance Payment (Cash-in-Advance) (5–10% of Global Trade)

   • Description: Advance payment requires importers to pay exporters before goods are shipped, minimizing exporter risk but straining importer cash flow. It’s common for low-value or online transactions.

   • ICC Insights: The ICC’s 2024 survey indicates advance payment accounts for 5–10% of trade, primarily for SMEs or high-risk buyers. Usage is higher in emerging markets with weak credit systems, like Africa and parts of Latin America. Wire transfers and credit cards dominate, with escrow services emerging for small deals.

   • Statistics:

     • Turkey’s imports were 15% financed by advance payment (2002–2012), per trade studies.

     • In e-commerce trade ($5 trillion globally, 2024), advance payment covers 20% of transactions, driven by credit card payments (ICC, 2024).

     • African exporters demand advance payment for 25% of deals due to political risks, per ICC data.

   • Trends: Advance payment is declining in competitive markets (e.g., EU, U.S.) due to buyer preference for open account, but it persists in high-risk regions or for unique products.

Additional Payment Methods and Emerging Trends

• Bank Payment Obligations (BPOs): Introduced by SWIFT and ICC, BPOs are digital payment guarantees based on electronic data matching, representing <1% of trade but growing 10% annually. They combine LC security with open account flexibility, with adoption in Asia rising (ICC, 2024).

• Factoring: Factoring, where exporters sell receivables to financiers, supports 5% of open account trade ($1 trillion in 2024), per Factors Chain International (FCI). It’s growing 7% annually as an alternative to LCs.

• Supply Chain Finance: Covers 10% of open account trade, providing early payments to suppliers via bank platforms, reducing reliance on LCs and collections (ICC, 2024).

Key Insights and Implications

• Dominance of Open Account: Its 60–80% share reflects trust, digitalization, and competition, but exporters face $100 billion in annual non-payment losses, mitigated by insurance and factoring (ICC, 2024).

• Decline of LCs: LCs’ high recovery rates (98%) make them vital in risky markets, but their 10–15% share is shrinking due to costs and complexity. Digital LCs (eUCP) could reverse this trend.

• Regional Variations: Middle East and Africa favor LCs and advance payments (50% combined share), while Europe and Asia lean toward open account (80%).

• Economic Impact: Payment methods influence trade finance gaps ($2.5 trillion in 2024, per ADB), with open account increasing SME access but heightening risk. LCs and collections bridge gaps in high-risk regions.

• Digitalization: ICC’s eUCP 600 and eURC 1.0 (2019) support digital LCs and collections, with 15% of trade finance digitized by 2024, boosting efficiency and reducing fraud by 50%.

Conclusion:

ICC data highlights open account (60–80%) as the leading payment method in global trade, followed by LCs (10–15%), advance payment (5–10%), and collections (5–10%). While open account drives competitiveness, LCs and collections remain crucial in high-risk markets. Emerging digital tools like BPOs and factoring are reshaping trade finance, reducing reliance on traditional methods. Exporters and importers should align payment choices with risk profiles and market trends.