Cross-border payment and settlement refers to the act of parties in international economic activities using certain payment tools and methods to settle international debts and credits arising from various economic activities and to transfer and exchange funds. It usually occurs in international trade and is an act of the parties with monetary payment obligations to fulfill their obligations.
Cross-border payment and settlement occurs with the import and export of goods and has the following characteristics.
(1) The cause of cross-border payment and settlement is the debt relationship caused by international economic activities. The subject of cross-border payment and settlement is the parties in international economic activities. The meaning of parties in international economic activities should be determined according to different activities. For example, in the sale of goods, parties refer to persons whose places of business are in different countries (or regions) and banks are involved.
(2) Cross-border payment and settlement are paid with certain tools. The tools for cross-border payment and settlement are generally currency and bills. On the one hand, since the parties involved in international payment are generally natural persons or legal persons across countries (or regions), and different countries (or regions) use different currencies, it involves the choice of currency, the use of foreign exchange, and the risks brought about by the fluctuation of foreign exchange rates. On the other hand, in order to avoid the various risks and inconveniences brought about by the direct transportation of large amounts of currency, it involves the use of bills or vouchers. Related to this are a series of complex legal issues related to the circulation of bills or vouchers in different countries (or regions).
(3) Cross-border payment and settlement use certain payment methods to ensure the security of transactions. In international trade, buyers and sellers usually consider their own interests and always strive to obtain greater security in the payment and collection of goods, try to avoid the loss of both money and goods, and hope to obtain some kind of financing in terms of capital turnover. This involves how to adopt different payment methods such as remittance, collection, letter of credit, PayPal, etc. that have been formed internationally for a long time according to different situations to deal with the security and financing issues in the payment and collection of goods.
(4) The payee and payee of cross-border payment and settlement are usually in different circles, which is a special case of long-distance settlement. Since the payee and payee are under different legal systems and are restricted by relevant laws, the prevailing conditions of one party cannot be imposed on the other party. Instead, the unified practices of international settlement can only be used as the criterion to coordinate the relationship between the two parties and constrain each other.
(5) International payment and settlement must use a currency that is acceptable to both the payee and payee as the payment and settlement currency. For the convenience and security of payment, internationally accepted settlement currencies such as the US dollar, euro, and pound sterling are generally used. There are exceptions in special cases. Cross-border payment and settlement are mainly carried out through banks as intermediaries to ensure that the payment process is safe, fast, accurate, secure and convenient. However, since cross-border payment and settlement generally use currencies different from the countries (or regions) of the payees as payment and settlement currencies, the settlement process carries certain exchange rate risks.