Documentary Collection

Entrustment Collection: A Streamlined Approach to Process Payments

Entrustment collection is an increasingly popular payment processing method used by businesses and organizations. By entrusting collection to a third party, businesses and organizations can save significant amounts of time and money in their transactions. In this article, we will discuss how entrustment collection works, the advantages it offers, and how it can benefit businesses and organizations.

Entrustment collection works by allowing the payee, who is the entity requesting payment, to link the account in which payment will be received to a third party. This third party can be a specialized collection agency, a financial institution, or potentially even a technological platform. This third party will then manage the process of collecting payment on behalf of the payee.

One of the primary advantages of entrustment collection is that it eliminates the need for multiple manual processes that are often required with other payment processing methods. For example, if a business was to accept payments with a credit card, they would need to invest significant time and money in setting up and managing the online payment system. With entrustment collection, all of this work is handled by the third party, who can do so more quickly, cost-effectively and securely.

Additionally, entrustment collection can be beneficial for businesses and organizations in terms of compliance with financial regulation. By having a third party responsible for collecting payment, businesses and organizations are able to ensure that all of their payments are being collected and processed in accordance with the applicable laws and regulations. This reduces the risk of being subject to any fines or legal repercussions for a breach of financial regulations.

Moreover, entrustment collection can also help to reduce fraud and security risks. By having a third party responsible for collecting payments, business and organizations are able to ensure that the payment is actually being made by the intended payer. Furthermore, through entrustment collection, businesses and organizations can limit the amount of sensitive data that they store, further reducing the risk of a data breach.

Overall, entrustment collection provides businesses and organizations with a streamlined and secure payment processing solution. By entrusting collection to a third party, businesses and organizations can save significant amounts of time and money in their transactions, while also ensuring that all payments are collected and processed in accordance with applicable regulations. Furthermore, entrustment collection can also help to reduce fraud and security risks.

Documentary Collection (D/C) is a UCP 600 (Uniform Customs and Practice of Documentary Credits) standard form of payment. It is a payment form both parties (seller and buyer) can use in international trade.

The documentary collection process is initiated when the buyer instructs the issuing bank to “open a documentary collection”. The issuing bank then contacts the nominee bank of the buyer (nominated by the buyer to collect payment for the goods), as well as the nominated bank of the seller (the selling party). All necessary documents (including the commercial invoice, shipping documents, insurance policy, and bank drafts), are sent to the buyer via their nominated bank.

Once the documents have been received and accepted, the issuing bank, the buyers nominee bank, and the sellers nominated bank understand to the terms and conditions presented in the documentary collection. The buyer is then granted a credit period (amount of time before payment is due) to pay the nominal bank. Throughout the entire process, all banks involved will provide acknowledgements and proofs of payment and delivery.

At the expiry of the credit period, the buyers nominal bank will collect the payment on behalf of the buyer according to the documents presented and the terms of collection. Then the sellers nominated bank will release the documents to the buyers nominated bank once payment has been delivered. Finally, the buyers nominated bank will release the documents to the buyer in exchange for payment.

In conclusion, a Documentary Collection is a reliable and secure form of international payment. By utilizing this payment form, the seller is assured of timely payment and the buyer is assured of the release of all necessary documentation for the shipment of goods. This payment method can also be used for high value and time-sensitive international transactions.