When an Italian company starts thinking seriously about export, one of the first operational questions concerns international payments. The form the question takes is almost always the same: "Which is the most secure payment method?" It's an understandable question and, on the surface, a sensible one. The usual answer — letters of credit, SWIFT transfers, digital gateways, documentary collection, each with its own advantages and disadvantages — is equally understandable. It's also, to a large extent, an answer that misses the point.
The point is that the security of international payments isn't an intrinsic characteristic of the chosen payment instrument. It's a function of the quality of the commercial relationship the payment accompanies. A perfect letter of credit between two partners who don't know and don't trust each other still produces problematic transactions. A simple bank transfer between two companies that have known each other for years produces smooth transactions. The instrument matters, but it's a layer on top of something else. Understanding this hierarchy changes the way you plan the entire payment apparatus of export.
The strategic question isn't "which instrument." It's: what phase of the commercial relationship are we in, with what level of trust, and therefore which instrument is appropriate for this specific phase?
The continuum of commercial trust
International commercial relationships go through phases worth distinguishing, because each phase requires different payment instruments.
Phase one: first contact, no direct knowledge. You're negotiating with a company you've never met physically, about which you have limited information, in a market where you have no direct experience. In this phase, the priority isn't payment efficiency — it's verifying that the transaction goes through in a controlled way for both parties. The instruments that reduce mutual risk are the most appropriate here, even if they have higher costs and longer times. Letters of credit, escrow, partial advance with the balance after confirmation of delivery, bank guarantees are instruments that are justified in this phase for the trust-building function they perform, regardless of their nominal cost.
Phase two: an established relationship on limited transactions. You've had two, three, five transactions go through successfully with a specific partner. You've built direct knowledge of their way of operating, their seriousness, their timing. In this phase, maintaining maximum-protection payment instruments becomes oversized — it's like continuing to use training wheels on a bicycle you now know how to ride. It's time to lighten the structure, keeping essential controls but reducing costs and times. Bank transfers with specific conditions, payments at 30 or 60 days with limited guarantees, are appropriate here.
Phase three: a strategic commercial partnership. You've worked with the partner for years, the volumes are significant, the relationship is structural. In this phase the priority becomes pure operational efficiency, with instruments that minimize friction and the cost of the transaction. Direct bank transfers, deferred payment terms, integrations of management systems, current accounts in the partner's currency are instruments that recognize the maturity of the relationship.
Most of the mistakes in international payments stem from applying the instruments of one phase to a different phase. Companies that maintain letters of credit even with long-standing partners (they pay costs that no longer make sense). Companies that accept 60-day transfers with new, unverified customers (they risk insolvencies they could have avoided). The rule isn't "choose the most secure instrument," it's "choose the instrument suited to the phase of the relationship."
The instruments, described for what they really do
It's worth going through the main instruments with a level of description that goes beyond the generic list. Each has a specific function, specific costs, and optimal contexts of use.
The letter of credit (L/C) is probably the most misunderstood instrument of international trade. It's presented as "the secure instrument," and in principle it is: payment is guaranteed by a bank against the presentation of specific documents attesting that delivery has occurred. In practice, the letter of credit is a complex, costly, slow instrument, and it works well only if the documentation is managed with absolute precision — one wrong detail in the documents can block the payment for weeks. It's the right instrument for high-value transactions with new partners, in countries where country or counterparty risk is significant, on products where delivery times are compatible with the complexity of the instrument. It's the wrong instrument for small recurring transactions, for partners with whom you already have an established relationship, and for situations where speed counts.
Documentary collection is a middle ground: the bank manages the documentary flow but doesn't guarantee payment. Cheaper than the L/C, less protective. It works well in contexts where trust is partial and speed counts more than absolute guarantee.
The international bank transfer (SWIFT) is the standard instrument for the majority of established international transactions. Fast (today often within 24-48 hours), traceable, with costs that vary significantly depending on the bank. Its security is that of the commercial relationship that accompanies it: it doesn't in itself protect against insolvencies or fraud. Recent developments — especially the SWIFT gpi (global payments innovation) system — have made the international transfer more traceable and predictable in terms of timing.
Specialized international payment services — Wise (formerly TransferWise), Revolut Business, Currencies Direct, OFX, and others — have significantly changed the landscape in recent years. They offer currency exchange at rates close to the interbank rate (significantly better than traditional banks), fast transfers, multi-currency accounts. They're particularly useful for medium and small companies that handle regular transactions in multiple currencies. Their security is equivalent to that of banks in the covered contexts (these operators are regulated as payment institutions), but the operational limits on single transactions or annual volumes can be significant for larger companies.
Digital payment gateways — PayPal, Stripe, and similar — are instruments designed mainly for small-amount e-commerce B2C or B2B transactions. For significant-amount B2B payments, the commissions make these instruments economically inefficient, even though the ease of integration and the familiarity for the end customer remain relevant advantages.
Escrow is an often-underused instrument. A third party (bank, trustee, specialized platform) holds the payment until specific conditions agreed between the parties occur. It's particularly useful in complex or multi-phase transactions, where delivery happens in multiple steps and each is a condition for the next. International escrow platforms have multiplied in recent years, making the instrument accessible even for medium amounts.
Cryptocurrencies and stablecoins are instruments that deserve a separate note, because their relevance in commercial payments is changing. For B2B transactions in contexts where the traditional banking system is slow, costly, or unreliable (some emerging markets), stablecoins (cryptocurrencies pegged to the dollar) have become real operational instruments, no longer experimental. They remain a niche for medium-sized companies, but it's worth knowing them so as not to be caught unprepared when a partner in a specific market proposes them as a payment method.
Currency risk: the elephant in the room
Currency fluctuations are the risk that those exposed to export most frequently underestimate. A transaction in US dollars invoiced to a US customer can lose or gain 5-10% of its nominal value between the moment of invoicing and the moment of actual collection, simply due to movements in the euro-dollar exchange rate. On significant volumes, this can cancel the profit margin of an entire operation, or multiply it.
Currency risk can't be eliminated, but it can be managed. Three main instruments, with different logics.
Forward contracts fix today the exchange rate for a transaction that will occur on a specific future date. They eliminate uncertainty but also any gain from favorable currency movements. They're the standard instrument for companies that want planning certainty and that have no appetite for currency speculation.
Foreign-currency accounts make it possible to maintain reserves in the customer's currency, reducing the frequency of conversions and therefore the cumulative exposure. For a company with regular flows in dollars, pounds, yen, or yuan, having dedicated accounts in the main currencies is a significant operational efficiency.
More sophisticated hedging instruments — currency options, swaps, structured derivatives — are appropriate only for significant-sized companies with dedicated internal financial expertise. For SMEs, in many cases these are instruments that produce costs higher than the benefits and that require a financial-risk governance that SMEs can rarely afford.
There's also a more radical strategic option worth naming: invoicing in euros when the commercial balance of power allows it. For many sectors and markets, the Italian company can negotiate the price in euros regardless of the local currency, transferring the currency risk to the customer. It isn't always possible (in some highly competitive markets, invoicing in local currency is a condition of access), but when it's possible it's the simplest and cheapest solution.
Vetting the partner: the thing nobody does enough
The most frequent cause of problems in international payments isn't technical. It's that the commercial partner wasn't as reliable as assumed. The preliminary verification of the partner's solvency and reliability is a step that many companies compress or skip, especially when the commercial pressure is high or the opportunity seems particularly promising.
Serious verification requires three levels.
Basic documentary verification. Legal registration of the company, seniority, corporate structure, the presence of international sanctions, documented tax situation. This is information accessible through public registers and specialized services like Cerved, Dun & Bradstreet, Coface, Atradius. The cost of verification is generally modest compared to the value of the transaction, and the returns in terms of avoided risk are significant.
Credit rating. For significant-value transactions, obtaining an updated credit rating on the partner is a step that takes hours and produces concrete information on the ability to pay. SACE for the Italian market and the credit-insurance operators offer targeted assessments.
Relational verification. It's the step companies skip most often, and it's often the most informative. Asking the partner for specific commercial references — customers, suppliers, banks they work with — and contacting them directly. In many cultural contexts, a company's network of relationships is a more reliable indicator of its solidity than formal documents.
Export credit insurance
For companies that operate regularly in export, credit insurance isn't an option among others — it's almost always the right choice. It transfers the risk of customer insolvency to a specialized insurer, against payment of a premium that varies according to the country, the sector, the customer's profile.
SACE is the Italian public reference, particularly active for export to medium-high-risk countries and for structured operations. Atradius, Coface, Euler Hermes (Allianz Trade) are the main international private operators, with coverage specialized for different sectors and geographies.
The cost of credit insurance is often perceived as "an expense that could be avoided." It's a perception that proves costly when the first significant insolvency arrives. For companies with export volumes above reasonable thresholds (generally over 500,000 euros a year of foreign revenue), credit insurance is a risk-management investment that amply repays the premium in the medium term.
Regulatory compliance: the level that's getting more complicated
The international regulatory apparatus that governs payments is progressively more stringent. Anti-money laundering (AML), countering the financing of terrorism (CFT), know your customer (KYC), international sanctions: these are areas where companies today find themselves having to demonstrate levels of compliance that weren't required twenty years ago.
The practical elements to oversee are three.
Verification of sanctioned countries. International sanctions — EU, US, UN — hit specific countries, specific people, specific entities. Operating with counterparts that fall on these lists entails significant sanctions for the company, even in good faith. Banks today verify systematically, but the ultimate responsibility remains the company's.
AML/CFT compliance. Transparency on the origin of funds and the destination of payments is today an operational requirement. Complete documentation of transactions, identification of beneficial owners, reporting of suspicious operations are part of ordinary activity.
Customs documentation. For goods, the documentation accompanying the shipment (commercial invoice, packing list, certificate of origin, transport documents, any specific certifications) must be consistent with what's declared in the payments. Discrepancies between commercial documents and financial flows trigger checks that can significantly delay operations.
The level of regulatory complexity has progressively grown, and managing it with improvised tools is today inefficient. The companies that seriously oversee export integrate stable specialized consulting on these themes, whether internal or external.
What digital and AI tools have changed in payment management
The last decade has substantially transformed the way companies manage international payments. It's worth naming the main changes, because many companies haven't yet updated their practices.
Integrated international banking platforms make it possible today to manage multi-currency accounts, exchanges, transfers, reconciliations from the same interface. Operators like Wise Business, Revolut Business, Mercury, have made accessible to SMEs a level of operational management that ten years ago required dedicated banking consulting.
Automation of export accounting has become standard. Management software integrated with banking platforms automates reconciliations, deadline monitoring, currency management. For companies with significant flows, automation reduces errors and administrative costs structurally.
AI tools for risk monitoring represent the most recent frontier. Systems that analyze in real time signals on customer reliability, country exposure, market movements, alerts on evolving sanctions. For medium-sized companies, accessing this level of monitoring was unthinkable until recently. Today it's available as a service integrated into many financial-management platforms.
Blockchain and smart contracts remain largely experimental for traditional export, but in some sectors (commodities, some luxury segments, supply-chain traceability) they're starting to be used operationally. For the majority of SMEs, they're not yet instruments of daily management, but it's worth following their evolution.
International payments, in the end, are a chapter of a bigger book. That book is called the quality of the commercial relationship. The companies that have built healthy export on international markets didn't choose the "most secure" payment instrument — they built commercial relationships with verified partners, managing payments with instruments appropriate to the phase of the relationship, overseeing the residual risks with proportionate insurance and coverage.
The payment instrument is the easy part. It's documentable, comparable, decidable in an afternoon. The hard part — the one that really makes the difference between profitable export and export that burns margins in management problems — is building the relational and control system that surrounds the instrument. Companies that think about the first without the second end up using sophisticated instruments to manage relationships they shouldn't have had in that form.
The operating rule is just one: choose the right instrument for the right phase, seriously verify who you're dealing with, cover the risks you can cover, accept that some residual risks exist anyway and budget for them. Everything else is detail.