How To Pay A Vietnamese Supplier And Not Get Scammed // PayPal, T/T Wire, Veem, Wise In Vietnam
So you’ve found a supplier in Vietnam –now how will you pay them?
Sending thousands of dollars to Vietnam to someone you’ve probably never met can be a scary, if not downright, sketchy step. Though most suppliers in Vietnam prefer direct transfers, this is not the safest way. Even if you have a trustworthy supplier, you’re likely to drown in fees. Lucky for you, we’ve made hundreds of transactions and tested a dozen different services to determine the best way to save you thousands of dollars on your next purchase.
Disclaimer: Remember that we may receive commissions when you click our links and make purchases. However, this does not impact our reviews and comparisons. We try to keep things fair and balanced to help you make the best choice.
Paying with Vietnamese Currency // The DONG (VND)
Vietnam’s Currency is called the Dong, which is abbreviated as VND. When writing (June 14th, 2020), the exchange rate is 23,029 Dong (VND) = 1 USD. If you want to see the most recent price, check out XE.com. It’s essential to remember that many factories and suppliers in Vietnam will give you prices in VND, and you will need to convert the amount yourself. If you ask for a quote in VND, they may choose an exchange rate that benefits them, not you.
At Cosmo Sourcing, we almost always ask for quotes in VND and set an agreed-upon exchange rate based on the most recent number. In addition, the team at Cosmo has a transparent sourcing process, and you make all payments directly to the factory. As a result, we can help all our clients with the payment process and even handle the payment when requested.
HOW MUCH DOES IT COST TO SEND $10,000 TO VIETNAM?
The following chart references sending $10,000 to Vietnam with currency exchange.
Note: We gathered information on July 10th, 2022.
The Vietnamese Financial System At A Glance
Vietnam’s financial system was closed until the early 1990s, when the country opened up to international trade. As a result, Vietnam developed a modern financial and banking system with hundreds of competing banks. Despite slightly lagging behind the Chinese financial system, it is relatively modern and equipped for international wire transfers.
Besides domestic, many international banks are opening branches to compete for the influx of foreign capital into the country. Vietnam is heavily cash-based, and nearly 85% of the population does not use banking services. However, this won’t be a problem because most factory owners/suppliers are well-versed in international payments and are open to the full range of payment options (listed below).
What Banking Services Available In Vietnam?
Vietnam has approved all international payment methods. The payment methods in Vietnam include SWIFT transfers, bank e-payments, interbank transfers, clearing systems, commercial bank e-transfers, and bilateral payment systems. Vietnamese banks have access to the full range of modern international payment systems.
With the introduction of PSBM2 (The Vietnamese Banking Modernization Project), Vietnamese banks now offer e-banking services to all customers, drastically changing the country’s payment service environment. As a result, Vietnamese residents can access their balances and make payments online with all banks in the country.
In the wake of the Chinese-US trade war, foreign investors brought billions of dollars into the country, and Vietnamese banking saw significant structural changes. The country is building a new payment infrastructure by partnering with international card companies like VNBC and Bancnet. Thousands of new ATMs all over the country accept international cards, making it easy for foreign buyers to pay suppliers in cash if they’re in the country.
SBV: State Bank Of Vietnam
The State Bank Of Vietnam (SBV) is Vietnam’s most important and largest bank. The Vietnamese government regulates this bank and is the country’s leading financial arm. SBV is under the jurisdiction of the Vietnamese prime minister and does not operate as an independent bank.
As the largest bank in Vietnam, SBV owns five large state commercial banks, four smaller joint banks, five foreign banks, 50 foreign offices, 50 branches of foreign banks, 12 leasing companies, and 18 financial companies. The bank also manages 2 Vietnamese policy banks.
Banking In Vietnam In 2020
The banking environment in 2020 is highly developed and stable. The reforms implemented by the Vietnamese banking sector by passing legislature with the SBV opened up the economy to international capital, and payment services such as PayPal and Veem are available in the country. In addition, the government continues restructuring domestic financial institutions, removing roadblocks for buyers, and more.
The SBV announced it would continue removing barriers to foreign capital entering the country and removing the red tape while unfreezing capital flows. As a result, Vietnam is currently one of the best-ranked countries for obtaining global credit.
Does Alibaba Trade Assurance Work In Vietnam?
No, Alibaba does not offer Trade assurance for suppliers outside of China. As a result, you cannot rely on Alibaba’s backing if you are looking for suppliers, assuming you successfully found a supplier in Vietnam.
Besides, Alibaba is not an excellent resource for finding suppliers. Therefore, we suggest using these Alibaba alternatives if you are looking for suppliers in Vietnam or elsewhere outside China.
Avoid Direct Bank Transfer
The default payment method for most purchases is direct bank transfer; however, this may be the worst way to send money due to outrageous fees. Example: We sent a payment of USD 38,000 via Wells Fargo and were slapped with USD 3,100 in fees. No, this is not a typo–that’s over 8%! You can expect the same exorbitant fees if you look at Citi, Bank of America, or any other major banks.
We should note that most banks are improving with international fees; however, a direct bank transfer does not have any protection built in. As a result, once the money leaves the account, it’s challenging to get back should something go wrong.
PayPal Is Reliable For Small Purchases
PayPal is adequate for small purchases, such as samples, as PayPal is quick and user-friendly. PayPal’s most significant benefit is that it has some of the strictest fraud protections in the industry. If a supplier does not accept PayPal, it is a major red flag for us, as PayPal has strict verification and lifetime bans for fraud. However, remember that PayPal charges higher fees (3-4%), and they do not offer the best exchange rate. For this reason, PayPal is not recommended for large orders.
Services to avoid when paying in Vietnam
Western Union For Paying Vietnamese Suppliers
Western Union is unreliable for large payments, and you are not protected if the factory scams you. Also, they do not convert currencies. The typical fee ranges from 7-12%, depending on the amount. Note: This is a favorite method among scammers and fraudsters.
The upside of using Western Union is that the funds are made available immediately for the supplier to collect, expediting the production. However, the lack of protection is why you should only send Western Union to suppliers who have made deliveries for you.
Warning: Never send Western Union for small samples because the transactions are irreversible, and the factory might scam you. Another downside to using Western Union is that there are daily sending limits. Depending on the country, most users can send a maximum of $2500-5000 daily. You may have to make multiple cash payments to pay off a supplier.
MoneyGram For Paying Vietnamese Suppliers
MoneyGram is the main cash-sending alternative to Western Union. MoneyGram is nearly identical to Western Union, and the funds are made available immediately as soon as they’re sent out. All the supplier needs is the transaction ID to collect the cash payment. MoneyGram partners all over Vietnam make it easy to collect their money.
The downside is the high fees. MoneyGram charges an average of 7-10% fees – this may be lower or higher, depending on the transaction amount. In that regard, it’s similar to Western Union. Avoid using MoneyGram for large orders unless you have a personal relationship with the supplier and know they will not scam you. MoneyGram also has daily sending limits of $900/day and $3000/month per sender. In this regard, it is more limited than Western Union.
T/T Wire Transfer For Vietnamese Suppliers
T/T, short for Telegraphic transfer and often called Telex, is the most commonly requested payment form. However, there is no buyer protection because it’s a bank-to-bank transfer. This method is prevalent in China, where most manufacturers demand it. We only recommend this method when paying trusted clients you’ve worked with before – similar to sending cash via WU. This method usually takes 3-5 business days for the funds to clear in the supplier’s bank account.
Bank-To-Bank Transfers // Wire Transfers
Bank Transfers are not a good option because you pay excessive fees, but there isn’t much protection from the buyer. Besides, this may take several days, and you can only transfer to certain banks (for instance, Wells Fargo only can transfer to the Agricultural Bank).
OK (But Not Recommended) Methods For Paying Suppliers in Vietnam
PayPal For Paying Vietnamese Suppliers
PayPal is not recommended for large purchases due to the high fees; however, it’s a decent option for the first purchase and samples as it can act as insurance. The only downside is that PayPal often freezes accounts for various reasons. In addition, it has been known to lock people’s money (including mine) while they sort out suspicious account activity.
The upside of using PayPal is that it’s the most used online payment platform with instant payments, and the fees are lower than those of cash-transaction services like Western Union. There are also fewer limits on the amounts you can send out. For instance, you could send $50,000 in a single transaction via PayPal, while the maximum allowed on Western Union is $5000. PayPal’s mobile alternative, XOOM, also offers excellent rates for international payments.
Letters of Credit For Paying Vietnamese Suppliers
Letters of Credit (LOC or L/C) is the preferred purchasing method for large corporations making transactions in millions of dollars. However, it’s incredibly complicated and risky, requiring both parties’ banks to cooperate and often accruing high fees, particularly for small buyers.
L/C payments are the most preferred by Vietnamese suppliers dealing with large quantities. If you place a large order with a supplier, they will likely recommend L/C payments. The documentary letter of credit (L/C) is an international payment method commonly used in Vietnam for export payments. When you use L/C payments, the suppliers get their money on time and the goods’ title.
Note: Some Vietnamese suppliers may reject confirming L/C for payments because other requirements and costs are associated with this payment method. For instance, there may be extension requirements of up to 360 days or more, making it complicated for suppliers to collect their money.
RECOMMENDED: Use The Following Methods To Pay Vietnamese Suppliers
Veem, Transferwise, and OFX are the services we use most at Cosmo. Though we have not used them personally, Wyre and Xoom are highly recommended. From our research, these have the lowest fees. In addition, some of these services don’t charge a fee and make money off the exchange rate. We currently use Wise for most purchases in both China and Vietnam.
Veem for Paying Vietnamese Suppliers
Veem specializes in sending payments to China. Remember that both parties must be signed up with Veem, though we haven’t had a problem convincing almost every factory we’ve worked with to sign up. Veem also has a customer service office in China. Now, we use it for the majority of our transactions. Example: A $20,000 payment had only about $100 in fees. That’s an incredible rate at only .5%.
The main benefit is the modern and safe platform. Most small and medium transactions arrive instantly, while large transactions may take up to 3 business days to clear on Veem. In addition, it is generally more reliable than PayPal, with lower fees.
OFX For Paying Vietnamese Suppliers
OFX provides transfer services to 55 currencies and ties with 115 banks. As a result, OFX and Transferwise work best for non-Chinese businesses. The upside of paying with OFX is that there’s a fixed fee of $15 for all payments below $10,000; there are no fees above that amount.
Wise (Formerly Transferwise) For Paying Vietnamese Suppliers
Transferwise is another solid way to send money and was previously our preferred way of paying factories in China. Cosmo Sourcing is a service used to make international payments and is one of the most widely used services. TransferWise is one of the most extensive online payment services, and the company has meager fees ranging from 0.55%-2.85%. The funds are usually loaded immediately; suppliers can withdraw them to their bank accounts.
Wyre For Paying Vietnamese Suppliers
Wyre - Though we have not personally tested Wyre, several people and companies we work with have recommended it to us. According to our analysis, they have the second-lowest rates behind Veem. We may set up an account and make a transfer to test them and update this post accordingly. According to their website, Wyre only charges a flat 0.2% fee for every transaction.
Alternative (‘Know-What-You’re-Doing’) Methods For Paying Vietnamese Suppliers
Payoneer
Payoneer is a widely used payment service for freelancers and internet entrepreneurs. The company issues a free MasterCard debit card from its website, allowing users to withdraw cash and make digital payments worldwide. The advantage of using Payoneer is that accounts can transfer funds between other accounts at a 0% fee – they only charge bank withdrawal fees (2%).
The Payoneer payment service works similarly to PayPal, and users only need an email to send payments to another user. Like PayPal, this means that if your suppliers have a Payoneer card, you can transfer funds to their cards. Suppliers can then use the card to withdraw cash at any MasterCard ATM in Vietnam and internationally. The withdrawal limit is $5000 in cash daily at any MasterCard ATM.
When To Pay a Vietnam Factory
We always recommend making two payments and doing it with a 30/70 split. You should pay 30 percent before production, the remaining 70% after production, and immediately before the items are shipped.
For the final payment, you must arrange where the handoff occurs. For most Vietnam projects, we recommend that you ensure the incoterms used are FOB, meaning that the goods leave the factories’ possession at the export port. If you are unclear about Trade Terms, check out our guide to the 2020 Incoterms.
Pro-tip: Tie the payments in with Inspections
We recommend you do at least two inspections at Cosmo, one before production to verify the factory and its capability, registration, and more, and a second final inspection after the goods are produced. You should also tie payments to happen after each inspection so that you pay the first payment after a satisfactory pre-production inspection and the final 70% after a satisfactory post-production or pre-shipment inspection. For a detailed guide on Factory inspections in Vietnam, see our guide here!
Final Thoughts On Paying Manufacturers in Vietnam
Anytime you work with a factory overseas, there will be a risk. While doing business with 0% risk is impossible, you can get close to that. To avoid getting scammed or ripped off, you must do your due diligence to ensure you know who you work for and protect payments with trustworthy methods.
Another way to protect yourself is by working with an experienced sourcing company that can help you find a great and trustworthy supplier and walk you through every step of sourcing, manufacturing, and shipping.
Cosmo Sourcing // Your Trusted Partner In Vietnam
Please email us at info@cosmosourcing.com
If you want to source from Vietnam, contact the Cosmo Sourcing team; we have been helping clients source from Vietnam since 2014. Cosmo Sourcing has the skills and the team to find you the best supplier possible. We are also established in China and are among the only companies that can find suppliers in China and Vietnam. Picking the one you think is best.
Our Vietnam Sourcing services allow you to access new manufacturers that you would not be able to in China and avoid Tariffs. Our services are designed to do everything to take your idea, turn it into a product, and ship it to the final destination. Cosmo can do everything from creating a product spec sheet, validation, sourcing, ordering and evaluating samples, arranging inspections, finding freight forwarders, quality assurance, negotiations, and shipping. We aim to handle every single step of your business in Vietnam for you.
If you start a new business, finding products and suppliers for your products is one of many things you need to handle. Our services are designed to handle every part of your business in China and Vietnam so you can focus on the rest of growing your own business.
We have helped clients from Fortune 500 companies, brick-and-mortar stores, FBA sellers, and brand-new businesses. So don’t hesitate to contact us and let us know how we can help you.