Dynamic currency conversion
Dynamic Currency Conversion (DCC) or Cardholder Preferred Currency (CPC) is a financial service in which holders of credit cards have the cost of a transaction converted to their local currency when making a payment in a foreign currency. Currently this feature is only possible for Visa and MasterCard networks. American Express provides for multi currency transactions for ecommerce merchants.
For example, the following is a typical DCC transaction at point of sale. A cardholder (say, from the United States) that is traveling in Europe presents a Visa/MasterCard for payment for a product/service priced in euros. The credit card details are captured on the point of sale device (POS), which identifies that the card is a USA issued card. The cashier asks the cardholder if he/she would like to pay in US dollars, and if so, the POS converts the euro amount into US dollars based on a set exchange rate. This exchange rate is selected by the merchant, but is usually less favorable to the cardholder than the rate offered by the card issuer[1]. The cardholder signs a receipt that shows the euro amount, rate of exchange and the US dollar amount. The service guarantees that this exact US dollar amount will be debited to the cardholder account, and the exact euro amount will be credited to the merchant’s account. However, the US bank that issued the card may impose an additional foreign transaction fee on the customer.
Prior to scheme rules relating to DCC, cardholder transactions were converted without the need to disclose that the transaction was converted into their home currency, in a process known as "back office DCC". Visa and Mastercard now prohibit this practice and require the customer's consent for DCC, although many travelers have reported that this is not universally followed[2][3].
Many of the largest internet sites (such as Paypal[citation needed], Digital River, hotel booking engines, and Amazon) and mail order companies[clarification needed] are also offering this service[citation needed].
DCC has proved incredibly popular for businesses. Many customers are unaware of the exchange rate and therefore agree to a dynamic currency conversion, resulting in additional revenue for both the merchant and the acquiring bank.
For acquirers DCC also has protected them from Card schemes who are regularly increasing international interchange fees making the Acquiring business more difficult and often loss making. The DCC revenue offsets the increases in interchange fees applied on them to at least make the acquiring business break even.
Among the biggest advantages to travellers according to proponents:
- the visibility of charges made in foreign countries
- the ability to enter expenses more easily (for business travellers)
- EU regulation 2560/2001 could make non-eurozone cash withdrawals within the European Economic Area cheaper for eurozone customers, because euro cash withdrawals are regulated. A Swedish law (SFS 2002:598) combined with the EU resolution does the same thing for Swedish cards if the transaction is in SEK or EUR. Generally, Eurozone banks charge a fixed fee for foreign cash withdrawals while domestic withdrawals are fee of charge. Because of the EU regulation, this makes EEA withdrawals in euros free of charge. For example, let's say that a eurozone card is used for a withdrawal in the UK. With DCC there are two options: processing the transaction in pounds (good exhange rate but a fixed cash withdrawal fee) or processing the transaction in euros (bad exchange rate but no fixed cash withdrawal fee). For small amounts, the latter option may turn out cheaper.
The biggest disadvantage to travellers, of course, is the additional cost that will be incurred as a result of DCC[4][5][6].
The main providers for the Card Present Environment (POS) are
- Pure Commerce
- Planet Payment
- Travelex
- Caxton FX Card
- Elavon
- Global Blue (Formally Global Refund)
- FEXCO DCC
- FINTRAX
- Monex Financial services
- Global Currency Exchange
- Chase Paymentech
- US Financial Services Group
- Concardis
The main providers for the Card Not Present Environment (Internet) are
- Planet Payment
- Travelex
- Pure Commerce
- Continuum Commerce Solutions
- Global Currency Exchange
- FEXCO DCC
- Monex Financial services
- Chase Paymentech
- US Financial Services Group
Gateways supporting DCC for merchants include
[edit] References
- ^ Keck, Gayle (July 31, 2005). "Charge It . . . but Check the Math". Washington Post. http://www.washingtonpost.com/wp-dyn/content/article/2005/07/29/AR2005072900927.html. Retrieved 31 December 2011.
- ^ Collinson, Patrick (12 July 2008). "Going to Spain? Just say no". The Guardian (London). http://www.guardian.co.uk/money/2008/jul/12/foreigncurrency.consumeraffairs. Retrieved 1 May 2010.
- ^ "Dynamic currency exchange". FlyerTalk. http://www.flyertalk.com/forum/milesbuzz/863268-dynamic-currency-exchange.html. Retrieved 31 December 2011.
- ^ Steele, Jason. "The Foreign Conversion Scam". http://blogs.courant.com/travel_columnists_leblanc/2008/03/dynamic-currency-conversion-st.html. Retrieved 31 December 2011.
- ^ Keck, Gayle (July 31, 2005). "Charge It . . . but Check the Math". Washington Post. http://www.washingtonpost.com/wp-dyn/content/article/2005/07/29/AR2005072900927.html. Retrieved 31 December 2011.
- ^ "Dynamic Currency Conversion: Still A Scam". March 9, 2008. courant.com. http://blogs.courant.com/travel_columnists_leblanc/2008/03/dynamic-currency-conversion-st.html. Retrieved 31 December 2011.
