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DCC: Is It Foreign to You?

By Michelle Graff

Have you ever traveled abroad and charged purchases, only to be surprised when you received your monthly credit card statement because the amount reflected on the statement is higher than you expected it to be?

The reason for this is the fee card issuers charge for providing the service of currency conversion. They assess a conversion fee for each foreign transaction settled, and it's proven to be quite a healthy revenue generator for them. They've been doing it for years.

However, thanks to new technological advances in the payments industry, the dynamics of the currency conversion process in the United States are about to change dramatically. The conversion process and the associated fee income will shift from the issuing side of the business to the acquiring side of the business.

This new solution is called dynamic currency conversion (DCC). Does this sound foreign to you? If so, read on for some insight into DCC and what to look for when partnering with a processor.

All Aboard!

DCC allows merchants to instantly convert international cardholders' purchase amounts into their local currencies at checkout. The solution calculates conversion at a competitive exchange rate and displays the U.S. dollar amount, conversion rate and local currency amount on the receipt.

The processor for the DCC operation assesses a conversion fee, which is similar to what card issuers would charge. The transaction amount that appears on cardholders' monthly statements matches the amount signed for at the time of purchase, preventing surprises once they are back at home.

DCC presents consumers, merchants and merchant level salespeople (MLSs) with a very strong value proposition. The right payment processor will share the conversion fee income with merchants and partners, typically crediting the merchant statements for their share and adding the MLS' share to monthly residual payouts.

A Well-heeled Traveler

DCC is not a new process; this solution has been available in Europe for at least 10 years. Companies such as euroConex Technologies, Ltd. have processed DCC transactions across multiple currencies for years.

euroConex is the European affiliate of NOVA Information Systems and a wholly owned subsidiary of U.S. Bancorp.

The company offers point-of-sale (POS), international POS and e-commerce solutions and provides an integrated payment processing service using a multi-currency platform to financial institutions and merchants in Ireland, the United Kingdom, France, Sweden, the Netherlands, Spain and Poland.

Because of globalization of the payments industry, companies are bringing the underlying network technology to support POS requirements and back-end funding requirements to the United States.

When conducted properly, merchants do not impose DCC services on the cardholders and clearly disclose the terms of the currency conversion in order for cardholders to make informed purchases.

Rules set forth by the card Associations mandate compliance by merchants, processors and third parties offering DCC services. Regulations cover transaction processing requirements, merchant customer service procedures and proper disclosure of the process.

These rules ensure that merchants and processors conduct transactions in the cardholder's choice of currency and minimize the potential for cardholder confusion and disputes relating to DCC services.

MLSs interested in offering this type of solution to their merchants should partner with a processor that has the experience necessary to manage the end-to-end requirements of DCC, not just a third party start-up company looking to take a slice of the pie.

Currency conversion is not just a quick calculation made at the terminal level. Rather, it's a complete process that includes the management of daily treasury exchange rates, the front-end authorization and data capture, POS compliance aligned with card Association rules, back-end reconcilement, settlement and funding, and the ability to properly manage exchange rates for returns, chargebacks and disputes.

A Souvenir to Share

DCC offers a strong value proposition because consumers, merchants and MLSs share in the benefits:

Consumers benefit from:

  • Instant, effortless conversion to currencies with which they are familiar. This helps with buying decisions and prevents surprises when they receive their statements.
  • Very competitive exchange rates that are disclosed on receipts. Often, the conversion rate, including the fee, is less than rates offered by hotels and currency conversion offices.

Merchants benefit from:

  • An opportunity to share in the fees generated by DCC, which are typically rebated on monthly processing statements.
  • Turnkey implementation and simple POS procedures, which reduce training and errors.
  • No change in reports and statements, which all reflect U.S. currency.

MLSs benefit from:

  • An opportunity to share in the fees generated by DCC, usually paid through monthly residuals.
  • An efficient, simple solution that's easy to sell because of its strong value proposition and simple turnkey implementation.

Where Do We Go From Here?

DCC will appeal to merchants of all types in high tourist cities such as Orlando, Fla., Las Vegas or New York, as well as to businesses in travel-oriented industries including lodging, restaurants, gift shops and airports.

A good processor partner can even analyze your merchants' transaction history to identify merchants who accept foreign cards; this will provide a fast track to opportunities based on facts. Terminal solutions are easiest to implement because they often require a simple download to add DCC capabilities.

In fact, businesses that have integrated payments at the POS, can justify the purchase of a stand-alone DCC-only terminal for foreign card transactions because of a strong return on investment.

Don't settle for a fly-by-night provider. As with any new service, do your research and make sure that you partner with an acquirer that truly has the global experience and network infrastructure to make this a profitable venture for you and your customers.

Michelle Graff is Vice President of Marketing for NOVA Information Systems. E-mail her at .

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