Dynamic currency conversion - Wikipedia

Dynamic currency conversion (DCC) or cardholder preferred currency (CPC) is a process whereby the amount of a credit card transaction is converted at the ... Dynamiccurrencyconversion FromWikipedia,thefreeencyclopedia Jumptonavigation Jumptosearch Foreignexchangeprocess Thisarticleneedsadditionalcitationsforverification.Pleasehelpimprovethisarticlebyaddingcitationstoreliablesources.Unsourcedmaterialmaybechallengedandremoved.Findsources: "Dynamiccurrencyconversion" – news ·newspapers ·books ·scholar ·JSTOR(June2012)(Learnhowandwhentoremovethistemplatemessage) Partofacreditcardslip,indicatingthatDCCtakesplace Dynamiccurrencyconversion(DCC)orcardholderpreferredcurrency(CPC)isaprocesswherebytheamountofacreditcardtransactionisconvertedatthepointofsale,ATMorinternettothecurrencyofthecard'scountryofissue.DCCisgenerallyprovidedbythirdpartyoperatorsinassociationwiththemerchant,andnotbyacardissuer,suchasVisaorMastercard.CardissuerspermitDCCoperatorstoofferDCCinaccordancewiththecardissuers’processingrules.[1][2]However,usingDCC,thecustomerisusuallychargedanamountinexcessofthetransactionamountconvertedatthenormalexchangerate,thoughthismaynotbeobviouslydisclosedtothecustomeratthetime.Themerchant,themerchant'sbankorATMoperatorusuallyimposeamarkuponthetransaction,inadditiontotheexchangeratethatwouldnormallyapply,sometimesbyasmuchas18%.[3] WithoutDCC,thecurrencyconversionwouldtakeplacebythecardissuerwhenthetransactionischargedtothecardholder'sstatement,usuallyadayortwolater,butforanincreasingnumberofcardsinrealtime.Eventhoughthecardissuerwillpublishtheexchangerateusedforconversiononthestatement,mostdonotdisclosetheexchangerateusedtoconvertatransactionatthetimeofpayment.BothVisa[4]andMastercard[5]statethattheratestheypublishinadvanceofatransactionpostingtoacardholder'sstatementareindicative,sincetheratestheyuseforconversioncorrespondtothedateandtimetheyprocessthetransaction,asopposedtotheactualtransactiondate. WithDCC,thecurrencyconversiontakesplaceatthepointofsale.Unlikeacreditcardcompany,aDCCoperatormustdisclosetheexchangerateusedforconversionatthetimeofthetransactionaccordingtocreditcardcompanyruleswhichgovernhowDCCisoffered.[1][2]TheDCCexchangeratemustbebasedonawholesaleinterbankrate,towhichanyadditionalmarkupisthenapplied.Visarequiresthatthismarkupbedisclosedtothecardholder.[1][2]Thecreditcardcompanymaystillchargeanadditionalfeeforchargesmadeoutsidethecardholder'shomecountry,evenwhenthetransactionhasbeenprocessedintheirhomecurrencywithDCC. ProponentsofDCCarguethatcustomerscanbetterunderstandpricesintheirhomecurrency,makingiteasierforbusinesstravelerstokeeptrackoftheirexpenses.Theyalsopointoutthatthecustomerhasfulltransparencyinclusiveofconversionfees,andcanmakeaninformedchoicewhetherornottouseDCC.ThefinancialbenefittothemerchantortheircardprocessormaybeanincentiveforthemerchanttoofferDCCevenwhenitwouldbedisadvantageoustothecustomer.OpponentsofDCCarguethatmanycustomersdonotunderstandDCC,andpointoutthatDCCmarkupsareusuallyhigherthanthecardissuers'currencyconversionfees,andtherefore,inalmostallcases,optingforDCCwillresultinahighercosttothecardholder. DuetothestrategicthreatposedbyDCConVisa'scorerevenues(namely,currencyconversions),in2010VisaattemptedtobanDCC.However,theFederalCourtofAustraliafoundthatVisaactedanti-competitivelytoprotectitsownrevenuesandwasfined$A18million.[6] Contents 1History 2Howitworks 2.1Practicalexample 2.2Limitations 3DCContheInternetandATMs 4Impact 4.1Advantages 4.2Disadvantages 5Regulatoryissues 6DCCproviders 7References 8Externallinks History[edit] Adynamiccurrencyconversionservicewasofferedin1996andcommercializedbyanumberofcompaniesincludingMonexFinancialServices[7]andFexco.[8] Priortothecardschemes(VisaandMasterCard)imposingrulesrelatingtoDCC,cardholdertransactionswereconvertedwithouttheneedtodisclosethatthetransactionwasbeingconvertedintoacustomer'shomecurrency,inaprocessknownas"backofficeDCC".VisaandMasterCardnowprohibitthispracticeandrequirethecustomer'sconsentforDCC,althoughmanytravelershavereportedthatthisisnotuniversallyfollowed.[9][10] VisaChargebackreasoncode76explicitlycoverssituationswherethe"CardholderwasnotadvisedthatDynamicCurrencyConversion(DCC)wouldoccur"or"Cardholderwasrefusedthechoiceofpayinginthemerchant’slocalcurrency".Customershaveastrongchanceofsuccessfullydisputingsuchtransactions,especiallyinsituationswheretheypaywithacreditcardandwhere3-DSecure(suchasVerifiedbyVisaorSecureCode)isnotinvolved.MastercardDCCComplianceteaminvestigatesthecaseandthennotifiestheAcquireroftheirfindings.Ifappropriate,theAcquirerwillalsobeaskedtotakeactiontoremedythecomplaint. MastercardtakeseriouslyanycomplaintfromacustomerbyinvestigatingthecaseforcompliancewithDCCrules,andifthecustomerwasnotgivenachoiceinaDCCtransaction,thecustomer'sbankhasthepossibilitytorefundthecustomerwithachargebacksenttothemerchant'sbank.[11] Howitworks[edit] DCCisprovidedbyDCCoperators,inassociationwiththemerchant,andnotbyacreditcardcompany.MerchantswhowishtoprovideaDCCoptiontotheircustomerswouldsignupforthefacilitywithaDCCoperator.TheDCCoperatorwouldprovidethemerchantwithaspecialDCC-POSterminal. Whenacustomerisreadytopayforatransactionandchoosestopaywithacreditcard,theDCC-POSterminalofaDCCmerchantwilldeterminethecard'scountryofissuefromthecard'sissueridentificationnumber(first6digitsofthecardnumber).Ifitdetectsaforeigncardisbeingused,thenthetransactionwillberoutedthroughtheDCCprovider.TheterminalwillsendtotheDCCoperatorthetransactiondetails,andtheDCCoperatorwouldperformtheusualcardverificationchecks,anddetermineusingitsowncriteriawhethertoofferDCCtothecustomer.Tothispoint,thecustomerisnotawarethatthecardandtransactioninformationhadbeenforwardedtotheDCCoperator.ThecustomeralsodoesnotknowwhotheDCCoperatoris. IftheDCCoperatorisgoingtoofferthecustomerDCC,thePOSterminalwillalsodisplaythetransactionamountinthecustomer'shomecurrency.VisaandMastercardrequiretheDCCprovidertodisclosetheexchangerateandmargintothecardholder,butnotallmerchantscomplywiththisobligation,andothercardissuersmaynothavethatobligation.Thecardholdercanthenselectwhetherthetransactionistobeprocessedinthelocalorhomecurrency. Ifthecardholderchoosestopayintheirhomecurrency,theDCCproviderwillcausethecardholder'saccounttobedebitedbythetransactionamountinthehomecurrency,andthemerchant'saccounttobecreditedwiththeamountinthelocalcurrency.Atregularperiods,usuallymonthly,themerchantwouldalsobecreditedwiththecommissionforDCCtransactions.TheexchangerateriskisbornebytheDCCoperator,whichmaycarrythatriskorsetupsomehedgingarrangementtominimiseortransferthatrisk. SomecardissuersimposeanadditionalforeigntransactionfeeonDCCtransactions,eventhoughtheyaredenominatedinthecard'shomecurrency. Practicalexample[edit] Anexample AnexampleofthedifferencewithDCCcanbeseeninthefollowingimage,wherethesameGBPpurchaseismadetwicejustaftereachother:onewithDCCandonewithoutDCC.Inbothcases,theoriginalamountisGB£6.90andispaidwithaVisacarddenominatedinEUR. Thedifferenceinchargescanbeseenonthecustomer'scardstatement.WithDCC(leftpartoftheaboveimage),theamountbecomesEUR8.20,atanexchangerateof1.1882.TheDCCprovider,inthisexamplethemerchantitself,alsodisclosedthatitisusingtheReutersWholesaleInterbankexchangerateplus2.95%.WithoutDCC(rightpartoftheaboveimage),theamountcanvarywithfluctuationsbetweentheGBPandEURcurrencies,butonthedateofthistransactionitwasEUR8.04(imagebelow). Inthisexample,differenceisjustover2%.Thoughthisdifferencemayseemasmallamountforthecustomer,itcanresultinabigincomestreamfortheDCCproviderandmerchant.OneshouldalsorealisethatevenwithoutDCCthecardissuerconvertsthetransactionamountusingitsownexchangeratesandmargins,whichinthisexamplewas1.16522. Limitations[edit] Themerchant'spoint-of-saleterminalcanonlydetectthecard'scountryofissueandnotthecurrencyoftheaccountthatistobeselected.TheDCCmakesanassumptionthattheaccounthomecurrencyisthecurrencyofthecard'scountryofissue.ThisassumptioncanresultinDCCbeingofferedincorrectly.Forexample,aDCC-enabledterminalintheEurozonewillofferDCCtoacustomerpayingwithadebitcardissuedintheUnitedKingdomonaEurobankaccount.IfthecustomermistakenlychoosesDCC,thenthetransactionwillfirstbeconvertedfromEURtoGBPbytheDCCprovider,andthenfromGBPbacktoEURbytheUKcardissuer,oftenwithitsmarkup. HereisadetailedstepbystepdemonstrationofarepresentativeDCCmisuse—enableDCCinforeigntransactionswithsoleUSdollaraccountcreditcardsissuedinChina.Duetoforeignexchangecontrols,China'sbanksissuelargeamountofsuchcreditcardsforinternationaluse.Intheworstsituation,cardholdersmayhavetoexperence3conversionstofinishthetransactions: Frommerchant'slocalcurrencytoCNYwithmarkupcarriedbyDCCprovider,butcardissuingbankcannotprocess; FromCNYtoUSDwithmarkup(sometimeswaivedbycardissuingbank)carriedbyVisaorMastercardandentersbankaccount; CardholderbuysUSdollarfrombanktopaystatementbalancebeforeduedate(cardissuingbankmaydothisautomatically).[12] Therehavereportedcasesofpoint-of-saleterminalsallowingmerchantstochangethetransactionamountandcurrencyafterthecardholderhasenteredtheirPINandhandedtheterminalbacktothemerchant.Inthisscenario,DCCiscarriedoutwithoutthecardholder'sconsent,eventhoughthereceiptsubsequentlyprintedstatesfalselythatthecardholderhasgiventheirconsent.[13] DCContheInternetandATMs[edit] DCCoperatessimilarlywithInternettransactions.Whenpaymentcardinformationisenteredtofinalizepayment,thesystemcandetectthehomecountryofthecardholderandofferthecardholdertheoptionofpayingintheirhomecurrency. Manycommercialwebsitescandetectthecountryfromwhichaqueryhascomeandquotepricesintermsoftheenquirer'scountry.Oftenthepricesinthelocalcurrencyofthesupplierarenotindicated,andtheexchangerateusedtoconvertpricesisoftenalsonotdisclosed. VisaissuedarulemakingDCCavailableforcashwithdrawalsatATMsasof13April2019.Mastercardnowdoesthesame. IntheVISAexample,whenDCCisNOTchosen,Visaconvertscurrencyatthewholesale(!)rateandaddsa1%chargeforperformingtheconversion.Thecustomergetsthe"real"exchangerate(nocommission)unlessthecardissueraddsachargeforinternationaltransactions.Americanbanks,forexample,oftencharge3%,eventhoughthedebitordertheyreceiveisalreadypresentedforcollectioninUSdollars.Somebanksandotherissuersmakenoextracharge,sothefullinternationaltransactioncostisjustthe1%. WhenDCCisapplied,thealternatecompaniesdotheexchangeandaddthecommissionsdescribedabove,whichhavenolimit.Thebankcardcompany,suchasVisa,stilltakesits1%. Visarule5.9.8.3of13April2019saysthatATMcustomersmustbegivenaclearchoicewhethertouseDCCornot: "AMerchantorATMAcquirerthatoffersDynamicCurrencyConversion (DCC)mustcomplywithallofthefollowing: ... "5Acceptance "—InformtheCardholderthatDCCisoptionalandnotuseanylanguageor proceduresthatmaycausetheCardholdertochooseDCCbydefault "--EnsurethattheCardholderisgivenalltherelevantinformationto allowthemtomakeaclearandtransparentdecisiontoexpresslyagreeto aDCCTransaction" Therealityisotherwise.ThescreenonanATMannouncestheexchangeratethatwillbeusedandaskswhetherthecustomeracceptsorrefusesthatrate.Itappearstobe"takeitorleaveit."ThereisNOexplanationthatrefusalwillnotendthetransaction,butrathermeanstheexchangewillbedonewithoutchargingthecommission.Theclear"choice"requiredbytheruleisnotpresented.Inaddition,thereisusuallyverysmalltypegivingthe %ofthecommissionandsayingthisisnotanadditionalcharge(whichisfalse).Onsomescreenstherewillbeadvicetobesuretoknowtherules,butnowayisprovidedtolearntherulesandbanktellersaregenerallyunawareofthem. Impact[edit] DCCenablesmerchantstoprofitfromtheforeignexchangeconversionthatoccursduringthepaymentprocessforaforeigndenominatedcreditcard.[14]Themerchantwouldnormallyearnamarginonthetransactionwithnoexchangeraterisk,whichisbornebytheDCCoperator. CreditcardacquirersandpaymentgatewaysalsoprofitontheforeignexchangeconversionthatoccursduringthepaymentprocessforforeigndenominatedcreditcardwhenDCCisused. Advantages[edit] DCCenablesacustomertoknowthecostofatransactionintheirhomecurrency.Inanon-DCCtransactionthecustomerwouldnotknowtheexchangeratethatthecreditcardcompanywillapply(andthefinalcost)untilthetransactionappearsonamonthlystatement. Otheradvantagestocustomers,accordingtoproponents,are: theabilitytoviewandthereforeunderstandpricesinforeigncountriesintheirhomecurrency, theabilitytoenterexpensesmoreefficientlyandpromptly,especiallyforbusinesstravellers,and EUregulation2560/2001couldmakenon-eurozonecashwithdrawalswithintheEuropeanEconomicAreacheaperforeurozonecustomersbecauseeurocashwithdrawalsareregulated.ASwedishlaw(SFS2002:598)combinedwiththeEUresolutiondoesthesamethingforSwedishcardsifthetransactionisinSEKorEUR.Generally,Eurozonebankschargeafixedfeefornon-EEAandnon-EURcashwithdrawalswhileEEAwithdrawalsinEURarefreeofcharge.Forexample,ifaEurozonecardisusedforawithdrawalintheUK,withDCCtherearetwooptions-processingthetransactioninGBP(cardissuer'sexchangeratebutafixedcashwithdrawalfee)orprocessingthetransactioninEUR(DCCmarked-upexchangeratebutnofixedcashwithdrawalfee).Forsmallamounts,thelatteroptionwilloftenbecheaper. Disadvantages[edit] ThemainobjectiontoDCCistheunfavorableexchangeratesandfeesbeingappliedonthetransaction,[15]resultinginahigherchargeontheircreditcard,andthatinmanycasesthecustomerisnotawareoftheadditionalandoftenunnecessarycostoftheDCCtransaction. ThesizeoftheforeignexchangemarginaddedusingDCCvariesdependingontheDCCoperator,cardacquirerorpaymentgatewayandmerchant.Thismarginisinadditiontoanychargesleviedbythecustomer'sbankorcreditcardcompanyforaforeignpurchase.Inmostcases,customersarechargedmoreusingDCCthantheywouldhavebeeniftheyhadsimplypaidintheforeigncurrency.[15][16] Regulatoryissues[edit] InMay2010VisaIncattemptedtobanDCConitsnetworkcitingstrategicissuesandultimately(asdescribedbytheACCC)significantfinanciallossestoitsbusiness.Manyprotestsweremadebymerchants,financialinstitutions,andregulators. In2015,VisawasfinedapproximatelyA$18millionplus$2millionincostsforengaginginanti-competitiveconduct,inproceedingsbroughtbytheAustralianCompetition&ConsumerCommission.TheactionwastakenafterVisapartiallyblockedtheuseofDCC1May2010to6October2010.[17] In2019,theEUlegislatorhaspassedRegulation2019/518,amendingRegulation924/2009.Theregulationintroducedtransparencyobligationsforcard-basedpaymenttransactionsatATMsandterminalsandforonlinetransactions.Paymentserviceprovidersmustinformtheircontractualpartnersofthetotalcurrencyconversionchargesasapercentagemark-upcomparedtothelatestavailableeuroforeignexchangereferencerate. DCCproviders[edit] ThemainDCCprovidersare: Alliex[18]basedinSouthKorea ConCardis[19]basedinGermany Cuscal[20]basedinAustralia EuronetWorldwide[21]basedintheUnitedStates PureCommercebasedinAustralia ContinuumCommerceSolutions[22]basedinIreland Elavon[23]basedinUSA Fexco[24]basedinIreland FirstData[25]basedintheUnitedStates GlobalBlue[26]basedinSwitzerland MonexFinancialServices[27]basedinIreland PlanetPayment[28]basedintheUnitedStates PremierTaxFree,partoftheFintraxGroup[29]basedinIreland SixPaymentServices[30]basedinSwitzerland Travelex[31]basedintheUnitedKingdom Worldline[32]basedintheUnitedStates References[edit] ^abc"Archivedcopy"(PDF).Archivedfromtheoriginal(PDF)on18October2020.Retrieved22April2017.{{citeweb}}:CS1maint:archivedcopyastitle(link) ^abchttp://www.mastercard.com/elearning/dcc/docs/DCC%20Guide%2020.02.17%20EN.pdf[bareURLPDF] ^Guy,Anker(4July2016)."Theworst'payinginpoundsabroad'rip-offI'veseen–where£160ofcashcosts£190".MoneySavingExpert.com.Retrieved30August2017. ^"ExchangeRateComp-Visa".usa.visa.com. ^"CurrencyConverter-ForeignExchangeRatesCalculator-Mastercard".www.mastercard.us. ^"Visaorderedtopay$18millionpenaltyforanti-competitiveconductfollowingACCCaction".AustralianCompetition&ConsumerCommission.4September2015.Retrieved26March2021. ^MonexFinancialServices-Dynamiccurrencyconversion ^"DynamicCurrencyConversion(DCC)".Fexco.Retrieved9June2014. ^Collinson,Patrick(12July2008)."GoingtoSpain?Justsayno".TheGuardian.London.Retrieved1May2010. ^"Dynamiccurrencyexchange".FlyerTalk.Retrieved31December2011. ^"DynamicCurrencyConversionComplianceGuide,MasterCard,2016"(PDF). ^"信用卡境外刷卡两大坑之DCC". ^Megan,French(17August2017)."Avoidholidayrip-offsbyALWAYSkeepingholdofthecardmachineAFTERenteringyourPIN".MoneySavingExpert.com.Retrieved30August2017. ^Yang,Maximilian,'DynamicCurrencyConversion–eingrenzüberschreitendesverbraucherpolitischesProblem'(DynamicCurrencyConversion–across-borderconsumerpolicyproblem),[2015]BKR407,408(inGerman),withfurtherreferences. ^abKeck,Gayle(31July2005)."ChargeIt...butChecktheMath".WashingtonPost.Retrieved31December2011. ^"DynamicCurrencyConversion:StillAScam".9March2008.courant.com.Archivedfromtheoriginalon9November2012.Retrieved31December2011. ^"Visaorderedtopay$18millionpenaltyforanti-competitiveconductfollowingACCCaction".AustralianCompetition&ConsumerCommission.4September2015.Retrieved16December2018. ^"Alliex-DCC,MCP".www.alli-ex.com. ^"ConcardisOptipay".www.concardis-optipay.com.Archivedfromtheoriginalon27October2018.Retrieved6January2015. ^"CuscalLimited".www.cuscalpayments.com.au. ^"PureCommerce:DynamicCurrencyConversion,MultiCurrencyPricing,MultiCurrencyProcessing".www.pure-commerce.com. ^"home".www.Continuumcommerce.com. ^"DynamicCurrencyConversion(DCC)".www.elavon.co.uk. ^"Introduction-DynamicCurrencyConversion-FEXCO". ^"DynamicCurrencyConversion(DCC)".FirstData. ^"Shoppingguide,Guidetoshoppingabroad-GlobalBlueofficialsite".globalblue. ^"DynamicCurrencyConversionDCC-Monex".monexfinancialservices. ^"PlanetPayment-Deliversinnovativepaymentprocessingsolutions".PlanetPayment. ^"Home".Fintrax. ^"PaymentServices–SIX".SIX. ^"CurrencyExchange&TravelMoneyatGreatRates-Travelex".Travelex. ^"Globalleaderine-paymenttransactionalservices".Worldline. Externallinks[edit] RepresentativebodyforcompaniesofferingDCC Mastercardcurrencyconverter OfficialVisaexchangerates WashingtonPostArticleaboutDCC(accessmaybepreventedbyPaywall) ArticleaboutDCCBanbyVisa ReviewofDCCbandecision Retrievedfrom"https://en.wikipedia.org/w/index.php?title=Dynamic_currency_conversion&oldid=1079555567" Categories:ForeignexchangemarketCreditcardterminologyHiddencategories:CS1maint:archivedcopyastitleAllarticleswithbareURLsforcitationsArticleswithbareURLsforcitationsfromMarch2022ArticleswithPDFformatbareURLsforcitationsArticleswithshortdescriptionShortdescriptionisdifferentfromWikidataUsedmydatesfromJuly2013ArticlesneedingadditionalreferencesfromJune2012Allarticlesneedingadditionalreferences Navigationmenu Personaltools NotloggedinTalkContributionsCreateaccountLogin Namespaces ArticleTalk English Views ReadEditViewhistory More Search Navigation MainpageContentsCurrenteventsRandomarticleAboutWikipediaContactusDonate Contribute HelpLearntoeditCommunityportalRecentchangesUploadfile Tools WhatlinkshereRelatedchangesUploadfileSpecialpagesPermanentlinkPageinformationCitethispageWikidataitem Print/export DownloadasPDFPrintableversion Languages Čeština日本語中文 Editlinks