Dynamic currency
conversion

Dynamic currency conversion (DCC) is the process of converting a card transaction amount from one currency (payer’s) to another (payee’s). In other words, it is a technology that helps to pay abroad using your payment card when a payment is performed in a foreign currency (i.e. the one that differs from the local one).

Merchants or banks usually provide the DCC service. It is performed when customers pay abroad with a bank card or withdraw money via an ATM, and the currency of their card account differs from the local one. The dynamic conversion implies additional transaction fees that depend on the service provider.

How it works

When a customer decides to pay with a payment card, the merchant's DCC terminal will determine the card-issuing country through the card’s ID number (first six digits). If it’s a foreign card, the payer will be noticed about the available options, and the transaction will be routed through a specific provider offering the dynamic currency conversion service.

Suppose the cardholder chooses to pay in his or her national currency. In that case, the DCC provider will debit the account in the payer’s national currency, and the merchant's account will be credited with the amount of the transaction in the local currency. Providers usually levy fees for this service.

Pros

DCC being offered, the terminal displays the transaction amount in the customer's home currency. Generally, the DCC providers are required to communicate their exchange rates and margins (fees) to cardholders, but not all merchants comply with this obligation.

Cardholders can choose to process the transaction in their national or local currency. Here’s the complete list of advantages of the dynamic currency conversion for those who pay:

• allows to pay in the currency of customers’ choice and make purchases more convenient;
• adds transparency and control through providing detailed information on each transaction (including cardholder statement, currencies quote, and the exchange rate applied to the transaction);
• helps to make purchasing more informed and confident, improving the overall shopping experience.

and these are pros for business owners:

• helps to boost your income, generating additional revenue flows — the conversion fees;
• allows to establish the exchange rates at the POS and reduce the risk of currency fluctuations;
• mitigates the cost of acceptance allowing you to offset the fees for accepting foreign credit cards;
• increases customer satisfaction and loyalty, removing uncertainty and making purchases more convenient;
• ability to accept payments from international payers in their preferred currency attracts new customers and helps your business expand.

Cons

The main drawback of the DCC is the unfavourable exchange rate and fees applied to the transaction. It can result in higher charges from their credit card. And in many cases, the payer is unaware of the additional and often unnecessary costs of a DCC transaction.

The amount of the currency conversion margin added with DCC varies depending on the provider, acquiring bank or payment processor, and merchant. This margin is added to any fees charged by the payer's bank or credit card company when purchasing overseas. In most cases, customers are charged a higher fee using DCC than if they were simply paying in foreign currency.

Having different payment options on your website attract customers from abroad. And if you’re up to scaling your business, it’s a surefire way to do it faster. You just post the prices in currencies you want to support, and you’re ready to accept online payments in them.

The DCC enables your international customers to view prices and pay online in their preferred currency. At the same time, your balance is settled in the currency of your choice. The DCC feature allows you to send payments and make payouts in another currency even if you don’t maintain a balance in it.

The customers are notified about the need for currency conversion during the payment process and see the available options.

Corefy supports an impressive list of currencies (160+) and currency pairs (1000+) to facilitate shopping and selling worldwide. The list comprises the following currency types:

• National
• Cryptocurrency
• Voucher
• Digital
• Technical
• Game
• Virtual
• Cash
• Alternative

Simply put, an exchange rate is the value of one currency versus another. Usually, exchange rates fluctuate based on supply and demand in the market. But sometimes, they are strictly regulated by governments or central banks.

Corefy offers a variety of connected exchange rate sources that get automatic updates. They are used in transaction processing if the payee's and the payer’s currency do not match.

Our payment orchestration platform allows for implementing different exchange rates and set fees per each client and currency pair based on an array of sources (central and commercial banks or FX-rate providers). To increase the overall efficiency, choose from the following types of exchange rates: direct, indirect, commercial, and fixed.

Use the Corefy default schemes or create an unlimited set of customised ones to get maximum efficiency of each transaction. Later, you can edit the name, description, and other features of the scheme rules, or remove the scheme at all.