Complete guide to Dynamic Currency Conversion

With the ever-growing global economy, the need to facilitate international payments is becoming increasingly apparent. A solution to this can be found in the face of Dynamic Currency Conversion (DCC). The service, which offers a fixed exchange rate and certainty on the final billing amount, undoubtedly has many advantages for businesses and customers alike. But in order for both parties to get the most out of it, it is important to first understand how the service works.

So what exactly is DCC, how does it work, and are there chargeback risks? The answers to all these questions and more can be found in this blog post.

What is the Dynamic Currency Conversion?

Dynamic Currency Conversion is a payment service provided by acquirers and their merchants. It essentially allows foreign cardholders the option to choose whether to pay in the local currency or their billing currency. 

The DCC option removes any ambiguity around the final price that the cardholder will pay. This is because they will be able to compare the purchase amount in both currencies and make an informed decision. In addition, they will have a clear idea of their spending at the time of the sale. 

It is, however, important to note that the decision to accept or reject it always lies with the cardholder.

How DCC works

The way Dynamic Currency Conversion works is to convert the local currency into the cardholder’s currency. Processing such a transaction is simple and requires minimal steps. The POS device itself triggers the service automatically at the point of sale when it detects that the card is foreign. The only action required is for the client to choose whether to accept it or not.

The DCC service is available to all myPOS merchants and it is free of charge. The only condition for the service is for the cardholder’s billing currency to be supported by us.

To help you better understand how Dynamic Currency Conversion works, we’ve gathered all the necessary steps here:

1. The customer swipes their card through the magstripe of the POS terminal or taps it on the chip reader.
2. The device detects that the card is in a non-local currency and automatically triggers the option.
3. The POS terminal screen or the PIN PAD will then show the amount in the local currency, the billing currency and the exchange rate. Depending on the device, the customer may have to scroll down to see all the information.
4. The cardholder evaluates both options, selects the currency they want to proceed with and confirms the transaction.

In case the DCC option has been chosen, the receipt will show the purchase amount in the local currency, the applied exchange rate and the amount in the cardholder’s currency.

It’s important to note here that the cardholder has the right to terminate the purchase and process the payment as a non-DDC before the transaction is sent for authorisation.

What are the benefits of DCC transactions

Dynamic Currency Conversion offers numerous benefits to businesses and customers alike, making it a win-win situation. Here are some examples of the main advantages Dynamic Currency Conversion brings about:

• Improved customer satisfaction and loyalty

By being flexible and transparent with your customers and providing more options for them, you improve their experience when purchasing from you. This in turn increases the loyalty of your customers and encourages recurring activity.

• Comparison of the amount in both currencies

With the option to see the purchase amount in both the local currency and their home currency, customers can assess the conversion rate and make an informed decision on which suits them better.

• Locked-in exchange rate

One of the most prominent advantages of DCC transactions is the fixed rate. This offers customers the security of knowing the exact amount they are paying at the time of the purchase, without having to worry about handling multiple currencies or conversion rates.

• Preferential exchange rates

With such transactions, often the exchange rate proves to be more favourable for the cardholder than the one the card issuer will apply later on. If a purchase is processed as a non-DCC, the exchange rate may end up higher than expected because of additional post-purchase fees.

• Minimised disputes and chargebacks

International payments without it can hide a higher risk of chargeback. That’s because a customer may fail to recognise the payment due to a price that seems higher than the cardholder expected. 

How to avoid DCC chargebacks

Chargebacks on Dynamic Currency Conversion transactions may occur when the cardholder does not recognise the payment. This may be a result of them not fully understanding the terms surrounding DCC or them not being the one to select the option. To avoid having to deal with chargebacks, consider the following:

• Inform all members of your staff about the service so they know how to react when handling international transactions.
• Always be honest, open, informative and transparent with your customers.
• Never choose the option by default, especially without the cardholder’s knowledge.
• Do not try to influence the decision of your customer whether to avail of the service or not.

Takeaways

Dynamic Currency Conversion is a service, which provides international cardholders with the freedom to choose whether to pay in the local currency or their billing currency at the point of sale. The service is free of charge and usually offers preferential exchange rates. 

To avail of the service, the customer should simply select their home currency when the option appears on the screen of the card machine. For their part, merchants have a responsibility to help their customers make an informed decision regarding the DCC service, but never to choose the option by default or without consulting the cardholder first.

Disclaimer: Please be aware that the contents of this article and the myPOS Blog, in general, should not be interpreted as legal, monetary, tax, or any other kind of professional advice. You should always seek to consult with a professional before taking action, since the particulars of your situation may materially differ from other cases.