How does dynamic currency conversion work with card networks?
Dynamic currency conversion lets a cardholder pay in the card’s home currency at a foreign merchant. The merchant’s provider converts the amount at the point of sale and shows the rate and markup. If the cardholder declines, the payment is made in the local currency and the card network converts it, with the issuer adding any fee.
In detail
Every cross-border card payment needs a currency conversion. The question is who performs it.
Without DCC
The merchant charges in its local currency. The card network converts the amount into the card’s currency using its own exchange rate, and the issuer may add a foreign transaction fee. The cardholder sees the final amount on the statement.
With DCC
- The terminal or checkout detects a foreign card from its number.
- It offers a choice: pay in local currency or in the card’s currency.
- If the cardholder chooses the home currency, the DCC provider applies its rate and markup, and the final amount is shown before confirmation.
- The transaction is sent to the network in the cardholder’s currency.
Card networks allow DCC under conditions: the cardholder must be offered a real choice, see the exchange rate and markup, and be able to refuse. In the EU, rules on cross-border payments also require the markup to be shown against a reference rate.
For merchants, DCC brings a share of the conversion margin. For cardholders, it gives certainty about the amount, often at a higher rate than the network’s.
See dynamic currency conversion for the detail and card networks for the roles involved. Operators offer it through acquirers in their global payment network.