Is DCC legal in the EU?
Yes, with conditions. Since April 2020, Regulation (EU) 2019/518, now part of Regulation 2021/1230, requires the charge to be shown as a percentage markup over the ECB reference rate, both amounts displayed before payment, and the local-currency option offered. The markup itself is not capped. Our PSD3 episode covers the wider rulebook.
In detail
Yes, with conditions. Since April 2020, Regulation (EU) 2019/518, now part of Regulation 2021/1230, requires the charge to be shown as a percentage markup over the ECB reference rate, both amounts displayed before payment, and the local-currency option offered. The markup itself is not capped. Our PSD3 episode covers the wider rulebook.
What the regulation requires at the terminal
Regulation (EU) 2019/518, since codified into Regulation (EU) 2021/1230, added currency conversion rules to the cross-border payments regulation. Since 19 April 2020, anyone offering conversion at an ATM or point of sale in the EU must express the total conversion charges as a percentage markup over the latest ECB euro reference rate, show the amount in both currencies before the payment starts, and tell the payer they can pay in the payee’s currency instead.
What the cardholder’s bank must send
Since 19 April 2021, the payer’s own bank must send an electronic message with its own markup after the first card payment in another EU currency, and then at least once a month per currency, unless the customer opts out. The UK kept the same text as retained law after Brexit.
What the rules do not do
The regulation did not ban DCC or cap the markup. For a platform, an EU terminal or checkout that shows a rate without an ECB-referenced percentage is non-compliant on day one.
More detail in our #PayDecoding episode on dynamic currency conversion.