PaySquare whitepaper Dynamic Currency Conversion for transactions via your payment terminal or website Extra service for your customers: payments in their own currency 1
Content Introduction: No need to convert currencies 3 Definition: What is (e-)dcc? 4 Benefits (1): Why would your customers want to pay in their own currency? 5 Benefits (2): Why would you want your customers to pay in their own currency? 6 In practice (1): How do DCC payments work? 7 In practice (2): How do e-dcc payments work? 9 Differences: (e-)dcc compared to Multi Currency Service 10 Roles: Which parties are involved in (e-)dcc transactions? 11 A sample transaction: A DCC payment 12 DCC surcharge instead of conversion fee 13 MasterCard and Visa: What are the criteria for (e-)dcc? 14 More information 15 2
Introduction No need to convert currencies Making international payments by credit card couldn t be easier. Consumers and business travellers can use credit cards to make quick, safe and easy purchases almost anywhere in the world. And that includes in countries which use different currencies. Until recently, however, cardholders had to wait to find out the exchange rate at which the payment would be processed. This is no longer the case with the Dynamic Currency Converter. This service means that shops, restaurants and other acceptors of credit cards can now offer customers from non-euro countries the option to pay in their own currency. This doesn t just benefit cardholders, who now know exactly how much they will be paying. Dynamic Currency Conversion also offers merchants major advantages: it lowers the purchasing threshold for customers and earns you an interesting commission. Experience tells us that a high number of customers from non-euro countries will opt for a DCC payment. The hit rate is usually about 50%. The Dynamic Currency Conversion service can be used via your payment terminal and your website. The former is called DCC and the latter e-dcc. The hit rate for e-dcc is usually higher than 60%. This PaySquare white paper contains detailed information on the background, options and practical aspects of (e-)dcc. There are also sections on rules and the (e-)dcc strategies applied by MasterCard and Visa. 3
Definition What is (e-)dcc? If you offer clients from non-euro countries (e-)dcc, you give them the option of paying via MasterCard or Visa in their own currency instead of in euros. The payable amount is immediately converted to the cardholder s currency. In the case of an integrated system, conversion takes place at a real-time exchange rate. If your customer agrees to your offer of paying in his/her own currency, the amount he/she pays is the same as the amount that will later be deducted from his/her account. 4
Benefits (1) Why would your customers want to pay in their own currency? There are several reasons why customers from non-euro countries would want to pay in their own currency rather than in euros. The main benefits of (e-)dcc for cardholders are: There is no need for customers from non-euro countries to hesitate about purchases as they are absolutely certain of the amount they are about to spend; It is easy for your customers to decide whether your price is attractive; The amount your customers pay is the amount that is later deducted from their account. Ambiguous conversions or exchange rate fluctuations are no longer an issue; Customers who use their credit cards during business trips abroad can claim expenses immediately on their return without having to wait for statements to arrive. 5
Benefits (2) Why would you want your customers to pay in their own currency? If you accept credit card payments, there are several reasons for offering customers from non-euro countries the option to pay in their own currency. The main benefits of (e-)dcc for merchants are: You run no exchange rate risk; You expand your client base. Customers who know exactly how much they will pay are more likely to decide to make a purchase and this increases your turnover; This service raises your profile as a customer-friendly business; You receive an attractive commission on each (e-)dcc transaction; You are paid the amount in euros and this saves you a great deal of administrative work; If you accept credit cards via PaySquare and offer (e-)dcc, you pay no fees or monthly subscription fees to be connected up to (e-)dcc; Some DCC providers (organisations specialised in currency services), such as Global Blue, provide clear insight into your results and the results of your (e-)dcc transactions via detailed reports; Some DCC providers, such as Global Blue, will train your employees to use DCC with a view to obtaining the best-possible results; Via PaySquare, you can serve your customers by converting amounts into 30 different foreign currencies, i.e.: Australia dollar (AUD) Brazil real (BRL) Canada dollar (CAD) China yuan renminbi (CNY) Czech Republic koruna (CZK) Denmark krone (DKK) Euro (EUR) Hong Kong dollar (HKD) India rupee (INR) Israel shekel (ILS) Japan yen (JPY) Kazakhstan tenge (KZT) Korea (South) won (KRW) Latvia lat (LVL) Malaysia ringgit (MYR) Mexico peso (MXN) Norway krone (NOK) Poland zloty (PLN) Romania new leu (RON) Russia ruble (RUB) Singapore dollar (SGD) South Africa rand (ZAR) Sweden krona (SEK) Switzerland franc (CHF) Taiwan dollar (TWD) Turkey lira (TRY) UK pound (GBP) Ukraine Hryvna (UAH) United Arab Emirates dirham (AED) US dollar (USD) 6
In practice (1) How do DCC payments work? When a customer wants to pay by credit card, the payment terminal establishes whether the customer is from a non-euro country. If so, the payment terminal displays a notification to this effect. You can then offer the customer the option of paying in his/her own currency. The payment is only made in the customer s own currency if the customer gives explicit permission to do so. Before you complete the transaction, the customer sees the following displayed on the payment terminal: The price in euros; The exchange rate (e.g. Reuters exchange rate including currency conversion fee); The total amount in the customer s currency. EMV chip If your customer pays using a credit card which has an EMV chip, he/she agrees to the payable amount by pressing the OK button. Your customer confirms the option of paying in his/her currency and keys in his/her PIN code to confirm the transaction. The transaction slip states the price in euros, the exchange rate and total amount in the customer s currency. Magnetic strip If your customer pays using a credit card which has a magnetic strip and signature, the customer also agrees to the payable amount by pressing the OK button on the payment terminal. Your customer confirms the option of his/her currency and as is usual in the case of magnetic strip transactions signs the transaction slip. Here, too, the customer receives a transaction slip which states the price in euros, the exchange rate and total amount in the customer s currency. 7
DCC INFORMATION Date: 01/01/2011 10:38 Total: 0,01 EUR Exchange rate: 1 EUR = 1.3424 CHF Transaction currency amount: 0,01 CHF Cardholder has chosen to pay in CHF. This transaction is based on Global Blue reference rate Plus 3% Mv choice is final.transactions can also be conducted in EUR. Service provided by PaySquare & Global Blue. You are offered a choice of currencies. The local currency is EUR. The cardholder currency is CHF. Please choose your preferred currency. DCC INFORMATION POS terminal no.: CT003087 Store: 123456789012 Booking period:0335 Reference: 00002430 VISA Card: xxxxxxxxxxxx0123 Exp. date: 07/12 PAYMENT Date: 01/01/2011 10.38 Trans. no.: 123456 Customer receipt Company name EENDRACHTLAAN 315 3526 LB UTRECHT PaySquare: We pay attention. Total: 0,01 EUR Exchange rate: 1 EUR = 1.3424 CHF Transaction currency amount: 0,01 CHF Retrieval ID: 001234A123B123CDE0 Reference no. 12345678901234 Signature: 8
In practice (2) How do e-dcc payments work? When your customers pay via your website, the payable amount appears on the payment page. The Payment Service Provider which processes the payment for you states this sum in euros. Once the customer has inputted his/her credit card number and other details, the processing system establishes whether the customer is from a non-euro country. If so, the processing system asks the customer whether he/she would like to pay in his/her own currency. The customer sees the following on the screen: The price in euros; The exchange rate including any surcharges; The total amount in the customer s currency. Here, too, it is important that it is the customer who decides whether to pay in his/her own currency. 9
Differences (e-)dcc compared to Multi Currency Service Credit cardholders have been able to pay in their own currency via Multi Currency Service for some time. The main difference with (e-)dcc is that you set the exchange rate yourself when you use Multi Currency Service. This means that you have to keep up-to-date on exchange rates and also that you run an exchange rate risk. When you use (e-)dcc, it is the DCC provider (an organisation specialised in currency services, e.g. Global Blue) which sets the exchange rate and runs the risk. If you accept an (e-)dcc payment, you will earn an attractive commission. This is not the case with Multi Currency Service. When you use (e-)dcc via PaySquare you can have euro amounts converted into 30 different currencies. Multi Currency Service via PaySquare can convert amounts into 10 different currencies. In the case of Multi Currency Service, you can opt to receive payment in the foreign currency. If you opt to use (e-)dcc, you receive payment in euros. 10
Roles Which parties are involved in (e-)dcc transactions? As is the case in all credit card transactions, several parties are involved in (e-)dcc transactions. 1. The acquirer (e.g. PaySquare) Is licensed by credit card companies (e.g. MasterCard or Visa) to conclude contracts with businesses for accepting international payment methods; Connects businesses to (international) payment networks; Processes transactions and makes payments to businesses which accept credit card payments (the acceptor, e.g. merchants); Reports to the acceptor. 2. The (e-)dcc provider (e.g. Global Blue) Specialises in foreign currencies and financial services to international travellers, e.g. tax-free shopping, international bank transfers, foreign exchange bureaus and (e-) DCC; Sets the exchange rate for (e-)dcc transactions; Bears the exchange rate risk in (e-)dcc transactions; Trains retail employees in using DCC so that you obtain the best-possible results; Provides clear insight into the results of your (e-)dcc payments via detailed reports. 3. Payment Service Provider for e-commerce transactions (e.g. Ogone) Sets up the website s payment flows and settles payments to the business behind the website; Enables the technical processing of online payments using one or more payment method such as (e-)dcc. 4. Payment system suppliers DCC can be used on different payment terminals, POS terminals and reservation systems. Please ask your supplier whether DCC can be added to your payment system; If your payment system is compatible, your supplier can ensure that you can accept DCC; If it is impossible to integrate DCC into your payment system, you can use a separate payment terminal for accepting DCC. 11
A sample transaction A DCC payment A customer from the US buys a pair of trousers costing 100 in Scheveningen. He wants to pay using his (US) MasterCard; The payment system establishes that the customer wishes to pay using a credit card from a non-euro country and displays a notification to this effect. The merchant asks the US customer whether he/she wishes to pay in US dollars. If so, the DCC system requests the current exchange rate and fees from the DCC provider via the acquirer; The current exchange rate including exchange rate surcharge is 1.00 = $1.2875. The DCC provider sends this information to the payment terminal via the acquirer; The US customer agrees to payment in US dollars and confirms the transaction. The transaction of $128.75 is sent to the credit card issuer via MasterCard; The issuer can immediately charge 128.75 to the cardholder s account; The DCC provider pays the merchant in Scheveningen the agreed commission out of the exchange rate surcharge. 12
DCC surcharge instead of conversion fee If your customer pays using a credit card issued in a non-euro country, he or she pays the credit card issuer a conversion fee. This fee is usually about 3% of the transaction amount. If an e-dcc payment is made via your website, it is the DCC provider which calculates the currency conversion. This organisation, specialised in foreign currency services, pays your DCC commission out of the exchange rate surcharge. This is done based on the arrangements you have made with your acquirer. At the time of payment, your customer knows exactly how much the transaction will cost and therefore does not have to wait for the credit card statement. In the case of an (e-)dcc payment, the customer is always entitled to full insight into the surcharge which he/she pays as part of the DCC exchange rate. 13
MasterCard and Visa What are the criteria for (e-)dcc? MasterCard and Visa have set specific criteria for (e-)dcc payments. Acquirers such as PaySquare must be able to demonstrate that businesses which accept (e-)dcc payments via their systems meet all these criteria. MasterCard and Visa have drawn up strict rules on the information shown to your customers via payment terminals or your website s payment page: You must always allow your customers to decide for themselves whether to pay in euros or in their own currency; Before your customer confirms the transaction, you must inform him/her of the exchange rate, surcharge and total amount in the customer s own currency; Once your customer has seen the applied exchange rate and total amount in his/her own currency, he/she must be given the opportunity to reject the (e-)dcc transaction and opt to pay in euros; Even after completion of the (e-)dcc transaction, your customer is entitled to cancel the transaction or opt to pay in euros. To do so, your customer must be able to demonstrate that the transaction was completed without you explicitly offering the option of paying in euros. It is therefore important that you instruct your employees clearly: always allow customers to decide whether to pay in euros or in their own currency; The cardholder has the option of objecting in retrospect to the exchange rate applied in the (e-)dcc transaction. Any restitution must always be made in the same currency as the original (e-)dcc transaction. 14
More information You can find more information on www.paysquare.be and www.global-blue.com. For more information on (e-)dcc: PaySquare, Merchant Services department T 00800 729 000 00 (Mondays to Fridays from 8.30am to 5.30pm) E merchantservices@paysquare.eu No rights may be derived from the content of this white paper. The information it contains was obtained from generally available sources. We bear no liability for printing or typesetting errors. As a professional payments partner, we are happy to provide pro-active and objective information on relevant topics via our white papers. These describe solutions relating to a wide range of topics which meet tangible needs in the market. 15
PaySquare BV Eendrachtlaan 315 3526 LB Utrecht P.O. box 30600 3503 AJ Utrecht T 00800-729 000 00 E merchantservices@paysquare.eu www.paysquare.lu PaySquare BV Chamber of Commerce 30196418 8.2007BL 07.13