Understanding dynamic currency conversion (DCC) and how it differs from its traditional counterpart can help you determine how to configure your ecommerce website’s shopping cart. 

As an international digital seller, you already know the challenges that are inherent in doing business with customers from other countries. 

Providing this enhanced payment option can help to increase customer trust by overcoming the obstacles that occur when buying in an unfamiliar monetary denomination.

Traditional currency conversion explained.

In the standard or traditional currency conversion scenario, a customer would press the “buy now” button on the seller’s website, and make their purchase in the foreign merchant’s native currency. 

For example, a French customer would buy goods from a U.S. website using American dollars. The customer’s bank would then convert those dollars into euros at the exchange rate that they set. When the customer’s credit card statement arrives, they will see the final cost, including all fees, in their home currency.

While the traditional method benefits from familiarity, it is difficult for buyers to get a clear idea of the exact costs at the time of purchase. The true amount that they are charged is often only evident weeks later, when their credit card bill arrives.

Dynamic currency conversion explained.

In the method described above, consumers often need to wait days or weeks to understand the true cost they have paid for a product or service. When DCC for international businesses is used, this is not the case because you, the merchant, offer to convert the transaction amount into the customer’s home currency amount at the point of sale. 

The complete cost, including all fees, is displayed to the buyer before the purchase is made. At that time, the person can either accept or decline the DCC offer.

The “dynamic” in DCC means that the currency conversion happens in real time, with the customer being able to lock in the exchange rate at that moment. 

Without this option, the customer will be charged based upon the exchange rate when the transaction is processed, often several days later.

The transparency that is built into dynamic currency conversion is a compelling advantage. However, it can come at a financial cost to both buyer and merchant

Benefits of dynamic currency conversion for merchants.

If you choose to implement dynamic currency conversion for international businesses, you will discover some tangible benefits. For one thing, you can charge customers a currency conversion fee at the time of purchase (of course, this must be fully disclosed). 

In doing so, you initiate a new revenue stream without needing to increase the prices of your merchandise. What’s more, if a bank, processor, or conversion vendor marks up the costs, you can also share in that revenue.

Moreover, you can offer clarity and transparency to your customers. They will see a full breakdown of the costs and fees before making the purchase, and will be offered the option of DCC or the traditional conversion type. 

Should they elect to use DCC, they will find that the amount they see on their product receipt will exactly match their subsequent credit card statement. Providing this visibility may even elevate you above many of your competitors who do not offer a similar DCC choice.

Regulatory and technical aspects.

If you decide to bring DCC into your business, here are some additional considerations to remember. 

For one thing, you will need to ensure that your payment hardware and software can be configured to calculate and accept DCC Your international payment processing provider will need to furnish you with the updated products that make DCC possible.

Additionally, anything you do to implement DCC must be done in accordance with local and national privacy and other regulatory guidelines put forth by card brands and other entities. 

In order to ensure that your company is in compliance with these and other requirements, consult a legal expert, preferably someone with experience in the local requirements set forth by the global partners your business serves.

Finally, you and your staff must be well-trained in the finer points of DCC so that you can explain them to any customer who has questions or concerns. 

Although your headquarters may be thousands of miles away, you still need to be able to address inquiries promptly and effectively, preferably in the language your foreign customers speak. 

Doing this right will usually involve hiring local personnel with DCC expertise, as well as training in providing excellent customer service and product support.

A word about chargebacks.

DCC is designed to bring transparency to international ecommerce. However, even though the customer is made aware of each cost, they may not realize that they are paying on average four percent more for each DCC transaction (the currency conversion fee discussed above). 

There are situations when disgruntled customers opt to file a chargeback once they realize that they have paid more than they would with a traditional conversion.

That being said, you can avoid most chargebacks by fully disclosing all fees and costs. You also need to give buyers a clear choice to use DCC or the traditional currency conversion option. 

As long as you comply with these strict rules, you will prevail in most chargeback disputes.

Offering the option of DCC to your international customers furnishes them with an additional choice that they can accept or decline. As long as you are completely transparent with buyers at the time of purchase, and give them the opportunity to make their choice without your exercising influence in either direction, you can view DCC as a positive addition to your international retail tool kit. 

If you are interested in implementing DCC for customers from other countries, talk to your international payment processing company today to get started.