When you sell your products or services to customers who live in other countries, you gain boundless opportunities for growth and expanded brand recognition. However, in order to maximize the effectiveness of your global marketing strategy, you will most certainly need to accept the international currencies that your customers use and prefer. Incorporating dynamic currency conversion into your business structure will facilitate easy payments while bringing about optimal customer satisfaction.

Dynamic currency conversion defined.

Dynamic currency conversion (DCC) is a service that is provided by acquirers and the merchants who work with them. When this service is enabled, your customers have the ability to pay either in their native monetary denomination or in yours. When DCC is in place, customers can easily compare what the purchase amount will be in both currencies so that they can make an informed decision about which to choose.

How does dynamic currency conversion work?

First, let’s start with what happens during a purchase made using a conventional currency conversion process.

• An international customer makes a purchase using their credit card.
• A temporary exchange rate is applied during checkout.
• The merchant sends the transaction for clearing and settlement later, sometimes days in the future.
• The final exchange rate is determined when settlement takes place.
• The merchant receives the funds at the advertised price in their own currency.
• The customer is charged a final transaction amount that is converted into their own home currency.

It is important to note that the temporary exchange rate and the final transaction amount are not necessarily equal, which can often lead to confusion for the customer.

Now, let’s look at how DCC works. First, you must let your payment services provider know that you want to begin accepting international currencies. Be sure to ask if they support the specific monetary denominations you wish to take. As long as they do, you will have no problem configuring your point of sale system accordingly. Here is a breakdown of the entire DCC process.

• Your customer enters their credit card information into your ecommerce payment platform.
• Your system detects that the customer’s card is in an international currency and instantly triggers the DCC option.
• The customer will then be presented with the amount that will be paid in both the merchant’s and the shopper’s currency type along with the exchange rate used for conversion and any fees.
• The customer compares the costs and can then make a decision as to which form of currency to use.

In all cases, it is the cardholder who makes the final decision about whether to pay in their native currency or the merchant’s.

Advantages of dynamic currency conversion.

DCC provides numerous benefits to merchants and customers alike. They include the following.

• Transparency inspires customer satisfaction and loyalty. People appreciate full disclosure and honesty, and providing DCC gives shoppers maximum control and choice. Frequently, sellers are rewarded with delighted, long-term customers.
• Informed choice. When consumers are able to compare product costs with their local currency and the merchant’s presented side by side, there are never any nasty surprises either during the purchase or later when the credit card statement comes.
• Fixed exchange rate. Although there will always be exchange costs, using DCC means that these charges will remain exactly what they were at the time of purchase.
• Preferential exchange rates. In many cases, the exchange rate the cardholder receives at time of purchase is more favorable than the one the card issuer would place on it later after adding post-purchase fees.
• Less confusion and fewer chargebacks. Many refund requests happen when a customer believes they are being billed a higher price than they saw at the time of purchase. This does not happen with DCC because amounts are fixed when the product is bought.
• You can generate revenue from the conversion fees on every DCC transaction.
• You can share any revenue from any cost mark-ups with the bank, processor or conversion vendor.

In the end, DCC leads to greater customer satisfaction, enhanced transparency, fewer costly and time-consuming chargebacks, and even added profits for you, the merchant. In other words, DCC is a win-win for both the buyer and the seller.

Downsides to dynamic currency conversion.

Of course, there are some negative points that should also be considered when deciding whether or not to bring DCC into your business model. They include the following.

• Higher cost to customers. Generally, DCC costs about 4% more than the going exchange rate. Although buyers are fully informed about what they will be charged and often value the convenience, they do pay the price.
• After completing a purchase, customers might discover that they were hit with steep mark-up fees. Their response might well be to file a chargeback with their bank.

Avoiding dynamic currency conversion chargebacks.

Although putting DCC in place definitely helps to reduce the number of credit card disputes and refunds you will experience, they do still occur. The good news is that there are some actions you can take to minimize their impact on your business.

• Train all members of your customer staff about how DCC works. They can then be well-equipped to address consumers’ concerns and answer any questions that arise during or after a purchase, thus reducing the likelihood of a chargeback.
• Make it a point to be clear and transparent in all aspects of your business practices, including your pricing and shipping policies. Prominently display your documentation, being sure to use clear wording in the languages that your customers speak. Finally, be available by email, live chat or via the phone to address any questions or concerns in a timely fashion.
• Always leave the decision of which currency to use up to your customer. Don’t try to influence them in any way.

As long as you adhere to the credit card companies’ DCC regulations, train your staff appropriately, and uphold an environment of clarity and transparency across all transactions, you will be able to keep disputes and forced refunds to a manageable, low number. Offering dynamic currency conversion is easy to implement and understand for you, your staff, and your international buyers. It promotes convenience and transparency and helps to inspire trust even for people located thousands of miles from your headquarters. If you are now convinced that DCC is the right move for your international transactions, talk to your payment processing company today about adding it to your ecommerce point of sale platform.