What is currency conversion?

Currency conversion is the process of exchanging one currency for another at an agreed exchange rate, which can occur in both transactions and settlements. We provide a currency conversion tool that helps the merchants automatically convert their prices into different currencies or settle in a selected currency based on the exchange rate designated by themselves or the acquirers.

Our currency conversion tool brings the merchants several features: Dynamic currency conversion, Multi-currency pricing, FX rate inquiry, Acquirer multi-currency request, and Persistent settlement.

Dynamic currency conversion (DCC)

The service enables the merchant to use a DCC FX rate to re-quote its products in cardholder's currencies and make settlements in local currency. When requesting EVO Cloud, the merchant is required to send the local currency.

Use case

Let's say you quote all your products in USD and a customer from the United Kingdom comes to your website and wants to buy 10 USD goods online. The customer's bank account is in British Pounds (GBP), and the current exchange rate is 1 USD = 0.82 GBP.

Without DCC, the customer's bank would convert the 10 USD transaction into GBP, and the customer would be charged 8.2 GBP based on the bank's exchange rate. With DCC, you can offer the customer the option to pay in GBP at the time of purchase.

If the customer chooses to pay in GBP using DCC, you will receive the settlement fund of 10 USD in this payment, and your acquirer can charge the customer a conversion fee (DCC markup), which will be added to the exchange rate. Let's say the DCC markup is set as 0.5%, and the acquirer uses an exchange rate of 1 USD = 0.815 GBP. The final billing cost of the customer is 8.19 GBP, which is better than the cost using the customer's bank rate.

However, if the acquirer uses an exchange rate of 1 USD = 0.818 GBP, the final billing cost of the customer is 8.22 GBP, which is worse than the cost using the customer's bank rate.

Conclusion

DCC provides convenience to the customer by allowing them to pay in their own currency, while you benefit by receiving the payment in USD without incurring any currency conversion fees. However, it's important to note that the customer may end up paying a higher overall amount due to the conversion fee charged by the payment processor.

Multi-currency pricing (MCP)

The service enables the merchant to use an MCP FX rate to re-quote its products in multiple currencies and make guaranteed settlements in local currency. When requesting EVO Cloud, the merchant is required to send the settlement currency as the local currency.

Use case

Let's say you quote all your products in the US site of your online marketplace in USD. Now you want to expand your global business in Hong Kong and Japan and re-quote the products in HKD and JPY in each of the new sites. You want to use a fair exchange rate to convert the price of the product, and at the same time be able to receive payment according to the original price of the product in USD.

MCP exchange rate can help you quote your products in multiple currencies at one time on your website, and at the same time settle with the original product prices in your local currency. Because of the guaranteed risk, your acquirer can add the guaranteed service fee (MCP markup), which will be added to the exchange rate.

Similar to DCC, with MCP, the final billing cost of the customer may be better or worse than the cost using the customer's bank rate.

Conclusion

MCP is an extremely important feature of your website if you want to improve customer experience when expanding globally. By displaying prices in a customer's local currency, it is easier for them to understand the cost of a product or service. This can lead to increased trust in your brand while may result in higher guaranteed service fees.

FX rate inquiry

The service enables the merchant to receive a daily FX rate for reference and use it to re-quote its products.

Use case

Let's say you have a US site and a Japanese site of your online marketplace and you currently receive all settlement funds in USD with MCP since you operate all your business in the US. Now you decide to create a local team in Japan and you want to receive the settlement funds of your Japanese site in JPY for your local operation use.

You can use the FX rate inquiry feature to change the price of the products in original USD to the price of the goods in JPY. Let's say you receive 1 USD = 135 JPY, and you then quote the products in 1350 JPY which has an original value of 10 USD. A customer comes to your Japanese site and buys the 1350 JPY goods. On the settlement day, you will receive the 1350 JPY deducting the transaction fee charged by your acquirer as the settlement funds.

You can discuss with your acquirer to determine the FX rate source and markup. The higher you set up the markup, the higher the value you receive in your settlement amount.

Conclusion

The FX rate inquiry is a reference feature. You can also use it only to check the daily FX rate. The key difference between MCP and FX rate inquiry is that MCP is a guaranteed price, guaranteeing the settlement amounts equalling the amount of the local price.

Acquirer multi-currency request

The service enables the acquirer to convert the merchant transaction currency into the transaction currency as PSP required.

The Payment Service Provider (PSP) is the upstream payment processor, and all the transactions will be routed to the PSP, for example, global card schemes including Visa, Mastercard, JCB, American Express, and Discover, or local payment channels including OPN, Komoju, iPay88, Smartro, and others.

Use case

Most local payment channels only support one or two transaction currencies. Without this Acquirer multi-currency request feature, the acquirer can only send the specified currency according to the requirements of the PSP; with this feature, the acquirer does not need to follow the requirements of the PSP and can send any currency. The acquirer can specify the transaction currency and markup, and EVO Cloud will convert the currency and amount according to the requirements of the acquirer, and send the transaction to the PSP.

Conclusion

This feature provides more flexible business scenarios for the acquirer so that the acquirer can use multiple currencies to initiate a transaction request when facing a single currency PSP and enjoy the FX rate markup.

Persistent settlement

The service enables the merchant to get settled in a specified currency. EVO Cloud will calculate the settlement amount by using the FX rate between the transaction currencies and the settlement currency.

Use case

Let's say you have different currencies and prices on different sites and want to settle in a unified currency.

Product 1 Sold: 1000 JPY

Product 2 Sold: 100 THB

Product 3 Sold: 100 HKD

Settle in: USD

The Persistent settlement will provide you with a set of settlement FX rates, which may be added with markup by your acquirer.

100 JPY = 0.73 USD

1 THB = 0.028 USD

1 HKD = 0.13 USD

The total settlement amount is 23.1 USD deducting the transaction processing fee.

Conclusion

This feature provides you with the ability to settle in a unified currency but requires you to bear part of the exchange risk.

Contact us

By setting in the EVO Cloud system, merchants and acquirers can implement different currency conversion scenarios. You can read and choose one scenario, or contact our payment experts to customize a solution for you.