Dynamic Currency Conversion (DCC) is a financial service that allows international cardholders to make purchases or withdraw cash in their home currency while traveling abroad or shopping on foreign websites.
When a transaction is initiated in a foreign country, DCC provides the customer with the option to pay in the local currency or convert the amount into their own currency at the point of sale or ATM. The conversion is done in real time using exchange rates provided by a third-party DCC provider or the merchant's payment processor.
While this feature offers greater transparency and shows the exact amount a customer will be charged in their native currency, it often comes with a markup on the exchange rate, typically higher than what the cardholder’s bank would offer. For merchants, DCC can be a revenue-generating tool since they often receive a share of the conversion fee.
However, for consumers, the convenience of instant currency conversion must be weighed against the potential added costs. Financial experts generally recommend comparing DCC rates with those of the card issuer before opting in.
Dynamic Currency Conversion (DCC) is a payment feature that allows international customers to complete transactions in their home currency rather than the local currency of the merchant. This service is offered at physical point-of-sale terminals, online checkouts, and ATMs.
The DCC process is designed to provide immediate transparency and show the exact amount the customer will be charged in their own currency, including the exchange rate used. However, this convenience often comes at a higher cost due to added conversion fees or less favorable exchange rates compared to what the customer’s bank might offer. For merchants, DCC can be an additional source of revenue, as they typically share in the fees collected from the currency conversion.
Here’s how the DCC process works:
The main difference between Dynamic Currency Conversion (DCC) and Traditional Currency Conversion lies in who performs the currency conversion and when it happens during a transaction.
Dynamic Currency Conversion (DCC) occurs at the point of sale or ATM. When a customer pays with a foreign card, they are given the option to complete the transaction in their home currency. If they choose this option, the conversion is done immediately by the merchant’s payment processor or a third-party DCC provider, using an exchange rate that usually includes a markup. The customer sees the final amount in their own currency before completing the purchase. The main benefit is real-time transparency, but the downside is the potentially unfavorable exchange rate and added fees.
Traditional Currency Conversion, on the other hand, happens after the transaction, typically by the cardholder’s issuing bank. The customer pays in the local currency of the merchant, and their bank later converts the amount into the customer’s home currency using the bank’s exchange rate, which is often more competitive than DCC rates. Any foreign transaction fees or markups are applied by the card issuer, and the customer only sees the final converted amount when the transaction posts to their account.
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