The market for Dynamic
Currency Conversion (DCC), where consumers are offered the opportunity to pay
in their home currency regardless of where they actually make the purchase, represents
a massive opportunity.
When Visa lifted its moratorium
in 2010, allowing its acquirer customers to activate new accounts and new
merchant locations for DCC in all regions, I expected a much more prolific
growth in the number of companies and merchants offering this service. Without those Visa limitations, new DCC
participants into the market could further capitalise on foreign spending by converting
new customers, while at the same time increasing their revenue from foreign
transactions.
The market is ripe for
this type of service. The global economy
is set to record 3.1% growth in 2013 with the IMF predicting global GDP to grow
by 3.8% in 2014. International tourist
arrivals worldwide are set to increase by 3.3% a year from 2010 to 2030 to
reach 1.8 billion by 2030. Business
travel alone recorded 212 million arrivals globally last year.
Unfair practices of DCC are
being ruled out. In Australia, in
February this year, the competition regulator launched a case against Visa in support of fairer DCC
services. The Regulator alleged that the
company had abused its market power by preventing customers from using a
currency of their choice when carrying out their international shopping. In other words they were accusing Visa of
actively limiting consumer choice by preventing retail stores in Australia from
offering DCC or preventing businesses from supplying DCC services on ATMs. Although Visa is asserting the opposite
stating it will “vigorously defend itself” against these claims, the reality
looks like Visa is simply not keen to drive the growth in any competing DCC
services as this represents a loss to their own earnings from the
transaction.
As of September this year Brazilian
banks, Itaú and Bradesco, no longer allow DCC on purchases made with credit
cards they issue. The Association of
Brazilian Credit Cards and Services Companies (Abecs) has recommended against
the practice stating that they were dealing with a number of complaints from
Brazilian consumers who bought goods in Brazilian Reals but were confused by
credit-card statements showing the purchase in dollars.
It’s too early too tell the
impact of this decision on e-commerce merchants selling into Brazil but
certainly not being able to pay for products on foreign websites in Brazilian Reals
will adversely affect sales for international e-commerce merchants. I think this decision will illustrate how a
lack of DCC services ultimately does not serve the consumer well.
Despite regulatory issues
like this, there is still plenty of growth available in this industry over the
next 5 years. I’ve extolled the benefits
of DCC before in my earlier blog namely the ability for consumers to view foreign prices in their own currency
therefore making a more informed purchase.
Equally I’ve highlighted that some merchants are using it as an excuse
to levy unfairly high fees which fuels consumer fears that this type of
currency conversion is artificially higher than actual market rates.
The market is
ready: the global economy is returning to levels of stability and tourism and business
travel is growing annually. The key
here, on the merchants’ side, is to ensure fair fee levels. Once there is complete transparency and trust
in this system, there are infinite possibilities for merchants to get on board
and offer DCC as part of their service.
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