By crossborderfees September 2, 2025
With the increase of global travel and cross-border eCommerce, there are more and more customers paying in foreign currencies. To simplify these types of transactions, many merchants provide dynamic currency conversion (DCC) at time of purchase or checkout online. It sounds like a win-win, but the situation is a bit more complicated.
Dynamic Currency Conversion offers revenue to Merchants. It is a convenience for customers but often at an undisclosed cost. It is important to grasp the reality of how it impacts both sides in order to make educated choices.
In this post, we will take a closer look at what dynamic currency conversion is, how it is processed, its pros, its cons, and the future of dynamic currency conversion in the world of global commerce.
What Is Dynamic Currency Conversion (DCC)?
DCC is a payment service that enables customers to directly pay in their home currency rather than the currency of the merchant. For example:
- An American tourist in Paris settles up dinner at a French restaurant with her bank issued card. At checkout, the terminal asks if the purchase should be made in U.S. dollars instead of euros.
- An Australian consumer makes a purchase at a UK e-store and is offered the option to purchase in Australian dollars rather than pounds.
In either event, the conversion is made automatically by the payment processor or the merchant’s service provider. Customers also see the price in their own money before they agree to the deal.
How Does Dynamic Currency Conversion Work?
The dynamic currency conversion works as follows:
- Transaction initiation – Foreign currency card presented by customer.
- DCC offer – The card is read at the terminal or online checkout, and the terminal or checkout asks if the cardholder wants to have the transaction converted into their home currency.
- Exchange rate applied – Here you are presented a conversion rate offered by the DCC provider.
- Customer decision – The customer accepts or refuses the conversion..
- Settlement – If approved, the transaction is conducted in the customer’s currency and includes surcharges.
Although it offers clarity on what the final charge would be in the customer’s usual currency, the rates can come with a higher markups than rates on traditional card networks.
Benefits of Dynamic Currency Conversion for Merchants
Dynamic currency conversion may seem like an appealing option for merchants. Key benefits include:
1. Additional Revenue
Merchants and sellers that offer DCC may be able to obtain part of the commission paid by the DCC provider. This represents an additional source of revenue, especially in areas with a lot of tourists.
2. Enhanced Customer Experience
Some customers find it convenient to have it in their home currency. It eliminates the need to manually calculate conversions.
3. Transparency at Checkout
By showing the converted amount upfront, vendors might win customers’ trust who dislike surprises on their bank statements later.
4. Competitive Advantage in Tourism Hubs
International hotels, restaurants, and stores have been known to use dynamic currency conversion to attract foreign travelers who want to make payment as simple as possible.
Benefits of Dynamic Currency Conversion for Customers
As for the customer, dynamic currency conversion may:
- Clarity on Costs – Customers see in the currency they are used to.
- Convenience – No need to mentally calculate conversion rates or wait to see charges later.
- Budget Control – Particularly for corporate travelers, having a firm understanding of costs in their home currency can help with accounting and reimbursement.
Drawbacks of Dynamic Currency Conversion for Merchants
However, dynamic currency conversion also has its cons for sellers:
1. Risk of Negative Customer Perception
Customers who discover that they have been overcharged for fees by a particular percentage may blame the merchant, even though the DCC provider determines fees. This can hurt trust and repeated business.
2. Training Requirements
Staff will need to be educated to communicate DCC to customers clearly, particularly in stores, thus ensuring that there is no opportunity for confusion or misunderstanding.
3. Revenue vs. Reputation Trade-Off
Merchants make commissions but the unhappy customers just might leave negative reviews, which are more costly than short-term profits.
Drawbacks of Dynamic Currency Conversion for Customers
For customers, the negatives associated with dynamic currency conversion far exceed the positives:
1. Higher Costs
The exchange rates provided at the point of sale during dynamic currency conversion often include quite high margins, up to 3-5% over the usual rate.
2. Hidden Fees
In addition to the conversion markup, banks can still impose foreign transaction fees or cross-border fees, resulting in double costs.
3. Lack of Informed Consent
In high-volume settings like restaurants or retail locations, customers might not realize that they are choosing DCC or not be offered a choice at all.
4. Illusion of Transparency
Customers may see the converted amount at the start, but frequently not understanding they are being charged on a mark-up exchange rate.
Real-Life Example
Imagine you’re an American traveler in Spain:
- The meal costs €100.
- Without DCC: Your card converts the payment at €1 = $1.10, so you pay $110 (plus possible foreign transaction fees).
- With DCC: The merchant’s DCC provider offers a conversion rate of €1 = $1.15. You pay $115 upfront, and your bank may still charge a foreign transaction fee.
In this case, the cardholder paid extra for the convenience of dynamic currency conversion, or the merchant received a little bonus.
Best Practices for Merchants Offering DCC
If you choose to offer DCC in your business, these are some of the best practices to consider:
- Offer Choice and Choice Again – Ideally give the customer the option to say no to DCC.
- Be Up Front – Make the exchange rate (and any fees) known.
- Staff – Train staff so they can tell customers the value of paying in local you vs. home currency.
- Trust – Don’t hard-sell customers on DCC, it will damage longer-term loyalty.
- Weigh Revenue vs. Reputation – Small commissions may not be worth the loss of customer goodwill.
The Future of Dynamic Currency Conversion
The future of dynamic currency conversion depends on evolving consumer expectations and regulatory changes. Key trends include:
- Increased Transparency – Regulators are going to put pressure on the industry to better disclose on the costs and exchange rates it’s providing.
- Smarter Technology – Artificial intelligence can help systems to adjust rates and bring in a better deal for consumers.
- Competition from Digital Wallets – Digital wallets already enable users to pay in home currencies at rates that are competitive.
- Shift in Consumer Awareness – With educated and informed customers, they will come increasingly to refuse DCC in favor of cheaper alternatives.
Merchants will need to balance short-term revenue gains with long-term trust-building.
Actionable Tips for Customers
- Always Know The Rate – If DCC is offered, pull up an exchange rate on a currency app and compare.
- Opt for Local Currency – The local currency costs less at times.
- Leverage Travel Cards – Various credit cards do not charge foreign transaction feesand then kind of DCC goes out the window.
- Pay attention at Checkout – Train yourself to spot DCC offers and decline them if the rate looks unfavorable.
- Know the local currency – Basic familiarity reduces reliance on “convenience” solutions.
Conclusion
Dynamic currency conversion was intended to make it easier to pay in another country, but not all the advantages — or the disadvantages — are shared with you. For merchants, it can mean extra revenue and a feeling of convenience for customers. But for consumers, it often means high prices from inflated exchange rates and hidden fees.
The answer is transparency and choice. Merchants should disclose rates prominently, and should never push a customer to make a decision harder or faster, while consumers need to decide when DCC makes sense for them rather than always pick the easy or handed down DCC.
As international travel grows, dynamic currency conversion will continue the subject of controversy. But with better understanding, fairer regulation and the advent of alternative payment methods, both retailers and their customers can use it more wisely.
FAQs on Dynamic Currency Conversion
1. What is dynamic currency conversion?
It’s a service that lets customers pay in their home currency when making international purchases instead of the merchant’s local currency.
2. Is dynamic currency conversion good for customers?
Not usually. While it shows prices in familiar currency, the exchange rates often include markups that make it more expensive.
3. Do merchants benefit from dynamic currency conversion?
Yes, merchants can earn commissions, but they risk damaging customer trust if customers feel overcharged.
4. Should I accept dynamic currency conversion when traveling?
Generally, it’s better to decline and pay in the local currency for better rates.
5. What alternatives exist to dynamic currency conversion?
Options include multi-currency pricing, paying in local currency, or using digital wallets with transparent exchange rates.