Dynamic Currency Conversion

September 10, 2018

When expatriates or tourists visit a foreign country and seek to make a financial transaction they usually gravitate towards a bank they are familiar with.

For many it would be natural to assume that the services they are accustomed to would be replicated across all branches in foreign countries.

This was not the case however for an Australian woman who when visiting Fiji assumed she would be charged a similar fee when she made an ATM withdrawal from an Australian bank.

Using her MasterCard, the consumer was offered two choices – a withdrawal without conversion or a withdrawal with conversion using the Dynamic Currency Conversion.DCC is a service offered by the merchant (card issuer) that enables cardholders travelling abroad to choose whether their transaction should be completed in either the local or the billing currency.

The billing currency being the currency of the country of the card holder. When the cardholder chooses this option, they use the exchange rate provided by the merchant at the time of the transaction.

If they were to use a normal withdrawal, the exchange rate used would be the available rate on the day the bank processes the transaction- which could be days later – and during this time, the rate could potentially change.

The consumer opted for withdrawal with conversion assuming it would cost the same with either option.

It wasn’t until she checked her bank statement later that she realised she was charged substantially more than what a normal withdrawal would have cost her.She then contacted the bank in a bid to understand why she was charged more and was informed that the bank charges a mark-up associated with facilitating the DCC service.

At no point during the withdrawal process was she informed that she would be incurring extra costs having chosen the DCC option.

This forced her to lodge a complaint with the Council. The consumer was greatly concerned as customers would not understand the difference between options ‘withdrawal without conversion compared to withdrawal with conversion’.

Furthermore they were not informed of the ‘mark up’ which prior to completing the transaction making it a non disclosed cost.

The consumer was further concerned that there would be thousands of tourists who while using their MasterCard’s would inadvertently be paying significant amounts of money when using ATM machines that did not disclose the additional markup.

She stated that she found the practice confusing and did not understand what the differences were between withdrawal with conversion and withdrawal without conversion.She also said that it would be unreasonable to present these options at ATM’s and not provide the consumer an explanation of the markup charged.

Consumers would be expected to make decisions about their money in an uncomfortable situation- where other consumers would be queuing to use the ATM. As such a consumer would not have time to adequately make an informed decision.

The Council findings showed that while many may think having the billing converted to the consumer’s home country may be convenient, the downside is that it will be more expensive.DCC was created to benefit consumers by allowing them to see the amount that their card will be charged in the currency of the card’s country of issue.But in these cases the mark-ups charged on the service negates the benefit.

Many consumers do not understand DCC and banks have preyed on their lack of knowledge on the subject as an opportunity to get more money.They point out that the exchange rate mark ups are mostly higher than the card issuer’s currency conversion fees that DCC avoids and therefore in most cases opting for DCC will result in a higher charge to the card holder.

The bank’s lack of effort to highlight this new service to customers is unacceptable and is a blatant disregard of their responsibility towards consumers.

It is imperative that banks create awareness on the extra costs that would be borne by the consumer in choosing the DCC option.The Master Card DCC Compliance Guide indicates each screen message of an ATM or unattended POS terminal offering DCC must include any other mark-up that can be charged and the reason for it being applied.

Why then are banks choosing to exclude such pertinent information during the withdrawal process?

Banks must alert their consumers of the charges and ensure that their customers understand what choosing the DCC option would entail and how much more they would have to fork out for the service.

There must be set standards created to ensure consumers are not beguiled into thinking the DCC service will help them. Council findings indicate that it does not.

Consumers accustomed to travelling overseas normally have ATM services offer only one option where the current international exchange rate applies. Others show costs in both the local and home currency making the transaction clear and transparent. The same must apply in Fiji.

Any consumer facing similar issues is urged to call the Council on 155 or email complaints@consumersfiji.org