Ep. 08 - DCC; friend or foe?, Stripe Sessions, CFPB BNPL ruling musings, Revolut POS 2.0, Podcast & more..
Grant Evans
VP @ Worldpay | LinkedIn Top Voice | Co-Host of The Payments Shed Podcast | Creator of The Payments Shed Newsletter
Welcome to episode eight of The Payments Shed, aka the pre-Money 2020 special edition episode.
That’s right, I’ll be following up shortly with my insights from Money 2020 next week after a full week on location in Amsterdam, meeting and greeting the very best the payments industry has to offer, as well as hearing from the merchant side of the fence in 2024. It is my favourite event of the year and to say I'm looking forward to it would be an understatement!
As for right now, I bring this episode to you from a very sunny Barcelona and Madrid, where I am currently meeting some of our amazing partners and merchants alongside the fantastic AJ Davison. Which brings me onto the first topic of this newsletter, Dynamic Currency Conversion.
Dynamic Currency Conversion – Friend or Foe?
Back in Spain yet again, I feel the need to write about Dynamic Currency Conversion and its pretty much blanket adoption on terminals out here. I should however first mention our hotels decade old Spire terminal, which I think probably dropped out of the scope of PCI Compliance in 2014 😂 I’ll try to get a picture of that bad boy in the morning after I’ve finished having nightmares about it. 🤦🏻
Anyway, Dynamic Currency Conversion, or DCC as it is more often referred to, as you know we love a good old abbreviation in the wonderful world of payments.
What on earth is it for those who don’t know first and foremost?
Dynamic Currency Conversion is a service offered on many card machines (and also for online e-commerce sales – E-DCC), particularly in places that cater to international travellers, such as hotels, restaurants, and retail shops.
Currency Choice:
When a customer pays with a credit or debit card that is issued in a different currency than the local currency, a DCC enabled card machine will offer the cardholder the option to pay in the currency from the country their card was issued in.
Conversion at Point of Sale:
If the customer chooses to pay in the currency from the country their card was issued in, the DCC service will instantly convert the transaction amount from the local currency to the cardholder’s preferred currency. This conversion is based on the exchange rate provided by the DCC service provider at that moment in time.
Displayed Amount:
The amount in the cardholder’s selected alternate currency is displayed on the card machine, allowing the cardholder to see exactly how much will be charged in their available alternate currency from their bank account or on their credit card statement.
Exchange Rate and Fees:
The exchange rate used for DCC will generally include a markup or service fee. This rate is typically less favourable than the rate that would be applied by the card issuer if the transaction were processed in the local currency and then converted by the card issuer.
Receipt Information:
The receipt usually shows both the local currency amount and the amount in the cardholder’s alternate currency, along with the exchange rate applied. As per the example below from today when I selected to pay in GBP to highlight this in action:
Advantages of DCC
Transparency:
Customers know exactly how much they are paying in their own alternate currency at the time of the transaction.
Convenience: Customers don’t have to wait to see how the transaction will be converted by their card issuer later. It has often been a preference of business travellers for the convenience of easier expenses claims as an example of adoption.
Disadvantages of DCC
Potentially Higher Costs:
The exchange rate offered through DCC is often less favourable than the card issuer’s exchange rate, leading to a higher total cost on the transaction.
Lack of Awareness:
Some customers might not be fully aware of the cost implications and might choose DCC without realising it could be more expensive. There is a trend of more issuers starting to recommend that cardholders opt for the local currency when travelling as a result of this, both on ATMs and when making in-store purchases.
I have also seen staff within merchant outlets make the choice for the customer on the terminal before they can even react to it on numerous occasions (in both directions I should add; current location currency and marked-up cardholder issuer currency being selected just to speed up the transaction process).
In summary, my personal opinion is that DCC is still a bit of a money spinner and I can only presume it is presented by acquirers in certain regions as something merchants will benefit from financially if they offer it on their devices.
What is most interesting in Spain is it just seems to be the standard setup on pretty much every device in the hospitality and retail sectors, which differs from the UK, where it is generally limited to high end retailers and hotels in the main.
Stripe Sessions & Tour Recap
Whether they are a competitor or a partner of yours, or both, it is hard to not admire the innovation that Stripe continues to drive in the payments industry.
Having recently attended the Stripe Tour in London, I was of course delighted to see Stripe announce the launch of their new 'Pay by Bank' payment method.
If Stripe has also settled on Pay by Bank, I'm hoping I never need to hear Open Banking payment ever again, but alas I suspect that is highly unlikely.
The narrative around their delivery of Pay by Bank seemed to lean into the sector specific use cases I have highlighted in recent months, most notably of course being high average transaction value sectors, where card payment fees can simply be a crippling cost of business.
Beyond Pay by Bank, the Sessions cover a whole host of fascinating topics and I highly recommend checking them out when you have some spare time.
You can browse video highlights from the recent Stripe Sessions here.👇
https://stripe.com/en-es/sessions/2024
US Consumer Financial Protection Bureau ruling on BNPL an interesting twist..
As reported by Finextra, the US Consumer Financial Protection Bureau (CFPB) has declared that BNPL lenders should be treated in the same way as credit cards, much to the bafflement of Klarna, which said "trying to regulate BNPL like a credit card is like comparing apples with oranges. So today’s announcement is confusing" .
This isn't the first time the US has taken an alternate stance to other regions around financial products and services and it is a further headache for an already heavily scrutinised BNPL marketplace.
We have already seen a host of BNPL providers exit the market, whilst others are skirting the void, but the reality is the biggest players are here to stay and they will need work closely with the financial authorities as the BNPL market becomes more heavily regulated over time.
Although many don't like the BNPL sector behind the curtain, convenience ultimately sells and there is no denying that BNPL is now a mainstream payment method that isn't going anywhere fast. Better regulation and consumer protection will be the only way to win over the naysayers, so perhaps this CFPB ruling is a blessing in many ways.
Read more on this announcement here.👇
Revolut to launch new payment terminal offering
I've said it numerous times and I'll say it again, point of sale devices aren't going anywhere fast, period.
Yes, their appearance may change and the delivery vessel may vary more with Tap to Pay on mobile devices growing SME market share over time for example, but the need for customers to interact with a physical payment device is going to be around for a very long time.
The recent announcement from Revolut that they will be rolling out a more comprehensive point of sale offering for merchants is yet another sign of this.
Did I expect Stripe and Mollie to move into the point of sale market, definitely not. Yet both have. Why? Well because it is still a massive, massive part of the payments ecosystem and to not be operating in this arena is leaving revenue on the table for others to benefit from ultimately.
What the modern acquirer is doing differently however is providing a true unified commerce stack across both in-store hardware and online offerings. The legacy acquirers need to close that gap and fast, or they will be left behind at point of sale in the same way many already have been in the e-commerce market.
You can read the Revolut announcement here.👇
Retail's biggest moments of 2024 to date..
Pyments.com has put together a great summary of the biggest retail moments of 2024 to date, the most interesting of which for me has certainly been the Amazon pivot on their Just Walk Out technology.
I'm not sure they have given it enough time personally and I certainly see great use cases for it in late night unattended venues, but it will be interesting to see if it keeps some place in their stack or disappears altogether over the next couple of years.
Book of the Month
BOTM was a tricky one this month, as a had a whole host of brilliant holiday reads, several of which have been finished post holiday thanks to the unrelenting energy of my two year old son and his tireless determination to give up his afternoon nap.
However, this one is going to 'Nearbound and the Rise of the Who Economy', by Jared Fuller.
This is a must read for those looking to truly understand the power of partner ecosystems and how to transform partnerships from a siloed department into an integrated strategy across your entire organisation.👇
https://www.amazon.com/Nearbound-Rise-Economy-Jared-Fuller-ebook/dp/B0CW2WPBS6
Podcast of the Newsletter
I listened to a great podcast recently by the team at Groundwork, who had the amazing Greg Portnoy, founder of Euler and all round partnerships legend on this episode of their podcast series with Tai Rattigan.
They discuss the importance of partnerships, the challenges Partnership Leaders face, and how Greg is aiming to address these issues with Euler.👇
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Thanks as ever for reading and keep your eyes peeled for the Money 2020 edition in a couple of weeks time. 👀
Sources:
Spotify / Groundwork / Nearbound / Amazon / Stripe / Finextra / Financial News / Humans of Globe / Pyments.com / Sports Business Journal
Head of Partnerships - Financial Services @ Acquired.com | Driving Strategic Partnerships
1yNothing quite like that taxi driver automatically selecting GBP yesterday 🤦
Helping businesses with payments | LinkedIn ‘Top Payment Systems Voice’. | #1 Head of Sales Top Voice 2025 | Co-Host and Co-Founder of The Payments Shed Podcast
1yGreat read, mate. P.s you defo look like John Collison from Stripe 😎