Accepting International Credit Cards

As discussed earlier, there are advantages for large merchants to establish a physical presence (domicile) in one or more of the merchants’ operating countries. For example, the merchant might have a real need for local currency to pay employees or rent. Another good reason for a foreign presence is that the U.S. is saddled with some of the highest interchange rates in the world. For instance, while the average interchange fee in the U.S. may be approximately 2.2%, this same fee may only be around 0.6% in France. What’s more, cross border assessments are much lower in certain countries, especially those in the EU. Assuming that the merchant has already managed foreign exchange risks, the savings potential associated with foreign domicile is significant. Establishing domicile in another country is no longer difficult thanks to incorporation services like Fletcher Kennedy Limited and Payventures which will help large merchants incorporate and establish relationships with local banks and processors.

Foreign payment types often pose a problem to U.S. merchants. In many countries, credit cards are not the most popular payment options. In the EU, most card payments are actually forms of Internet Bank Payment (IBP) and Direct Debit. These transactions use proprietary networks available only through local banks and processors. Fortunately, companies like Netgiro (Digital River) and Moneybookers.com  provide large merchants with entry points into these networks. Smaller merchants can receive similar services by hosting their sites with eCommerce Solutions Providers  like Plimus and 2CO.

Another interesting payment technology geared toward point-of-sale (POS) merchants is called Dynamic Currency Conversion. Popular with hotels and other travel locations, DCC allows customers to pay their bills in their own currency. The logic for DCC is programmed into the POS device. Once read, the card data is used to determine the country of origin. Once this is known, the device uses the current exchange rate to present the price in the cardholder’s local currency. Because the transaction is billed to the consumer in their local currency at the POS, they do not get charged a currency conversion fee by the card issuer – which can be as high as 3%.

The consumer, however, is subject to a slight mark-up at the point of sale for the benefit of paying in their own currency. This fee is far less than the currency conversion fee they would have paid the card issuer had they used local currency. This mark-up is shared by the device provider and the merchant, providing the merchant with an additional source of income. Planet Payment is one of the leading providers of this technology.