FlyerTalk Forums - View Single Post - Dynamic Currency Conversion (DCC) [2014-2016]

Sep 2, 2014 | 2:18 am

#993

JEFFJAGUAR

Join Date: Jul 2007

Posts: 1,762

Quote:

Originally Posted by percysmith

Jeffjaguar: yes you're right, when first imposed.

http://www.washingtonpost.com/wp-dyn...2900927_2.html

This is the status quo til now. I don't know where Citibank Hong Kong got the 0.4% "The fee is charged by American Express" given Citibank US doesn't charge this fee, nor American Express itself to its own customers, nor any of the other 3 Amex licencees in HK.

But anyway, in the multi-currency processing situation, is this fee justified?

Card associations certainly bears more cost as it has to perform international settlement for airlines and other merchants who choose to skinflint their international collections by using a multi-currency processing from their head offices. If card associations chooses to pass it on then they have a case to argue they're not profiteering from it.

Airlines certainly profit from cost savings by centralised multi-currency processing from head office rather than setting up local merchant accounts and remitting the proceeds. They're passing international remittance and administration costs to passengers. Their disclosure this happens is inadequate and they try to shift blame/hide behind zombie CSes.

Banks who pass on published card association fees, not add any of their own and make full disclosure of their cost recovery can't reasonably be blamed. However banks who add fees or try to charge them on Visa cards are blatantly price-gouging - AFAIK there is no difference in interchange earned from processing a local currency-denominated transaction offshore as compared to onshore. So they're just doing it because they have an excuse to.

Similar to multi-currency processing, DCC on the grounds it will save costs (or rebuttal on the grounds that customers should not bear additional fees) is unjustified. Before FTF, it was exploiting a similar loophole in card association fee structure. It's not "greed" that card associations recover their costs and plug the loophole.

Thank you for your excellent reply; but I'm sort of lost on the last paragraph. So perhaps with a concrete question example I can get a better idea of what you're saying. I buy $1000 worth of air tickets on British Airways from Orbitz in a transaction that never leaves the USA from Orbitz. Now Orbitz is acting s an agent of BA so it transmits the transacftion to BA via the Airline Reporting Corporaton if it still exists. Orbitz receives its commission in USD and is out of the picture at this point. BA has the charge for $1,000 and submits it to its visa let's say credit card acquirer in London. What happens at this point? Is it converted to sterling for them and they receive theirs (minus the discount of course) in sterling? Or in dollars? The charge then enters the international visa interchange in what currency? Sterling or USD? It is then transmitted to the US bank of the cardholder. In what currency? Sterling or is it converted back to dollars. At what point in this whole business is the charge converted from USD to UKL back to USD. Or is it in USD throughout the process. By doing it this way, does BA evade any foreign currency transaction fees? So when I get my bill, I get it that the additional 2% Bank of America or Citiblank or Chase may impose is a total rip off. We agree there. But what about the 1%? Who profits from that? Visa? British Airways? British Airways acquirer processor? That's the part I don'tunderstand in equating what the airline does to dcc.