Credit Card Processing Blog

We are constantly reminded that the world keeps getting smaller and nowhere is that more evident than in the e-commerce. By default, web-based merchants have the world as their market and cross-border transactions are for many an everyday occurrence. With the global market, however, come global currency challenges that need to be well understood and adequately addressed to enable you to take full advantage of the opportunities. Let’s take a look at the choices that are available to you for accepting international payments and whether settling your funds in foreign currencies is a good idea.

Before we dive into the details, it is important to point out that Visa and MasterCard are global institutions and payment cards that bear the logo of either credit card association are accepted in every store or ATM that accepts that brand of cards. It does not matter where the card has been issued. What is different is the processing rate that merchants pay for accepting cards issued by foreign banks and this rate is higher, sometimes substantially higher. The same is true for the other global card brands, including American Express, JCB, etc.

Both Visa and MasterCard issuers can add surcharges on foreign transactions involving their cards. In the United States, currently Capital One is the only major issuer that has chosen not to do that and their Visa- and MasterCard-branded cards can be used abroad at no extra charge. The majority of issuers, however, do add a mark-up that can typically range between 0.50% – 1.00% per transaction, on top of the regular processing fees for the type of card used. Processors then pass this mark-up on to their merchants and can add a surcharge of their own.

If your business sells globally, you will have several options for settling your daily batches:

• Multi currency. With this option you can accept card payments and receive funds in several major currencies, typically North American, European and some Asian. This service could work for those of you whose customers are located mostly in the major world economies.
• Cross currency. With this option you can accept payments in a much greater number of world currencies, but the settlement will be done in a limited number (about a dozen or so) of major currencies. The benefits are that your customers will be able to pay you in their local currency and you will not have to deal with any foreign currency conversion.
• Local currency. With this option you can accept payments and receive funds only in your local currency. You can provide your customers with an estimate of the equivalent amount in the local currency, but it would be solely for information purposes. The local currency option would be best for those of you who would prefer to keep your operations and accounting simple and would rather not deal with foreign currencies at all. When a payment card transaction is authorized and cleared, your funds will be settled in U.S. dollars and you will be charged a conversion fee.

Once you select the option that would best address your requirements, you will need to make sure that you sign up with the right processor. It is important that, before setting up your merchant account, you check what your prospective processor’s conversion rates are. These rates may be different for MasterCard and Visa, as well as for debit and credit cards of the same brand. You may find that a provider that offers higher processing rates actually has the cheapest solution for your needs, because they don’t mark-up the conversion or cross-border fees charged by the issuers. American Express and Discover do their own processing and their rates are the same regardless of the processor, so you don’t have to worry about comparing them.

The e-commerce offers merchants the ability to reach out to consumers all over the world. Some web-based businesses have preferred to remain local and serve their own country, mainly for fears of fraud and issues with shipping to some countries. Some products are more susceptible to fraud than others as well. Yet, many other merchants have fully embraced the brave new world of e-commerce and have made their merchandise available to everyone willing to buy it, regardless of where they live.

Apart from adjusting their marketing and sales campaigns to address the cultural uniqueness of each region of their worldwide market, e-commerce organizations must comply with additional requirements. The transaction currency the merchant accepts and the rules governing the currency conversion process is one example. Credit cards and various other non-cash methods enable merchants to accept payments from consumers all over the world, regardless of the local currency. However, whatever type of currency is used to complete the transaction, the customer will see the charge in his or her statement in the local currency.

In order to avoid confusion or misunderstanding, the merchant will have to provide the customer with an estimate of the sales amount in local currency. Be advised that you cannot actually convert transaction amounts into a different currency. This is done by your processing bank and the bank will do in accordance with its own rules and procedures. What you can do is to provide an estimate of the equivalent amount in a different currency and you must label them as being listed for information purposes only. Following is a list of requirements and best practices regarding the management of transaction currencies in e-commerce transactions.

• Provide a full disclosure to customers, on the check-out page of your website, of the country your business operates in and of the currency used for the purchase. Remember that the currency of your settlements is the transaction currency and you cannot convert currencies. The currency must be clearly stated on your website’s payment page, particularly if the currency is not unique. For example a dollar may be an Australian, New Zealand, Hong Kong or U.S. dollar.
• Clearly display all information relating to the Dynamic Currency Conversion (DCC) service on your website, if applicable. DCC gives cardholders the option of either paying for products or services in their own billing currency or in the merchant’s currency. DCC is an optional service that is facilitated by the merchant at the point of sale through support provided by the processing bank or by a third party.
• Require that cardholders indicate whether they accept or decline using the DCC service. This selection can be done by checking one of two boxes, one to accept DCC and one to decline it. When cardholders select DCC and check the appropriate box, all transaction receipt statements should be displayed on the screen and include all required information.

Your e-commerce website should clearly communicate to visitors where you stand on consumer privacy and what you do to protect personal information, how billing and shipping will be handled, and what your return and refund policies are. The more customers know about your business practices, the better. Implement the following features and content into your website and you will see less customer disputes and will reduce the number of chargebacks.

1. Full description of products and services. The importance of accurately describing the product that you are selling or the service that you are offering cannot be overstated. Different customers are looking for different features in a product and are evaluating the quality of a service based on criteria that you might not even consider. Provide as much information as possible, even if it looks redundant or needless. Use product images, if possible.
2. Telephone number and email address. Customers often have questions regarding their purchases. Providing an easy way to contact you is key to minimizing customer disputes and chargebacks.
   • Provide an easy-to-locate email contact option on your home page. For better results, offer customers separate email addresses for different inquiries (product, shipping, billing, return, etc.).
   • Send auto-respond emails to customers to acknowledge receipt of their inquiries and to inform them when they should expect their questions to be answered. Make sure that you respond within the promised time frame.
   • Display your customer service’s phone number on your home page. You should offer a toll-free number in addition to a local one. Email communication may very well be sufficient for many consumers, but not having a phone number to call is a leading cause for customer dissatisfaction and chargebacks. Consumers often need immediate attention and, if not provided, are likely to contact their card issuer and file a dispute.
3. Return, refund and cancellation policies. These policies should be carefully designed to demonstrate your commitment to customer satisfaction.
   • Your return, refund and cancellation policies must be made available to consumers through a link on your website’s home page.
   • Customers must agree to the terms of these policies during the order process. Have your customers click on an “Accept” or “Agree” button to confirm acceptance of the policies before submitting their payment information. Then, once the order has been submitted, send your policy to the customers with the order confirmation email.
4. Recurring transactions. Recurring transactions are one of the major sources of customer disputes and chargebacks and I have written about them at greater length here. You should require customers to click on an “Accept” or a similar button to acknowledge acceptance of the recurring payment plan agreement.
5. Product delivery policy. Include the delivery time frame and any restrictions that you might have on delivering your products. If there is a change in the delivery date, especially if it is going to be late, immediately notify your customer.
6. Shipping policy. Your shipping policy must be available to customers through a link on your home page and. With your shipping policy you should:
   • Explain shipping options and expected delivery.
   • Provide full disclosure of all shipping and handling charges.
   • Develop an email response system to inform customers of expected delivery delays.
7. Billing practices. A full disclosure of your billing procedures should be made available to customers at the time of purchase.
   • Tell your customers when their cards will be charged.
   • Inform customers how the transaction will be displayed on their credit card statement, so they can easily identify it.
   • Advise customers to keep a copy of the transaction.
   • Include your billing disclosure in the order confirmation email that you will send to your customers.
8. Transaction currency. Clearly state the currency that your transactions will be processed in. Do not assume that your customers will know that. Remember that the internet allows consumers from all over the world to visit your website. Once you have stated the transaction currency, you may provide a currency conversion tool to help consumers estimate the cost in their own money, but you should clearly state that this tool provides the conversion amount for information purposes only.



9. Home country. You need to state the country your business is established on your website. Your payment processor can help you with the statement.
10. Export restrictions. List on your website all export restrictions that you are aware of for the products that you sell.
11. Privacy statement. You will have to develop a privacy statement and make it available on the home page of your website. You should tell visitors:
    • What customer information is collected and tracked.
    • With whom this information is shared.
    • How customers can opt out.
12. Register with a privacy organization and display their sign on your website. A membership with an organization like BBBOnLine is another way to demonstrate to your website’s visitors that you are serious about protecting personal data.