In the payments industry, currency conversion refers to the process of converting one currency into another when conducting a financial transaction. It is commonly used when a customer makes a purchase in a currency different from the one used by the merchant.
Currency conversion typically works by using exchange rates to determine the equivalent value of one currency in relation to another. These exchange rates can be obtained from various sources, such as financial institutions or currency exchange platforms. The rates may fluctuate based on market conditions and factors like supply and demand.
When a customer initiates a transaction in a different currency, the payment system or merchant processor calculates the equivalent amount in the merchant’s currency based on the current exchange rate. The customer’s currency is usually converted into the merchant’s currency at the point of sale or during the payment processing stage.
To facilitate currency conversion, merchants often work with payment service providers or acquire merchant accounts that support multi-currency processing. These accounts enable merchants to accept payments in different currencies and handle the currency conversion process on behalf of the merchant. Some payment processors or financial institutions may charge fees or apply a markup on the exchange rate for providing this service.
It’s important to note that not all merchant accounts or payment processors support currency conversion. If you wish to offer currency conversion as a merchant, you should inquire with potential service providers about their capabilities and whether they can assist you with multi-currency processing.