Multi-Currency Pricing (MCP)

Multi-currency pricing (MCP) is a card acceptance service that lets a merchant show prices and charge customers in currencies other than its own. A shop based in the United States can display a price in euros to a visitor from France, charge the card in euros and still receive dollars from its payment provider. The shopper sees a familiar currency from the product page through to the card statement, with no conversion by their bank.

The service is offered by acquirers and payment service providers, mostly to online merchants selling internationally. It should be distinguished from dynamic currency conversion, which also results in the cardholder being charged in their home currency but works in a different way and at a different point in the purchase.

The merchant decides which currencies to offer and sets a price in each, either by fixing local price points or by converting its base price at a rate supplied daily by the provider. The site detects the visitor's likely country and shows the matching currency, usually with an option to change it.

At payment, the transaction is submitted to the card network in the shopper's currency, known as the presentment currency. The card issuer authorizes and bills that exact amount. The provider then converts the proceeds into the merchant's settlement currency, at a rate that includes its margin, and pays the merchant. Currencies are identified throughout by their ISO 4217 codes.

With dynamic currency conversion, the price is set in the merchant's currency and the cardholder is offered, at the terminal or checkout, the choice of paying in their card's currency at a rate quoted on the spot. The conversion is an optional extra presented to the customer, who must be shown the rate and may refuse it. With multi-currency pricing there is no offer and no choice at the point of payment: the price simply is in the foreign currency, as a matter of the merchant's own pricing, and the customer sees it from the start.

The consequences differ. Dynamic conversion rates are often poor value for the cardholder and are subject to disclosure rules. Under multi-currency pricing the merchant bears the conversion cost unless it builds it into the local price, and it has full control over how prices look in each market.

Shoppers are more likely to complete a purchase when they understand the price without mental arithmetic and know exactly what will appear on their statement. Foreign-currency prices are a recognised cause of cart abandonment. Paying in the home currency also spares the cardholder the issuer's foreign transaction fees and conversion spread, at least where the fee is triggered by currency and not by the merchant's location.

Merchants gain the ability to price for each market: rounded, psychologically attractive amounts, prices that stay stable when exchange rates move, and different price levels in countries with different purchasing power or competition. Fewer customers contact support or dispute charges because the billed amount differs from what they expected.

The provider charges for conversion through an FX markup over the wholesale rate, commonly one to a few percent, so the merchant should compare the rate applied with the mid-market rate. The merchant also takes on currency risk between the time it sets a foreign price and the time it is paid. A fixed euro price yields fewer dollars if the euro weakens, and frequent repricing irritates customers.

A refund exposes the same risk in reverse. The cardholder is normally refunded the original foreign-currency amount, but the merchant's account is debited at the rate on the refund date, which may be higher or lower than the amount first received. Chargebacks behave the same way.

Charging in the shopper's currency does not by itself make a transaction domestic. If the merchant's acquirer is in another country, the payment is still cross-border in the card networks' terms: it attracts cross-border interchange and scheme fees, issuers approve such payments less often, and some cardholders are still charged a foreign fee by their bank. Removing those effects requires local acquiring through an entity in the shopper's country.

A merchant with costs in several currencies may prefer not to convert at all. Many providers allow settlement in the same currency as the sale, into a bank account or multi-currency balance in that currency. The merchant can then pay local suppliers, staff and refunds from those funds and convert only the surplus, at a time and exchange rate of its choosing. For larger businesses this turns multi-currency pricing from a conversion service into part of treasury management, with the pricing decision separated from the conversion decision.

Consumer law in some jurisdictions adds constraints: prices shown must be the prices charged, any taxes and duties must be clear, and in the European Union merchants may not block or automatically redirect customers on the basis of nationality or residence, although they remain free to set different prices on different national sites.