A customer in London buys from an Indian online store with a UK card. Somewhere between the price on the page and the money arriving in the store's bank account, pounds became rupees. The questions that matter are where, at what rate, and who paid for it. The answers depend on choices the merchant makes, often without realising they're choices.
This guide untangles the currencies involved in an international payment, the main ways conversion can happen, the rules on offering customers a currency choice, and the effects on refunds, reconciliation and cost. For accepting foreign cards in India and settlement in INR, see our international payment gateway guide.
The three currencies in an international payment
Keep these apart, because each can be different:
| Currency | What it is | Example |
|---|---|---|
| Presentment (transaction) currency | The currency the price is shown and charged in | The store charges GBP 40.00 |
| Cardholder billing currency | The currency of the customer's card account | The UK card is billed in GBP |
| Settlement currency | The currency the merchant is paid out in | The store receives INR |
Whenever two of these differ, someone converts. Each conversion has a rate and usually a markup over a reference rate, and those are where the real cost of international payments often hides.
Three ways the conversion can happen
The same purchase can be converted at different points:
| Approach | What the customer sees | Who converts | Who carries exchange-rate risk |
|---|---|---|---|
| Price in your own currency | A price in INR; their bank converts on their statement | The card issuer, at the network's rate plus any foreign transaction fee | The customer |
| Multi-currency pricing | A price in their currency (GBP), set by you | Your provider, from the presentment to your settlement currency | You, between setting the price and settlement |
| Dynamic currency conversion (DCC) | A choice at checkout to pay in their own currency, at a quoted rate | The DCC service provider on the merchant's side | The customer accepts the quoted rate |
Pricing in the customer's currency usually converts better: people trust a price they understand, and they aren't surprised by a different amount on their statement. The cost is that you take the exchange-rate risk and pay your provider's conversion markup, so it has to be priced in.
Dynamic currency conversion and its rules
With DCC, a customer paying with a foreign card is offered the choice of paying in their own currency instead of the merchant's, at a rate quoted on the spot. It gives certainty about the amount, and it can be expensive, because the DCC rate can include a substantial markup. Rules exist to make sure the choice is real and informed:
- Card network rules require that the cardholder is offered the choice and makes it themselves. Visa's guidance to travellers, for example, says merchants and ATMs should let cardholders accept or decline the conversion and must not choose on their behalf, and that the amounts, rate and any markup should be shown clearly.
- In the European Union, Regulation (EU) 2019/518 requires that before a card payment involving currency conversion at an ATM or point of sale, the payer is told the total conversion charges as a percentage mark-up over the latest euro reference rates published by the European Central Bank, along with the amounts in both currencies.
Double conversion
The worst case is converting twice. Suppose an Indian store prices in US dollars for all international customers, and a UK customer pays with a GBP card. The issuer converts pounds to dollars for the customer's statement, then the provider converts dollars to rupees for settlement. Two markups, for a payment that only needed one conversion.
Single conversion
- Price shown in GBP, or in INR
- One conversion: GBP to INR
- One markup, by whoever converts
Double conversion
- Price shown in USD
- Issuer converts GBP to USD for the customer
- Provider converts USD to INR for the merchant
- Two markups on one payment
Avoid it by presenting in the customer's own currency where you support it, and otherwise in your settlement currency, rather than in a third currency.
Refunds and chargebacks across exchange-rate moves
Exchange rates move between a payment and its refund. A refund is normally made in the presentment currency for the same amount, but the conversion back happens at a later rate:
- If you price in the customer's currency, they get back exactly what they paid in their currency; you may refund more or fewer rupees than you received.
- If you price in rupees, you refund the same rupees, but the customer may get back a different amount in their own currency than they were charged.
- Chargebacks follow the same pattern, and may also carry fees.
Tell customers this in your refund policy, so a small difference doesn't become a complaint. Our guide to chargebacks explains the dispute process.
Minor units and rounding
Currencies don't all have two decimal places: the Japanese yen has none, and the Kuwaiti and Bahraini dinars have three, according to the ISO 4217 list. Prices, conversions and refunds must use each currency's own minor unit and a consistent rounding rule. Our guide to storing money in code explains how.
Setting prices in several currencies
If you present prices in customers' currencies, decide how they're set:
- Converted automatically from your base price at a daily rate, rounded to a sensible price point for each currency.
- Set by hand per market, independent of daily rates, and reviewed periodically.
- A mix: hand-set for your main markets, automatic for the rest.
Whichever you choose, record the rate and source used for each price, and keep a buffer for the conversion markup and rate movement between payment and settlement.
Reconciling multi-currency payments
Every international payment should carry, in your records: the presentment amount and currency, the settlement amount and currency, the conversion rate applied, and the fees, each in its own field. Without these, the settlement report won't match your orders, and you can't tell a fee from an exchange-rate difference. Our reconciliation guide covers the matching.
In India, receiving payments from abroad and how you can be settled are governed by RBI's foreign exchange rules and your provider's arrangements, so confirm with your provider how international payments are settled to you and what documentation you'll receive. LILPE's global payment collection page covers collecting from international customers.
A checklist
Before offering prices in more than one currency:
- Decide your presentment currencies, and avoid presenting in a third currency that forces double conversion.
- Know who converts at each step, at what rate, and with what markup.
- If you offer DCC, make it a genuine, clearly explained choice.
- Store presentment amount, settlement amount, rate and fees per payment.
- Use each currency's minor units and a documented rounding rule.
- Explain in your refund policy how exchange rates affect refunds.
- Measure success rate by card issuing country and presentment currency; our guide to local acquiring explains when processing in the customer's country helps.
Frequently asked questions
What is presentment currency?
The currency in which a price is shown to the customer and in which the payment is made. It can differ from the currency of the customer's card account and from the currency the merchant is settled in.
What is settlement currency?
The currency in which the merchant's provider pays out the proceeds of payments. If it differs from the presentment currency, the provider converts the amount, usually at its own rate including a markup.
Is dynamic currency conversion good for customers?
It gives certainty about the amount in their own currency, but the quoted rate can include a significant markup compared with letting their own card issuer convert. Card network rules require that the customer is offered a genuine choice, and in the EU the markup must be disclosed as a percentage over the ECB reference rate.
Should I show prices in my customers' currency?
Often yes, because customers trust prices they understand and aren't surprised by their statement. In return you carry the exchange-rate risk and pay your provider's conversion markup, so price that in, and avoid presenting in a third currency that causes double conversion.
Why is my refund a different amount from what I paid?
If the payment involved a currency conversion, the refund is converted back at a later exchange rate, so the amount in your own currency can differ slightly from what you were originally charged.
Official sources
- EUR-Lex — Regulation (EU) 2019/518 on cross-border payment charges and currency conversion chargesBefore a card payment involving currency conversion at an ATM or point of sale, disclosure of total conversion charges as a percentage mark-up over the latest ECB euro reference rates.
- Visa — Dynamic currency conversionCardholders should be offered the choice to accept or decline conversion; merchants must not choose on their behalf; amounts, rate and markup shown.
- SIX — ISO 4217 currency codes
Last reviewed . Examples, amounts and screens marked illustrative are not LILPE figures.
