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Foreign travelers are spending money in the United States as never before, and ISOs and agents have the tools to take advantage of this growing trend.
Dynamic currency conversion and multicurrency pricing are processing services that can give ISOs and agents a new revenue stream and a product to differentiate themselves from the competition. Melissa Jones, vice president of North American sales for Long Beach, N.Y.-based Planet Payment, highlighted those points at the recent Northeast Acquirers Association conference in Mount Snow, Vt.
"More consumers are asking to pay in their own currency when they visit retail stores in the United States," Jones says.
According to the U.S. Department of Commerce, 51.1 million international visitors spent $107.4 billion here in 2006. Look for the numbers to increase in the next four years, a Commerce Department release says.
Most of today's foreign travelers in the U.S. come from Canada or Mexico, but Commerce Secretary Carlos Gutierrez said last year in a statement that Brazil, China, India and Japan will fuel the growth of U.S. tourism in the near future.
That influx presents an opportunity for ISOs and agents to grab a significant piece of the cash pie.
And they can reach that goal with the help of dynamic currency conversion. In a demonstration of the technology for ISO&Agent Weekly, Payment national sales director Bud Willie swiped a replica Australian credit card through a payment terminal showing a $100 sale in U.S. dollars. A message on the terminal screen asks him if he wanted to pay in his home currency, in this case Australian dollars.
Once he agreed, the store receipt showed the transaction price in his home currency, the conversion rate from Australian to U.S. dollars and the price of the transaction in U.S. dollars.
"The service provides customers with the convenience of seeing the true cost of their transactions in their home currency at the time of purchase rather than when their credit card bill arrives," says Joel Mayer, Planet Payment director of corporate development.
If the consumer declines to pay in his own currency, the point-of-sale terminal shows the current conversion rate and asks again what the consumer wishes to do.
Mayer says the pay-in-your-currency feature is a value-added service that cardholders pay for in the form of a fee on the margin of the exchange rate. The merchant and the acquiring bank that delivers the service determine the margin, he notes.
ISOs and agents receive a varying share of the conversion margin, based on an agreement with the acquiring bank, according to Willie.
revenue sharing varies
"One of our partners gives 75 basis points to the merchant and 25 points to the ISO, and usually the ISO will take half of that and give it to the [merchant-level salesperson]," Willie says. A basis point is on-hundredth of a percentage point.
Planet Payment does not endorse a particular formula, Willie says, but "we strongly recommend that there is a compensation program that does include getting down to the man on the street."
Jones describes dynamic currency conversion as ideal for merchants in cities with a large number of foreign travelers. But margins are best with high-ticket items.
"If you have a jewelry store in a heavy tourist area, that is going to be an opportunity right there," says Theresa Leahy, an account executive at DCC Merchant Services, a Long Beach, N.Y.-based ISO.
Payment-terminal manufacturers are using Planet Payment's software in their systems.
Danielle Millberry, a senior program manager at Phoenix-based Hypercom Corp., says the industry began adopting dynamic currency conversion slowly because ISOs and merchants did not understand the service.
"But what's going to happen now and in the near future is that people are going to see it as an investment," she says.
Multi-currency pricing, another processing service an ISO or agent can use as a revenue stream, also is becoming a necessity for a merchant's global e-commerce strategy, Jones says.
The service enables consumers to conduct an Internet, mail or telephone purchase in their own currency while the merchant receives the funds in U.S. dollars.
If a Japanese consumer visits a Web site, for example, product prices appear in yen. If a consumer from the United Kingdom visits the same site, product prices appear in pounds.
Jones says foreign consumers see that payment option most often on the sites of merchants offering digital content because no shipping costs are involved. But Web sites may use the option for any product, she says.
"The market for multicurrency pricing can be anything from retail to book services," Jones says.
Multicurrency pricing can be fixed or variable, depending upon the merchant, and most are taking advantage of the weak American dollar, Jones says.
For example, a merchant can price a product for $100, which converts to 69 euros. Or a merchant can price that same $100 product for 100 euros, which converts to $144.97.
ports of call
Because of the markup, ISOs and agents can get a bigger piece of the revenue. In some scenarios, Willie say, it can be as much as 300 basis points
"Some merchants are pricing just in pounds or euros because they will get that back in dollars," Jones says.
Merchants need to adjust their Web sites and shopping carts to reflect multicurrency pricing, Jones says.
Kirk Kennedy, a merchant-level salesperson for Nationwide Payment Solutions, a Scarborough, Maine-based ISO, was impressed with possibilities for agents who use multicurrency processing services.
"It's a great way for us to possibly be able to make additional money without anyone having to suffer the more for it," Kennedy says.
Kennedy works in Maine—not in an area with a lot of foreign travelers—but sees some opportunity in Portland, the state's largest city.
"They do have some international travelers there because occasionally a cruise line comes into the port," he says of Portland.
