Which Currencies Should I Accept on My Online Shop?
by Cristi Gheorghe
When starting an online shop, most business owners have to decide what currency they will use on their their e-commerce website. Whether it's their national currency, a widely used international currency like the Dollar or Euro or even the new kids on the block-chain (Bitcoin, Ethereum and the like), merchants have to decide which - or which combination of these - best suits their business and their clients.
Know Your Customer!
The first question any website owner must find the answer to is "Who is their target audience?". For example, an Austrian merchant that has a website used mostly by customers in the USA, will most probably decide to display their prices in USD rather than their national currency; this is why the first step in deciding what currency you will use on your e-shop is knowing your customers.
Based on the ecommerce platform that you use for your e-shop, you might be given the option to display the prices of your products in the local currency of the customer depending on their location, but you should keep in mind that even if you display your prices in 10 available currencies, if your payment provider does not offer you the option to process all those currencies, then the price will be subject to foreign currency exchange when the payment is made, and because of the additional charges, the amount displayed on your website will differ from the amount charged on your customer’s credit card. This usually leads to complaints or unnecessary refund requests.
If you find yourself in this situation, make sure that you inform your customers upfront about the possible differences in displayed versus charged prices due to the FX conversion fees.
Is it better to display the prices in my or my customer’s local currency?
If your business' local currency is a popular one, then you can list your prices using this currency, as clients will understand that you are not based in their country, they will recognise your currency and will expect a conversion rate to be applied when their credit card will be charged.
Most clients will recognise USD, EUR or GBP as they are widely spread currencies, and it's possible that they have used them previously to make purchases online.
Let’s say an Australian customer wants to purchase a ticket from Spain to Hungary using a European airline. They will not think twice about the EUR currency that they are presented with when they try to book the ticket using a Spanish ticket agency, as EUR is a well known currency. A similar scenario will not play as smoothly if the ticket is purchased through a Hungarian agency that uses HUF (their local currency) to display the price and charge the customer; the client will most likely think twice about making the purchase, will try to convert the price to see how much he will be charged and will probably lose interest and use a Spanish agency that charges EUR and provides him with a similar ticket for a price that they can understand.
So it is ok to display the prices in your local currency if it is a well known one, or you're only selling to the local market. Alternatively, if you are based in a country that uses a less common currency, you may choose to show the total value of the cart in both your currency and an approximation of the amount in either the customer’s currency or a widely spread currency like USD or EUR.
Which currency should I use when charging my clients?
The second part of the currency debate is related to the currency that will be used when the client is charged, and it is an important issue as it will determine the payment processor that you should go for as it has to have that particular currency in their portfolio.
For obvious reasons, customers would prefer to be charged the same currency that their credit or debit card is issued in, as this way the will know exactly the amount that will be charged to their card and will not be applied any FX fees. Mostly that will be the case if the currency of the online shop is within the currency list provided by the payment processor and is also the same currency that the card was issued in.
Fun fact: many users will feel more comfortable seeing and paying in their local currency, even if that means ultimately paying more for the same product. This is where the Dynamic Currency Conversion kicks in. Some large retailers employ this mechanic by using a third party foreign currency exchanger to display and charge the price in the user's local currency (while applying a hefty exchange rate). However, this is something we generally don't recommend as it's trading user loyalty for short term wins.
What we DO recommend is to find and use a payment provider that can process payments in your user's local currency. This has its advantage on the user's side and increases conversion rate. Being able to settle funds to your account in that same currency will avoid the FX rate applied, and here you are in advantage. Alternatively, if volume wise it doesn't make sense to open accounts in all currencies you sell in, make sure that your payment provider has transparent FX rates and fees.
Ask your payment provider about their processing and settlement currencies
As a merchant, you should make sure that your payment provider offers the processing and settlement currencies that you need (the settlement currency is the currency that will be used when the funds will be transferred in the merchant’s bank account).
Also ask your payment provider about the exchange rates used when converting foreign currencies to your settlement currency, this way you will be well informed and will be able to adjust your prices in order to still make a profit when selling your products.