When it comes to contactless and mobile payments, uptake in the UK has been extremely high, with Britons amongst the biggest users of contactless payments around the world.
It’s part of the reason why UK spending on debit and credit cards has doubled over the last decade. Perhaps it’s no surprise then that Apple chose the UK as the first overseas market in which to launch its mobile payment solution, Apple Pay.
For Apple, convincing the UK public, which was already very used to using contactless payments to adopt Apple Pay has been relatively straightforward, particularly when many of the biggest card providers have been pushing the technology with offers such as free travel on the London Underground on Mondays for a limited time.
Apple now faces its next challenge in expanding Apple Pay to new countries. After all, the ultimate goal is to launch Apple Pay in all major markets by working with local banks and card providers. Apple Pay launched in Canada in the last few weeks and is set for its next big test as it seeks to launch in China in February of 2016.
Whether or not Apple Pay adoption is ultimately considered a success in these new markets, there is no doubt that card providers, banks, and retailers are betting on mobile and contactless payments becoming much bigger in the coming years not just in tech savvy economies like the UK, but globally.
All of this presents a new challenge for businesses who accept payments across the world as they are faced with a higher likelihood of encountering a shopper from overseas who might want to use contactless or mobile payment technologies. This is coupled with the recent raising in the UK of the contactless payment limit from £20 to £30, covering more than just small purchases.
For those shopping in their home market, the growth of contactless should generally only create more convenience. However for those shopping abroad, this new convenience could come at the cost of choice when it comes to what currency to pay with.
Currently, for any traditional payments using debit or credit cards from abroad, retailers or hotels can offer what is known as dynamic currency conversion (DCC) to their customers as an additional service. This gives their customers the choice as to which currency they would like to pay in. By selecting to not use DCC, customers can choose to pay in the local currency, that is, the currency that the retailer deals in. In the UK, this means customers from abroad paying in GBP. For some customers, they will be happy to make their payment in GBP, particularly if they feel confident about converting the current exchange rate or if they are familiar with their bank’s rate.
Alternatively though, they can select to pay in their home currency which they will be much more familiar with. In this case, the usual fees charged by card providers or banks will be replaced by a DCC fee. This fee will already be included in the amount charged at the point of transaction, rather than card provider fees which are not visible until some days later. The retailer, hotel, or restaurant collecting the payment also takes a margin of the DCC fee, which they can reinvest or pass on as savings to their customers.
At present, DCC is being offered on contactless transactions in a small but growing number of locations relative to the size of the market. However as the retailer’s payment technology partners continue to develop DCC solutions to meet the changing payment landscape, we will see an ever increasing number of customers being offered the choice of DCC on contactless transactions.
All of this means that businesses who cater to shoppers or visitors from abroad need to start preparing now for the impact of contactless and mobile payments proliferating abroad.
As more visitors arrive wanting to pay using their contactless cards, iPhones, or smartwatches, retailers need to know the impact that DCC will have on the transaction format and customer choice.
Gino Ravaioli, Chairman of the DCC Forum
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