Two payment processors are striking deals with property management system providers to offer "dynamic currency conversion" through client hotels. Planet Payment and Fexco claim the process of converting foreign-incurred expenses into cardholders' native currencies on hotel bills makes it easier for travelers to compile expense reports, while the fee is equal to or less than what card companies charge cardholders for conversion services.
Long Beach, N.Y.-based Planet Payment said it has secured dynamic currency conversion contracts with First Horizon Merchant Services, which is the acquiring bank for Hilton, InterContinental and Starwood hotels. Planet Payment also has inked agreements with Global Card Systems, which is the "payment gateway company" for Marriott, the company said.
While it may take some time for the process to trickle down to individual properties, some could be running as early as next year. The DCC program at InterContinental Hotels Group will be "up and running in January," according to Tom Deluca, Planet Payment senior vice president of product management.
Another dynamic currency conversion provider, Ireland-based Fexco has garnered deals that have enabled DCC for such travel vendors in the United Kingdom as Jurys Doyle Hotel Group, in addition to individual U.K.-based hotels and Budget Rent A Car, as well as other indigenous car rental companies.
Through DCC, currencies denoted on hotel folios automatically are converted for cardholders staying abroad. According to an unpublished white paper from Planet Payment, such technology "identifies foreign-issued cards in the hotel's property management system and converts the transaction from the hotel's currency into the cardholder's local currency," bypassing similar services—as well as their associated charges—widely offered by charge card companies.
However, among the biggest advantages to corporate buyers and travelers, proponents said, are the visibility of charges made in foreign countries, the ability to enter expenses more easily, as well as a less expensive fee than the currency conversion rates charged by card companies. Planet Payment "converts the transaction at a rate that is guaranteed to be less expensive than the cardholder would otherwise pay to the credit card provider," its white paper stated.
While such expense reporting system providers as Concur and Extensity offer currency conversion components through their automated platforms, many companies still are left doing the math, since paper- or Excel-based expense reporting systems still dominate corporate practices. The lack of penetration of electronic folio transmission also has made the line item detail difficult to break out and convert into the correct currency, experts have said.
Through DCC systems, hotels are undercutting the charge card companies, installing the proper equipment into their property management systems and pocketing the fees themselves, turning the service into a profit center.
Currency conversion has been a source of revenue for years among card vendors, but practices recently have yielded the ire of some cardholders, manifesting into lawsuits against the major card networks. According to the Nilson Report, a trade paper that focuses on the card business, Visa and MasterCard reaped $3.6 billion in currency conversion fees last year. American Express' conversion revenues were not disclosed.
Since such fees only are mentioned in cardholder agreements—not in individual statements after foreign charges are incurred—some peeved consumers have brought suits against major card networks based on nondisclosure. While some still are pending, the outcomes have not been favorable to card vendors. A California judge in April sided with consumers and ordered Visa and MasterCard, as well as their bank issuers, to disclose fees to cardholders in agreements, applications, solicitations and monthly billing statements
(BTN, April 9, 2003). In the ruling, the judge ordered Visa and MasterCard to refund the 1 percent currency conversion fee to cardholders.
A separate lawsuit was filed against American Express, which Amex cited in a quarterly report: "The plaintiffs allege that the company purportedly failed to disclose a transaction fee that is assessed on purchases of goods and/or services in a foreign currency and further allege that the company includes in its cardmember agreements unconscionable and unlawful arbitration provisions."
The American Express cardmember agreement states that charges made overseas "will be converted into United States dollars on the date it is processed by American Express or our agents at a rate set by the us, based on inter-bank, tourist or official rates by up to 2 percent." Visa and MasterCard both charge a foreign currency conversion rate, plus a 1 percent fee to issuing banks. The banks, which many times add their own fees, then pass on the charge to cardholders.
However, like many services offered to companies by their vendors, the currency conversion fee is negotiable. Earl Foster, president of Partnership Travel Consulting, said travel buyers typically are unaware of currency conversion service charges when putting in place a corporate card program, but savvy travel managers will negotiate. "They talk about it at contract time, at what rate they are going to be charged for currency conversion," he said. "The smarter ones get that put into their contracts so they have deals with what kind of rate they'll be charged. It's negotiable."
Despite the fee, charge cards still are widely considered to offer a favorable currency conversion rate, compared with exchanging cash, wherever travelers find themselves.
"Bottom line," said David Hillman, president of New York-based Hillman and Associates, "what you get on your credit cards on conversion rates are much, much better than you would get otherwise, whether you convert money here or wherever you're traveling."