Regulatory
FX Markup
Definition
FX Markup the margin added to currency conversion, expressed as a percentage above the interbank rate. Applies to cross-border transactions, multi-currency pricing, and payouts. Typical markups range from 1-3%. Some PSPs offer at-cost FX; others build significant margin into conversions. For international merchants, FX costs can exceed processing fees.
Related Terms
DCC (Dynamic Currency Conversion)
A service allowing cardholders to pay in their home currency rather than the merchant's currency at the point of sale. The exchange rate includes a markup (typically 2-4%) split between merchant and processor. Controversial due to unfavorable rates for consumers. Requires cardholder consent. Can increase revenue for merchants but may create customer complaints.
Cross-Border Fees
Additional fees applied when the card-issuing country differs from the merchant's country. Includes both interchange surcharges and scheme fees. Cross-border transactions typically cost 0.5-2% more than domestic. Can be mitigated through local acquiring in key markets. Significant cost factor for international merchants.
Settlement
The process of transferring funds from captured transactions to the merchant's bank account. Settlement typically occurs in batches (daily or weekly). Timing varies by acquirer and merchant agreement - next day, T+2, or weekly. Net settlement deducts fees and chargebacks from gross volume. Faster settlement improves cash flow but may come with higher costs.
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