The service will allow merchants, who may receive a commission, to offer international cardholders the option at the U.S. point-of sale to pay in their home currency rather than U.S. dollars. Vital plans to make the service available to merchant acquirers for resale to merchants by the Christmas holiday season, says Phillip L. Kumnick, SVP of Global Partner Solutions at Vital Processing Services.

“It’s a tectonic shift in the US credit card industry,” says Thomas J. DeLuca, SVP of product management at Planet Payment, which is based in Long Beach, NY. “This is all about consumer empowerment. Visa is listening to what the cardholders want.” Planet Payment offers conversion in five currencies: U.S. dollar, British Pound, Japanese Yen, Euro and Australian dollar.

First Data and Vital together process 67 percent of all credit card transactions in the U.S.; Vital alone has relationships with banks and independent sales organizations that process transactions for more than 1 million physical and e-businesses. Kumnick says he doesn’t know what percentage of that number would ultimately want DCC capability at the point of sale, since it requires a card reader and trained personnel to explain the option to consumers.

“It’s a nice product that generally serves the T&E [travel and entertainment/business] sector, as well as the retail establishments,” he says. “It removes some [consumer] ambiguity.” He notes that Vital has been working with its clients for nearly a year to set up card readers and develop employee training.

Ironically, the deal appears to be a sign of surrender by Visa USA, which has long opposed DCC in the U.S. since the transaction would usurp its traditional one-third share of the three percent currency conversion fee charged foreign customers. However, if a customer chooses DCC at the point of sale, that three percent fee eludes Visa’s grasp, only to be captured and split instead three other ways: among the merchant acquirer bank, the technology vendor and the merchant. Indeed, Visa seems to have adopted a “If you can’t beat ‘em, join ‘em mentality,” since Vital is a joint venture of Visa U.S.A. and TSYS. Visa officials did not return phone calls seeking comment.

DCC is big business for acquirers, which in 2003 would have earned up to $530 million from $3.76 billion billed in the processing of the more than $1.2 trillion worth of Visa and MasterCard credit and debit card purchase volume in the U.S., according to credit card trade publication, The Nilson Report.

Although DCC offerings are expected to be most popular in foreign-business and tourist locales in the U.S., such as New York City, Miami and Las Vegas, analysts say it will eventually be a must-have in the hospitality industry.

Bank Technology News, May 2004 - Reprinted with Permission