This article appears in the Sept. 17, 2009, edition of ISO&Agent Weekly.
More ISOs and merchants are expressing interest in multicurrency-payment services as a way to increase client retention rates and add an additional revenue stream to their businesses, observers generally agree. Typically, multicurrency-payment services allow merchants to accept and process card transactions in multiple currencies.
"The proposition to the ISO [in reselling multicurrency services] is that it represents a new revenue stream," says David Fish, senior analyst at Mercator Advisory Group, a Maynard, Mass.-based consulting firm. Merchants also can earn additional revenue with multicurrency processing, he says.
With multicurrency point-of-sale services, sometimes referred to as dynamic currency conversion, international consumers can transact at retailers in their own currencies when shopping abroad. Typically, merchants do not need updated terminal hardware to enable multicurrency applications. During a foreign card transaction, the terminal identifies the card as foreign and presents the cardholder an option to pay in the foreign currency.
Merchants usually do not have to "do anything outside of their norm" when conducting a multicurrency transaction, says Xavier Ayala, vice president and director of national sales and marketing at Humboldt Merchant Services, a Eureka, Calif.-based merchant-service provider.
The total revenue opportunity for multicurrency products "is usually 2% to 4% of the purchase amount," says Mike McCormack, president of Palma Advisors LLC, a Fort Lauderdale, Fla.-based consulting firm. The amount is split among the
parties involved, such as the processor,merchant and ISO, he says.
Another benefit for ISOs is lower merchant-attrition rates, says Ayala. "In the United States, there is a select number of processor banks" that offer multicurrency services, Ayala says.
It is more difficult for merchants to shop around among competing multicurrency companies because of the limited number of providers. ISOs that offer multicurrency services "can create a merchant situation with more stickiness," agrees Fish.
The products also typically are easy for ISOs to sell and for merchants to operate, notes McCormack. "If designed properly, the products are simple from a merchant and ISO standpoint," he says. "The merchant should have to do nothing from an accounting perspective other than receive a revenue-share payment."
Increased ISO Interest
More ISOs have been approaching Planet Payment Inc. regarding multicurrency payments, says Deborah Camm, Planet Payment product and sales consultant. ISOs are beginning to identify multicurrency services a potential revenue stream they can add, Camm says. "'We are losing revenue in the U.S. What can we do outside the U.S.? merchants say.' The product is becoming more widely talked about now in light of the economy."
Roughly 10 ISOs have signed up to resell Planet Payment's multicurrency transaction services under a shared bank identification number program the payment processor launched early this year, according to Long Beach, N.Y.-based Planet Payment.
Processors and acquirers provide bank identification numbers, or BINs, to identify merchants during the transaction process. Large ISOs typically have enough merchants to afford a unique BIN for their clients, but some smaller ISOs may not have enough clients to justify the cost to secure a unique number and choose instead to commingle their merchants with other ISOs' merchants within a shared BIN.
Axia has been a part of Planet Payment's shared BIN program for the better part of 2009, says Randal Clark, president and CEO of the Santa Barbara, Calif.-based merchant-service provider. The multicurrency products have created an opportunity for Axia's agents to communicate with merchants and partner with them to improve their revenue, he says.
Planet Payment, which launched the program to give small and midsize ISOs an opportunity to sell their products, believes the program is doing "quite well," says Camm. Not having a shared-BIN program "was a barrier to getting the smaller ISOs
and agents that want to sell" the company's services, Camm says.
Having a shared or unique BIN does not affect the merchant or cardholder, says Ayala. "It's strictly between processors and ISOs," he says.
"Considerable" interest exists among merchants in multicurrency products, says Fish. Such products can "reinforce" customer loyalty to the merchant because it is offering a value-added service, he says.
The income from multicurrency products can help offset some of the fees associated with processing foreign card transactions, notes Ayala. Merchants "still get the same interchange rate," but they may experience additional revenue from an increased customer base and higher foreign-transaction amounts, he says.
Some merchants may experience increased transaction totals, says Camm. Planet Payment has "had merchants that have seen up to a 20% increase in processing volume," she says.
Though Axia only recently began selling Planet Payment's products to merchants, the reception thus far from clients has been "excellent," says Clark. "In this economy, getting money back to the merchants opens a lot more doors," he says. Axia clients that use Planet Payment produces "absolutely are experiencing increased revenue," says Clark.
The products also have allowed Axia's sales agents to be "more of an advocate" for merchants' needs instead of "just another vendor," Clark adds.
Not all merchants, however, are a good fit for currency-exchange products, observers generally note.
"It's a matter of geography and a matter of merchant business type," says Fish. Merchant verticals that cater to international customers, such as hospitality or restaurants, can be a good fit for such products, he says. To benefit from multicurrency products, brick-and-mortar merchants also should be located in cities with many international travelers, such as Miami or New York.
Many ISOs want to know if the products apply to their merchants, Ayala says. Typically, a merchant with more than 3% to 5% of its sales from foreign card transactions is a "good candidate," he says. Additionally, ISOs will "want to do this with a merchant that is processing a fair amount" and is seeking to differentiate from the competition, says Ayala, noting new merchants typically are not a good fit for multicurrency products.