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How automatic currency conversion works
Automatic currency conversion (FX auto-conversion) is a process in which a payment or withdrawal in one currency is automatically converted into another at the current rate, taking into account the provider's mark-up and technical settlement rules. For the user, everything looks "instant," but under the hood - quotes, liquidity, routing to correspondent accounts and T + N calculations.
What the course you see is "assembled" from
1. Price source.
The provider takes quotes from liquidity providers (banks/ECN), card networks (for card transactions) or from its own pricing.
2. Basic course (mid-market).
The theoretical middle of "buying/selling" is the guideline on which premiums are layered.
3. Spread and markup (markup).
Difference between buy/sell rates + commercial provider surcharge for service and risks.
4. Rounding and technical adjustments.
Bank minimum step rules (e.g. up to 0. 0001), surcharges for weekends/holidays, protective "buffers" against volatility.
5. Final Consumer Course.
The one for which the money is debited/credited to the client.
Where exactly the conversion takes place (options)
On the side of the card network (Visa/Mastercard) when clearing. The network applies its course at the time of calculation; the bank can add margin.
Acquirer/PSP merchant (DCC - Dynamic Currency Conversion). The client is offered to pay in "home currency" right at the checkout/on the site - the rate and margin are set by the DCC provider.
In the bank/fintech wallet of the client. The Bank converts according to its own rules; sometimes more profitable than DCC.
On exchange/OTC FX through a partner. Relevant for payment companies, marketplaces, crypto/fintech services.
End-to-end life cycle
1. Determination of desk currencies: card/wallet/account currency vs purchase/payment currency.
2. Choice of exchange location: DCC at the merchant → DCC course; otherwise - network/bank/PSP rate.
3. Course fixing:- Online (real time) - for instant rails (A2A, wallets).
- The network rate for clearing is for cards (time → shift risk may pass between authorization and clearing).
- 4. Application of margin and rounding: final consumer rate and calculation of the amount.
- 5. Hedging (for business): Provider/operator closes FX position with forward/netting to lock in margin.
- 6. T + N settlements: settlements between participants on correspondent accounts (NOSTRO/VOSTRO), reporting and reconciliation.
Card transactions: what is important to know
Authorization vs clearing. The amount for "holding" and the actual write-off may differ due to a change in the exchange rate.
Weekends and holidays. Exchanges are closed - networks/banks add "weekend markup" as insurance.
Issuer fees. Separate "conversion" fee above the network rate.
Chargeback and returns. Refand goes at the current rate on the day of return - the amount may differ from the original.
DCC (Dynamic Currency Conversion) in simple words
Pros: instant transparency - you see the amount in "home currency" at the checkout.
Cons: The rate is often worse due to the high markup of the DCC provider.
Advice to the user: if there is no hard reason, choose payment in merchant currency, entrusting the conversion to your bank/network.
A2A and local fast rails (SEPA Inst, FPS, PIX, PayID)
Conversion usually makes the provider-orchestrator pri跨valyutnom translation.
The rate is fixed at the moment of quotation; for transparency - show the rate, margin, total amount and quotation "window" (for example, 30-60 seconds).
For large amounts, RFQ mode is used (request for individual price from LP).
For business: how pricing and risk management work
1. Liquidity pool. Multiple LPs/banks, ECN aggregators, spread prioritization and SLAs.
2. Routing and netting. Convergence of counter flows (buying/selling) and minimization of external exchanges.
3. Hedging. Forwards/swaps by expected volumes, auto hedge when reaching the threshold of an open position.
4. Risk parameters. Steam limits, daily VAR, stop-out with abnormal volatility.
5. Commission model. Fixed +% or net markup to mid-market; transparent reporting to the client.
6. Observability. Control of deviations from reference indices, p95 quotation time, frequency of recots.
7. T + N operations. Correspondent account management (NOSTRO/VOSTRO), cut-off times, control of correspondent commissions.
Rounding, minimum steps and "kopecks"
Banker's rounding and rules for rounding to minimum currency units (for example, to a cent).
Combined commissions. Part in the course, part in a separate line - it is important to transparently show the total cost.
Accuracy of calculations. Keep the calculation in high accuracy (for example, 8-10 characters), round only on output.
Hidden costs and how to reduce them
High markup at DCC/provider. Revise the pricing, compare against mid-market indices.
Weekend and night windows. Lower risk with limits/add. margin, but don't "play it safe" excessively.
Double conversion. Avoid "currency A → B → C" routes if "A → C" is possible.
Slippedge. Fix the course to a short "action window"; for large amounts - RFQ.
Correspondent accounts and FX fees to banks. Optimize the network of settlements and "home" currencies.
Auto-conversion architecture (for payment/fintech systems)
FX service (pricing) in real time. Quotation sources, aggregator, failover, cache.
Risk & Limits. Limits on pairs/amounts/time, VAR/volatility, stop modes.
Quote API. Fixing the rate for the client (including RFQ), TTL quotes.
Deal & Hedge. Deal creation, auto hedge (partial/full), position accounting.
Ledger & Reconciliation. Double entry, commission/spread accounting, summary with LP/bank reports.
Reporting & Transparency. Rates, margin, total, timestamp quotes, link to source/methodology.
Compliance. Pricing logs, disclosure of rules for users, complaint processing.
User Experience (UX) - what to show on the screen
Clear course and outcome. "Rate: 1 USD = 0. 92 EUR; Mark-up: 0. 35%; Total to be written off: 92. 32 EUR».
Mode selection. DCC vs "payment in merchant currency" with pros/cons hint.
Quotation validity window. Timer 30-60 seconds for the stability of the sum.
Warnings. About a possible discrepancy in the return/chargeback due to a change in course.
History. Save the rate, margin and amount for each payment - this reduces the dispute.
Special cases
Returns/refands. Go at the current exchange rate on the return date (difference is possible).
Foreign currency subscriptions. Fixing the rate at each write-off; it is better to warn about fluctuations in advance.
Crypto ↔ fiat. Additional risks of volatility and network commissions; you need targeted risk scoring and a slippage buffer.
Weekend/night betting. Follow the "weekend markup" and cut-off banks.
Business checklist
1. Connect 2-3 quotation sources and aggregator with failover.
2. Define a transparent markup and show it to the client.
3. Enter limits and VAR control for pairs/times/volumes.
4. Implement Quote API with TTL and RFQ for large amounts.
5. Set up auto-hedge and netting to reduce the open position.
6. Make a ledger + summary of LP/bank reports, taking into account correspondent commissions.
7. Show in the interface the rate, margin, total, validity and warn about differences in returns.
8. Run the UX A/B test (DCC prompts, currency selection, timer).
9. Prepare reports and logs for audit and support.
10. Periodically check your courses with reference indices and competitors.
Mini-FAQ
Why is the amount different when holding and debiting a card?
The network/bank rate may have changed between authorization and clearing; possible commissions of the issuer and "weekend markup."
Is DCC always worse?
Not always, but often - because of the high mark-up. Compare the rate and total amount before confirmation.
Can I "fix" the course for an hour?
Usually - for a short TTL window (seconds/minutes). Longer is a risk for the provider; solved by RFQ with hedge.
Why did I get a different amount when I returned it?
Refand goes at the current exchange rate on the date of return; courses change, a difference is possible.
Auto-conversion is not a "black box," but a controlled process: a source of rates → markup and rules → fixing quotes → hedges and calculations → transparent UX and reconciliation. Users are helped by a conscious choice (usually pay in merchant currency), and businesses are helped by multi-liquidity, fair pricing, risk control and understandable communication. This approach reduces costs, reduces disputes and makes international payments predictable.