A digital merchant’s guide to FX

Jamie Bide, Engagement Manager at CMSPI, discusses how merchants should tackle FX, emphasising on conversion at checkout and post-checkout, optimisation opportunities for merchants, as well as different types of FX fees applied in cross-border payments.

Despite economic headwinds, the cross-border payments market continues to grow rapidly – predicted to be worth USD 320 trillion by 2032. As international volumes rise, merchants are increasingly adopting multi-currency setups, adding another layer of complexity to an already far-reaching global web of regulations, customer preferences, and payment method acceptance. Amidst all the intricacies, how are some merchants approaching foreign exchange (FX) as an opportunity, rather than a cost of doing business?

FX in the transaction flow

1. Conversion at checkout

In some cases, the customer’s presentment currency (i.e., the currency charged to the customer at checkout, also known as the authorisation currency) is converted during the checkout process. For example, when a customer pays a US merchant using a UK-issued card, their issuer typically converts British pounds (GBP) to US dollars (USD). The customer pays a conversion fee to the bank, and the merchant only receives USD – removing the need for conversion down the line.

2. Conversion post-checkout

In some cases, a merchant may need to settle in a different currency than the one the customer paid in – either for accounting purposes, or because their acquirer does not support settlement in the relevant currency. Either their acquirer, often using a third party, or an FX conversion provider can do this. Merchants typically pay an FX fee, plus any variation between the underlying exchange rate and the one charged by their provider (the FX spread).

Cross-border: where money is made

Beyond currency trading and hedging, this rapidly growing segment generates income for the payments industry in a variety of ways:

FX fees – direct fees for exchanging currencies, such as those charged by acquirers. These apply in addition to the higher network and interchange fees often associated with cross-border transactions.

FX spreads – there may be differences between the exchange rate paid to third-party converters and the one charged to merchants to protect payments partners against currency fluctuations, creating an unseen cost of transacting.

Account fees – additional fees for holding multi-currency accounts, for example. 

Optimisation opportunities for merchants

1. Know your FX sources

Acquirers may differ in the underlying FX source they use to perform currency conversions. These sources are not uniform, and CMSPI has identified significant differences in settlement amounts between exchange rate sources for a given currency pair. Uncovering these unseen costs allows merchants to think strategically about their routing strategies and localisation priorities.

2. Leverage like-for-like settlement

For merchants able to meet local requirements, like-for-like (L4L) settlement allows them to settle in the currency of the original transaction. This avoids many of the fees associated with cross-border transactions – and can reduce business risk from currency fluctuations. However, not all acquirers can support L4L settlement in all markets and establishing an optimal strategy can have implications across tax, compliance, and payments.

3. Look for revenue opportunities

Common amongst travel and hospitality merchants, dynamic currency conversion (DCC) is an example of a potential FX-based revenue stream for merchants. With DCC (or eDCC), a customer can choose whether to transact in their own currency or the local currency at checkout. This can improve the customer experience by creating greater transparency over the value of their purchase and potentially offering lower rates than bank conversions. In this case, the fee the customer would typically pay to their bank is split between the merchant and the FX provider.

4. Emerging technologies

Stablecoins – cryptocurrencies pegged to a stable asset, typically a fiat currency such as the USD – are a hot topic in cross-border payments today, claiming the potential for faster transaction times and lower costs. For example, a consumer in Argentina could buy Tether (USDT) with their local currency and use it to pay at a stablecoin-accepting merchant via a crypto wallet, avoiding FX and international wire transfer fees. However, for merchants unwilling to hold stablecoins and instead choosing to accept them via a third party, there are typically fees for converting to fiat currency.

The road ahead

Despite efforts by the G20 to make cross-border payments more efficient, acceptance remains a pain point for merchants today – fraught with higher costs, greater risk, and a lower likelihood of approval. FX is just one component of the challenge, but it is a crucial one for merchants to understand, since the true cost of conversion often goes beyond headline rates. For those with a granular understanding of their transaction-level data, cross-border payments can move from a cost of commerce to a revenue opportunity.

This editorial piece was first published in The Paypers' Global Ecommerce Report 2026, which provides a complete overview of key trends and strategies to help businesses worldwide succeed. Download your free copy today to explore in-depth insights on global ecommerce trends, the latest innovations in payment solutions, and strategies to stay ahead in a competitive market.

 

About the author

Jamie Bide is an Engagement Manager at leading payments consultancy CMSPI, where he works with a specialist team to support large, international, and multi-channel merchants in understanding and optimising their payments acceptance arrangements. He has a strong interest in cross-border operations and foreign exchange and works closely with merchants to implement innovative solutions to achieve their global business objectives.

 

About CMSPI

As the world’s leading payments advisory, CMSPI partners with hundreds of Global 500 merchants to save them millions every year. Leveraging the combination of specialist expertise and the CMSPI Platform, CMSPI helps merchants harness the power of data to maximise payments supply chain performance and increase the profitability of every transaction. CMSPI delivers Smarter Payments Intelligence that keeps merchants ahead of the curve.