Currency Conversion
Category: payment
The process of exchanging one currency for another, incurring exchange rate costs in cross-border sales.
Currency conversion (also called foreign exchange or FX) is the process of converting one currency to another, essential in cross-border e-commerce where sellers receive payments in foreign currencies. Conversion is performed by banks, payment processors (PayPal, Stripe), or dedicated FX services (Wise, OFX). Exchange rate margins and conversion fees typically add 1-4% to the cost of international transactions.
Examples
- • A US seller receiving EUR payments from EU customers through PayPal faces a 3-4% currency conversion margin on top of transaction fees.
- • Using Wise (TransferWise) for currency conversion offers mid-market exchange rates with transparent fees, often 0.4-0.6%.
- • Amazon converts marketplace payments using its own exchange rate, which typically includes a 2-3% margin over the mid-market rate.