New Zealand banks are investigating how they can process payments over the Internet in US dollars and other currencies.
The ASB Bank is considering modifying its systems so that it can accommodate US dollar transactions from New Zealand-based merchants. New Zealand Web sites often have overseas customers, particularly in the US. Until now it was believed that Visa and MasterCard — the leading credit card companies — would not allow banks to acquire transactions in non-domestic currencies.
However, Daniel Jeffares, Visa International's New Zealand manager, says there has been some confusion over the matter. "There are two basic issues. The first is whether or not the banks can acquire US dollar-based transactions in their own country. They can and many banks are working to change their systems to do this. The other issue is whether banks can acquire transactions from a merchant sourced in another country. That is called cross-board acquiring and is generally prohibited to protect non-US banks from large US institutions which would otherwise dominate the world. However, Visa International is reviewing this rule to ensure it's still relevant."
Jeffares believes the systems changes required by banks are relatively simple.
"They would need to make a change to allow them to process the transaction without currency conversion," he says.
ASB Bank IT manager Garry Fissenden says there has been confusion about whether or not the banks are allowed to process non-domestic currency payments but Visa and Mastercard appear to have clarified the matter. "We have been told that if the merchant is physically located and registered in New Zealand, the credit card scheme rules allow us to do that."
He says the bank is in the early stage of investigating the feasability of changing its IT systems. "We can do it, it's just a matter of how we do it."
The Bank of New Zealand is also working on the problem. BNZ's product manager for electronic payments Russell Briant says the BNZ clearly understands the problems the current practice imposes on Internet business.
"We're investigating options to resolve it sooner than later, although any resolution is probably some months away."
Hugh McKellar, general manager of ISP Internet Company of New Zealand (ICONZ), says it is in the country's interest to resolve the problem as soon as possible. If New Zealand retailers start setting up shell companies in the US to sell their products online, the government will lose tax revenue and local Web site hosting companies will lose business opportunities. He says many of the Web sites that ICONZ hosts have customers in the US. "The US dollar has also become the default Net currency and a lot of people when thinking internationally, think in US dollars," he says.
"If someone buys something on a Web site and it's advertised at $US2.50 and it's processed by the bank at $US2.67, that will annoy the customer. The merchant can't control it because it depends on the exchange rate the credit card company uses on the day they do the conversion. It's just another barrier to e-commerce."