How my €5 cell phone bill helps me track currency swings

…and the billion-dollar dark patterns prevalent in cross-border payments

Cross-border payment fees generate billions annually for the payments industry, and living in Lisbon with financial ties to the USA, I see exactly how every single day.

One way I’ve loosely tracked the EUR/USD exchange rate is through my 5 EUR per month cell phone plan. It’s swung from as low as 5.22 USD to as high as 5.90 USD this year. A 13% currency swing in 10 months is substantial and can wipe out a year of typical stock market returns.

But beyond that volatility, there’s another issue: how prevalent dark patterns are in international payments, both in-person and online.

Jargon check: A dark pattern is a design practice used in websites, apps, or digital products that influences users to take actions they might not have intended. In payments, this can occur with Dynamic Currency Conversion (DCC) options.

Let’s start with in-person payments. Quite often when I use my foreign card, the card reader prompts me if I want to spend in EUR (local currency) or USD (my bank’s currency). Most folks know by now that choosing USD leads to an awful exchange rate and a 2-5% markup. As such, many folks default to saying NO to DCC.

Rather than accepting that initial NO selection, many payment readers here in Portugal will ask you the question again, but framed slightly differently such that a customer not paying close enough attention might blindly accept.

Merchants often receive a kickback whenever DCC is used and that has led to some questionable practices. Some merchants now state that it’s their policy that they MUST charge me in USD, with one recent restaurant claiming it was a tax that I needed to pay. They were visibly annoyed when I cancelled the transaction and used my Portuguese debit card instead.

Contactless payments have inadvertently enabled this behavior. Because most people just quickly tap the back of a payment terminal and never see the DCC prompts, they’re unknowingly leaving the currency choice up to the merchant. I’ve even had a merchant literally snatch a reader out of my hand and tap USD themselves in an uber-touristy part of town.

Online transactions shouldn’t have this issue right? After all, users are fully in control of what they choose during the checkout experience, but that’s not the case. Some websites make it seem like there is no choice. They default to USD and hide the currency option under opaque language or scare screens and messages that make you not want to choose them.

I would truly love an option to disable this functionality on an issuer or wallet level, but it’s unlikely to happen as the incremental revenue from this is likely in the billions annually if you consider overall cross-border payment volumes. Even Amex, which restricts DCC on its cards, anecdotally seems to just capture the full margin themselves with less competitive exchange rates than Visa or Mastercard.

This is not primarily a technology problem, but a matter of incentives skewed against consumers in cross-border commerce. Don’t even get me started on remittance payments to places like my birthplace of Barbados! So here’s my question: What would a truly consumer-aligned payment experience look like here? And what could cause enough pressure to make it happen?