When you spend as much time with payments data as we do at Pagos, you’re never really surprised when something changes that impacts businesses and customers when they try to transact. This can be especially tough for merchants who are trying to establish good relationships with new customers or keep existing customers happy. The November 2022 announcement of the introduction of Tourist Exchange Rates —also called the MEP (Medio Electrónico de Pagos) rate—by the Argentinian Central Bank is one such impactful change.
Without going into full details around the economics of the situation, the key thing to highlight about this change is that the Central Bank of Argentina is allowing visitors to convert money to Argentinian Pesos at a more favorable rate (40% more Argentinian Pesos for your dollars or Euros) when compared to the official published central bank rate. This is in order to incentivize more dollars, euros, and pounds to go through the central bank and help build up badly needed foreign currency reserves. The chart below shows the gap between the “blue” exchange rate which is the one that you can get on the streets of Buenos Aires and is significantly better than the official central bank rate. Getting more of those currencies into the bank is the point of the tourist rate.
In order to make this easy for tourists, starting in December 2022 the major card networks have made the tourist rate available automatically when paying with credit cards in Argentine Peso (ARS). To be clear, this is now the law of the land in Argentina, so everyone needs to comply—including the card networks and banks—and it applies to both online and in-person transactions.
These types of regulatory changes happen all the time and have an impact on how payment processing works because the entire ecosystem—card networks, acquirers, issuers, and gateways/PSPs—have to adjust. In this particular case, the introduction of two foreign exchange (FX) rates could be impacting you and your acquirers right now.
These changes only matter if you are transacting in ARS. If you are not transacting in ARS then you can skip to the end, although I think some of the payment geeks reading this will stick around. If you are transacting in ARS then the next question is: are you doing local or cross-border acquiring? Meaning, do you have a local entity in Argentina or are you working with a provider that has localized your transactions?
If you are local in Argentina then you are already expecting to get paid in ARS locally, and most of your transactions will probably not be converted. If any foreign cards are processed domestically in Argentina they will be converted at the tourist rate. This means that you’ll get the ARS you expect and the cardholders will benefit from the better exchange rate, ultimately paying less. This is a skip to the end scenario too.
If you are a company transacting in Argentinian Peso, are not local in Argentina, and are settling in your home currency (AKA cross-border acquiring), then it’s important to note that:
If you are transacting in ARS and you are not local in Argentina. This means that all of your transactions will be subject to some form of FX conversion; the question then is who pays for what?
This last “merchant pays” use case is the one where problems arise depending on how you set your ARS pricing: you now have to select the correct rate, and selecting the correct rate is a complex choice that includes understanding where a cardholder is, how the networks are implementing the two FX rate structure, and who your FX rate provider is in the first place.
So if you are a cross-border merchant offering ARS to non-Argentinian cardholders and using some form of dynamic pricing based on USD, EUR, or GBP costs, at least two or three of these questions will be relevant to you:
*Refunding in particular will be complex going forward because it requires you to know which FX rate to use to calculate ARS refunds. Some acquirers and networks have proposed prohibiting refunds in ARS, which could further complicate things and may necessitate you finding an alternative payment method.
Your payments data combined with network data can help you identify the impacts of regulatory changes and how you might manage it going forward. Payments geeks that we are, we opted to do some experiments to see how our band of Pagos birds could help.
With Peacock by Pagos you can easily use data filters to create views that allow you to see your volume:
Once you filter your data like this, you’ll see all those transactions in your volume that are on cross-border merchant accounts, processing in transaction currency ARS, and all countries outside of Argentina. When looking at your processor approval and volume charts you’ll see something like this:
What we see in the graph are customers from non-Argentinian issued cards processing ARS transactions cross-border. This amounts to 1,000 to 2,000 transactions per month that will be impacted by regulatory changes. Depending on the details of this situation, unforseen costs could add up quickly. Questions to ask:
We also looked at this example merchant’s decline details for recurring as well as non-recurring transactions to see what has happened over the last few weeks and whether the decline distributions changed.
Start by looking at the yellow marks on January 28th: these are blocked transactions, indicating there is no longer a transaction “route” available.
It only took a couple of clicks to answer some key questions in Peacock. You can also look deeper into refunds, chargebacks and disbursements of processed ARS transactions. Our built-in filters and charts enable you to answer payment data questions quickly, inform your stakeholders, and prepare operationally for challenges in chargebacks and refunds. While you’re at it, consider using Canary by Pagos to monitor for and alert you to events like this as they’re happening versus finding out later when more damage has been done.
Many problems can be avoided by communicating expectations with your customers upfront, controlling what currencies and products are offered at checkout, and giving your customer service representatives more and better context. We’ve squawked about the importance of accurate BIN data plenty, so it should come as no surprise that Parrot by Pagos, our direct-from-network BIN service can really be useful for these use cases (and more).
We have all the data you need to identify customers impacted in the two FX rate use case. Once you provide us with a 6, 8, or 9-digit BIN we will respond with which country the card is from as well as other associated attributes including whether it is enabled for cross-border, the card product type, and whether it’s in a token range or a PAN range. With a card’s country of issuance alone, you can start to make decisions about how you process that payment, in what currency, and even what FX rate you use on the transaction. You can also use Parrot to do a deeper analysis on which of your customers are impacted, as was described in earlier sections of this post, by linking the BIN details to your transaction database and starting your own analysis. (Or you could just put a bird on it. Peacock is made for the job.)
If you are processing transactions in ARS for settlement outside of Argentina and transacting with both local Argentinian card holders and non-Argentinian cardholders, consider these factors when using BIN data to streamline your checkout flows:
Both of these require a simple API call to Parrot or Parrot Batch and you’ll be set to make better decisions.
The power of payments data is in the details: being able to use that granularity to understand what’s actually happening in your payments stack enables you to make better decisions about your vendors, your customer experience, and your technical setup. Industry and regulatory changes can create a lot of bespoke work. Whether it’s related to the performance of new technologies like network tokenization or further changes in currency regulation (Nigeria and Egypt are considering changes similar to Argentina’s), the best way to navigate that environment is 1) having access to your payments data and 2) using tools that make it easy to understand what’s going on and execute meaningful change. We’re here to help, and we’d love to hear from you about this topic or other data-driven challenges you’re experiencing.
