As a service that enables people to travel worldwide, airlines and airline staff handle currency conversions on a regular basis, facilitated by online booking technology which can process currency conversions fast and with ease. Of course, the benefit for air travellers is they can see exactly how much they're paying in their own currency. However, it's been reported that this may not give customers the best deal.
Many big airline companies are using dynamic currency conversion to make more money from customers. Ryanair is one example. Their online booking technology uses dynamic currency conversion to increase prices through poor exchange rates.
Online booking technology may boost flight costs
Air travellers who buy UK inbound flights in pounds are being subjected to dynamic currency conversion, whether they're aware of it or not. For example, when they book a flight from France to London, the cost is in the native currency, euros. With this method, the bank sets the exchange rate.
Ryanair uses a different strategy. During the booking process, once a customer buys a flight, all foreign currency converts into pounds. The conversion exchange rate is often poorer than the rate offered by the bank.
Dynamic currency conversion is optional
Air travellers can actually opt-out of dynamic currency conversion, but it may be hard to find. For example, on Ryanair's booking system, the option is located beneath a small link entitled "Click to find out more information on our guaranteed exchange rate". While this doesn't seem intuitive or transparent, the option is there.
Also, some airline customers may not be familiar with exchange rates or currency conversion. They could consider it a risk to opt-out and so may prefer the certainty of viewing the exact price at the time of checkout, to know exactly what they're paying.
New regulations on dynamic currency conversion
The European Union recently amended the Cross-Border Payments Regulation. Now, airlines must show customers their conversion rates as a percentage mark-up over the current foreign exchange rates from the European Central Bank. In other words, airlines have to show the mark-up percentage to customers before they buy flights. But, with the UK leaving the EU, it's uncertain what will happen in the future.