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The challenges of multi-currency reconciliation

ReconciliationArticle
The challenges of multi-currency reconciliation 2
“PSP Reconciliation” is the process by which companies that operate online can reconcile their transactions. This process aids companies to compare transactions and ensures that they match from all sources.
In this digital age, companies are having to process international transactions using a multitude of currencies. Multi-currency reconciliation can therefore be challenging; however, there are two main solutions. Firstly, to contact the PSP, Back office, or Gateway to find out whether they can add data such as a common currency and amount into the transactional report file. Secondly, converting the transaction amounts into the required currency, which can be a more complicated solution.
 

Converting transactions into another currency

The first step in converting transactions into another currency is downloading the currency exchange rates using an API, or manually downloading the rates from the site. Rates can vary daily, and discrepancies can be found between sources due to the fact that it is not always possible to know which exchange rate providers are being used by the PSP, or which days rates were used. For example, if we have a transaction occur close to midnight, then there can sometimes be uncertainty around which days rates were used. A tolerance could be allowed of say 0.1 in any currency to make up for this.
 

"FX Checking" and "Fee Checking"

Some companies require some currency conversions for their transactions in which conversions to a common currency have already occurred. Even though the reconciliation between all sources will be possible, they would like their transactions verified in order to ensure that they have been converted using the correct exchange rate. This is what we call “FX Checking”. A PSP or Back Office can include the original amount or currency of each transaction in the report files, and convert each of them into the converted currency amount to check if the data matches.
 
Another popular reconciliation is “Fee Checking”, which refers to the process of checking whether the fee charged by PSP agrees with those stated by them; this can be done by obtaining the PSP fee schedule and the single transaction fees. Checking the fees of PSP transactions can be highly beneficial as errors can result in large refunds to gaming companies. However, the process of “Fee Checking” is not always simple, particularly when dealing with multi-currency transactions as currency conversions are necessary, and tolerance of any discrepancies will need to be managed. For example, a PSP can charge a fixed percentage per transaction along with a flat amount of say 1 GBP. The 1 GBP will then apply, not only to GBP transactions, but also to EUR, USD, CAD… transactions. Therefore, to check the fees match the fee schedule, some currency conversion will need to take place.
 

Journaling to a Finance System

Currency conversions can also be needed when journaling transactions into a finance system, to keep a record of all PSP transactions. There are two main ways that this can be needed to be done. The first is that you will post a journal file containing a sum per currency of the PSP transaction amounts, and the finance system will convert these into one currency. The second is that the PSP transaction amounts will need to be converted into a common currency, before they are posted into the finance system. This would be an identical process to conversions for the “PSP Reconciliation”.
 
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Nathan Jones
Build Consultant @ Aurum Solutions
11th February 2022
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