Banks settle int'l card payments by buying dollars from open market

Debit/credit card transactions on international merchants and websites can only be settled by banks buying dollars from the open market, a leading bank said.

As a result, the conversion rate for the transactions would be determined by the current open market rate, which may be different from the rate indicated on the website of the foreign merchant.

"We would like to inform you that banks can only settle debit/credit card transactions on international merchants/websites by purchasing dollars from the open market. Hence the conversion rate on these transactions is applied according to the prevailing open market rate which may differ from the rate displayed on the international merchant website," Meezan Bank Limited announced on its official social media platform.

Bankers said the announcement was in response to various customer complaints regarding higher exchange rate. "Currently, banks as a whole are having a problem. Banks purchase dollars from the open market in order to settle card transactions because they have been asked not to do so from the interbank market.

As the dollar rate is high in the open market, the rate is higher than official rates," a banker said. "This shows a scarcity of dollars in the market," he added.

The rupee has been under pressure against the dollar. The gap between the interbank and open markets' rates also widened.

The local currency depreciated by 49.90 rupees versus the greenback in the interbank market and 55.20 rupees in the kerb market in 2022. In November, the State Bank of Pakistan (SBP) said that debit/credit cards were being used for transactions, not aligned with the profile of the individual or, were intended for commercial purpose.

The central bank has advised banks to ensure that the use of debit/ credit cards for international transactions is aligned with the profile of card holders and for their personal needs only.