The settlement currency is whichever currency your payment provider actually pays you in, regardless of the currency the customer was charged in. A shopper paying in Norwegian kroner while the merchant receives euros produces one transaction with two currencies and a conversion somewhere in the middle.
Choosing what you settle in
The rule that survives contact with reality is to settle in the currencies you spend in. If suppliers, salaries and tax bills are denominated in euros, euro settlement removes a conversion; converting euro sales into dollars and back to pay a euro invoice pays two spreads to solve nothing.
Businesses with genuinely mixed obligations use multi-currency payout arrangements, where each currency lands in a matching account and conversion happens when the treasury team chooses rather than automatically at payout. That normally requires a receiving account per currency, often issued as a virtual account under one provider.
Where the spread is taken, and by whom
Conversion is rarely billed as a fee. The cost sits inside the rate applied, which is the FX margin: the distance between the interbank rate and the rate you were given. A two percent spread on five million of annual cross-currency volume is one hundred thousand that never appears on an invoice.
Sitting separately from that is the cross-border fee, charged when issuer and acquirer sit in different countries. It applies whether or not any currency conversion takes place, so a merchant settling in the same currency the customer paid in can still see it.
The question providers dislike
Ask which reference rate is used and, more importantly, when it is fixed. The rate at authorization and the rate two days later when funds move are not the same number, and whichever party chooses the fixing point captures the difference. Ask for the spread in basis points rather than a description of it, and ask whether the foreign exchange conversion happens at capture or at payout.
What a mismatch does to month-end
If revenue is booked in one currency and cash arrives in another, the difference has to be recorded as an FX gain or loss, using a documented rate. Without that, balance reconciliation fails by small amounts every single day and someone spends the first week of each month explaining variances that were never errors.
What adding a currency actually changes
Adding a settlement currency is not a configuration switch. It usually means a new receiving account, a new reconciliation stream, a separate set of scheme fees, and a decision about which entity holds the balance. Merchants who add currencies for conversion-rate reasons should price that operational load in alongside the expected uplift.