Magazine article American Banker

Tempo Unaffected by Reform

Magazine article American Banker

Tempo Unaffected by Reform

Article excerpt

Byline: Sean Sposito

The pending overhaul of debit interchange regulations is widely expected to lead to cuts in banks' rewards programs, but it remains unclear how this could affect decoupled debit cards that have long promoted their lucrative rewards offers.

Decoupled cards settle transactions through the automated clearing house systems rather than the standard debit networks and, therefore, are unlikely to be significantly affected by the Dodd-Frank Act or the amendment sponsored by Sen. Dick Durbin authorizing the Federal Reserve to regulate debit interchange rates. These rules have not yet been drafted.

Tempo PaymentsInc - perhaps decoupled debit's biggest champion - said it has no plan to capitalize on the changes.

"We already facilitate higher rewards than consumers get with traditional debit cards," said Mike Grossman, Tempo's chief executive. "And in a post-Durbin world, that may increase. But our primary focus is on our current business model."

Tempo's debit system lets people link any bank account to its cards, and affinity partners get transaction fees when the cards are used. The transactions are authorized over standard card networks but settle through the low-cost ACH network. As a result, transaction fees are lower than on regular debit cards, and the savings typically go toward rewards and other benefits.

In the past year, Tempo has expanded its focus to nonprofit groups that see the cards as fundraising tools.

Grossman said he is taking a wait-and-see approach to the major payment networks' response to the new legislation before considering any change in Tempo's business model. …

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