Tempo Payments Inc. plans to conduct a pilot program early next year in which it will support mobile contactless payments tied to so-called decoupled debit cards.
The trial at first will involve stickers with embedded payment chips. Participants would place the stickers on their mobile handsets, but the network eventually plans to tie the contactless application to microSD chips, which consumers can install in phones themselves, and ultimately to chips that would come embedded in phones, said Mike Grossman, Tempo's chief executive.
"The core notion we have is a vision of utilizing mobile handsets for point of sale [debit] payments," regardless of which bank holds the funds, Grossman said. "We're in a unique position, because we operate an open-loop decoupled debit network."
Tempo's network primarily supports cobranded affinity cards and cards cobranded with retailers. It routes purchases either through MasterCard Inc. or Discover Financial Services for authorization, and it settles the transactions through the automated clearing house system.
With this setup, Tempo can tap in to accounts held by any U.S. financial institution to support decoupled debit offerings backed by cards, stickers or chips.
Though some observers question the timing and revenue prospects of Tempo's plan, Grossman said he believes the company can get more debit cards tied to contactless platforms out into the market quicker and with greater volume because consumers do not have to wait for thousands of banks to decide individually whether to support contactless payment.
Indeed, financial institutions likely will be fragmented in their support of mobile contactless payments, and that could slow market development, Grossman said.
Tempo issuers include HSBC Holdings PLC and First Bank and Trust in Brooking, S.D., a unit of Fishback Financial Corp. Tempo, of San Mateo, Calif.
The network's pilot program will involve "a couple of retailers to work closely with at the beginning," Grossman said. Retailer partners working with Tempo include the QuikTrip Corp. and Sheetz Inc. convenience stores and ARCO petroleum stations.
The pending overhaul of debit-interchange regulations is widely expected to cause cuts in banks' rewards programs, but Tempo says it has no plan to capitalize on the change.
Adil Moussa, an analyst at Aite Group LLC, said that although Tempo's concept is good, its timing may be off.
"First of all, decoupled debit has not had a success that people were expecting," Moussa said by e-mail. And mobile payments "are still struggling to get a place in the sun," he said.
Moreover, he said he has doubts about the revenue potential of the Tempo plan. Giving one example, Moussa said the processor might earn 10 cents per transaction, and cardholders use their cards the typical nine times a month. Taking that monthly 90 cents per card and tying it to the bank's card base and multiplying the total by 12 to come up with a full-year sum, "you'll see that it doesn't amount to much annually to create the type of revenue necessary to support Tempo in the long run and make it a viable solution," Moussa said.
"And this is considering that all cardholders are using it and that all merchants are equipped to take [contactless] stickers, which is more than optimistic," he said.
Grossman said Tempo is "getting very significant traction, really for the first time." He would not provide specific transaction data.
