Tempo Payments Inc. early next year plans to conduct a pilot in which it will support mobile contactless payments tied to “decoupled” debit cards, PaymentsSource has learned.

The pilot initially will involve stickers participants would place on their mobile devices, but the network eventually plans to tie the contactless application to microSD and ultimately to Near Field Communication chips embedded in phones, says Mike Grossman, Tempo CEO.

“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 says. “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 Worldwide or Discover Financial Services for authorization, and it settles the transactions through the automated clearinghouse system (see story).

That way, Tempo can tap in to accounts held by any U.S. financial institution to support so-called decoupled debit offerings backed by cards, stickers or chips.

Though some observers question the timing and revenue potential of Tempo’s planned initiative, Grossman 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 the thousands of banks supporting demand-deposit accounts 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 (see story).

Tempo issuers include HSBC Holdings PLC and First Bank & Trust, a Brooking, S.D.-based unit of Fishback Financial Corp. The company also supports merchant-funded rewards initiatives.

The network’s pilot initially will involve “a couple of retailers to work closely with at the beginning,” Grossman says. Existing 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 lead to cuts in banks’ rewards programs, but Tempo says it has no plan to capitalize on the changes (see story).

Adil Moussa, an analyst at Boston-based Aite Group LLC, contends theoretically Tempo’s concept is good, but the timing may be off.

“First of all, decoupled debit has not had a success that people were expecting,” Moussa said in an e-mail. And mobile payments “are still struggling to get a place in the sun,” he said.

Moreover, Moussa questions Tempo’s revenue potential.

Say the processor earns 10 cents per transaction, and cardholders use their cards the typical nine times per month, he cites as an example. By 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 says. “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.”

Though Grossman says Tempo is “getting very significant traction, really for the first time,” he declined to provide specific transaction data.

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