Tempo Plans Some Noise for a Quiet Decoupled Debit Card Market

The market for decoupled debit cards, which has been eerily silent for about a year, may soon be making waves again. An executive with Tempo Payments Inc., a non-bank processor with the only network-branded product on the market currently, said this week the company plans to launch a new product in about three months. “We've been in stealth over the past year, but we'll issue a new product in July with decoupled debit at the core of it,” said Anthony Ruebner, vice president of business development at the San Mateo, Calif.-based company, in a presentation at NACHA Payments, a trade show in Orlando, Fla. Speaking to Digital Transactions News, Ruebner said he is unable to give any details about the product. But it would represent the first major development in the decoupled-debit market since the credit crisis that erupted last year forced bank executives across the country to rewrite business plans and shelve pilots and projects across the board. Capital One Financial Corp., which stunned the payments business by introducing a MasterCard-branded decoupled product in 2007, has quietly suspended the card after shutting down a pair of merchant pilots almost a year ago (Digital Transactions News, May 8, 2008). Cap One's entry in the market excited substantial interest not only because of its marketing prowess but also because its new product was widely seen among banks as a threat to their bread-and-butter demand-deposit accounts. A decoupled debit card links to a checking account held at a bank other than the entity issuing the card. Transactions clear through the automated clearing house. But now Tempo, whose roots in decoupled debit go back to its days issuing ACH-based debit cards on behalf of retailers under the Debitman name, says it is seeing encouraging results with so-called open-loop products. These are cards that Tempo either issues on its own or with a bank partner and that bear the MasterCard logo. Ruebner told the audience at the conference that Tempo data indicate merchants operating an open-loop system issue 50% more cards than like businesses using closed-loop cards. Monthly transactions, meanwhile, jump from 3.7 to 13.3 on the same comparison. The cards, which can be cobranded by merchants, typically carry rewards that encourage usage by cardholders. Ruebner said the reward rate on a Tempo card is 0.5% per transaction, which he compared to no more than 0.1% on a traditional, signature-based debit card. That has helped drive transaction volume up to 161 transactions per active card per year, he said. Tempo's bank partner is HSBC Retail Services, which issues a Tempo-supported card under its OptiPay brand for merchants like CVS Caremark Corp. Speaking to Digital Transactions News, Ruebner refused to break out Tempo's volume between the HSBC-related activity and that which is Tempo-direct. He said the company is seeking more bank partners, but conceded current conditions in banking have made that job a tough one. “What with the economy being what it is, innovative new products are not top of mind,” he told the audience. “That's why you've seen decoupled debit go quiet.”