Durbin Amendment drives Tempo Payments out of business

Tempo Payments Inc., the leading provider of decoupled debit cards, has announced that it is going out of business as a result of the Federal Reserve’s new debit card regulations.

According to Mike Grossman, Tempo’s chief executive, the regulations will cut its revenue in half, is reporting.

Last month, the Fed released its final rules setting price controls on debit card interchange fees. Tempo currently receives 44 cents in gross revenue per debit card transaction but the new rule, set to take effect in October, caps the fee at 21 cents plus 0.05 percent of the sale.

Over the past two years, Grossman said the Calif.-based company had grown to “hundreds of thousands” of cards in issue and “millions” more in the pipeline, reports.

Clients of Tempo include ACRO and Sheetz. Its main issuing partner is Brookings First Bank & Trust. First Bank & Trust is exempt from the Fed’s new rules because it has less than $10 billion in assets. The Fed, however, specifically did not exempt decoupled debit cards whose transactions are routed over payment card networks.

In 2007, Tempo joined with convenience store chain QuikTrip Corp. QuikTrip began offering a personalized debit card in August but was informed that Tempo would cease operations by July 15, CSP Daily News reports.

Grossman said the company laid off 15 of its 25 employees last month and that the remaining employees would be laid off over the next few months, according to

Tempo debit cards use payment card networks for authorization and settlement with the merchant acquirer. It debits the DDA via the automated clearing house for settlement with the cardholder.

Tempo’s revenue is generated based on the interchange fees of the card network. Tempo controls the whole process and divvies up the revenue between the issuer, merchant and itself.

Grossman said about $20 million had been invested into Tempo.

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