Dodd-Frank Bill Poses Issues for Mobile and Most Other Payment Providers

The new Dodd-Frank bank regulations impose a transaction fee cap of 12 cents per transaction. If the rules stand, there are business implications for mobile payments firms that promise "lower transaction costs." The typical assumption is that a new provider can provide the retailer with a lower transaction cost, but that might not be the case.

Square, whose one-inch-square card swipe device attaches to an iPhone, iPad, or Android device, charges 2.75 percent plus 15 cents for each swiped transaction; typed-in transactions cost slightly more. A standard debit card transaction might cost less, at 1.75 percent.

Sage Mobile Payments offers a credit card reader that plugs into the audio jack of a smartphone. The company plans to charge customers a set-up fee and then a monthly fee starting at $10.95, but no transaction fees.

Intuit's GoPayment, which works with iPhone, iPad, iPod Touch and BlackBerry devices and will be one of the first mobile payment apps available on Android 3.0-based tablets, provides a free card reader but charges 15 cents per transaction along with 2.7 percent per swiped transaction or 3.7 percent per keyed transaction for low volumes; businesses that process more than $1,000 a month pay $12.95 per month and 30 cents per transaction as well as 1.7 percent for swiped transactions, 2.7 percent per keyed transaction.

If new providers cannot offer lower fees, there will have to be some other value driver.

Can Square, Intuit and Other Mobile Payment Providers Compete With A 12-Cent Debit Card Transaction? - Bank Systems & Technology