Sunday, May 15, 2011

Dodd-Frank hurts mobile payments business model

Unintended consequences always occur when any major piece of national legislation gets passed by the U.S. Congress. If you choose to believe it was a major issue (some will suggest other plausible alternative explanations), AT&T says the Dodd-Frank financial reform law, with the Durbin Amendment," makes transaction fees for debit card transactions a much less attractive business model.

AT&T, Verizon Wireless and T-Mobile USA launched Isis in November 2010, with a transaction fees revenue model. John Stankey, AT&T's head of business solutions, says the Durbin Amendment, expected to cut annual debit processing fee revenues to about $10 billion from $23 billion. To be sure, a sudden reduction in addressable revenue opportunity of $13 billion is not trifling.

But Isis had all sorts of other reasons to change course, including the time it would take to create a new retail brand for payments, at a time when activity is moving faster across the entire mobile payments front.

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