Dodd-Frank hurt mobile payment system plans: AT&T
NEW YORK |
NEW YORK (Reuters) - New debit card regulations have hurt U.S. mobile carriers' attempt to compete in the payments processing industry against dominant networks Visa Inc (V.N) and MasterCard Inc (MA.N), a top AT&T Inc (T.N) executive told Reuters.
AT&T, Verizon Wireless and T-Mobile USA launched "Isis" in November, saying it was building a new mobile payments processing network that would add competition to a business dominated by just two firms.
But last week, Isis said it was seeking to work with Visa and MasterCard, scaling back plans to build a new, separate network.
John Stankey, AT&T's head of business solutions, on Thursday partly blamed the Dodd-Frank financial reform law for the retreat. The law's "Durbin amendment" will make payment processing less profitable by restricting the fees that merchants pay banks and networks every time a customer buys something with a debit card.
"Some changes in the banking laws occurred with the amendments that were put in with the Dodd-Frank bill ... As transaction fees were limited and things were changed, it kind of changed the business model," said Stankey, speaking ahead of next week's Reuters Global Technology Summit.
He said he was supportive of the venture's modified goals and that Isis had always planned to be open to working with "all parties" over time.
"Frankly, it just happened a little bit sooner than probably what we would have guessed," he said.
The banking industry is mounting a furious last-minute effort in Washington to delay the law's restrictions on debit card fees, which are expected to cut annual debit processing fee revenues to about $10 billion from $23 billion. The Federal Reserve still has to finalize the proposed restrictions, which are scheduled to go into effect in July.
Isis told regulators in a February letter that the proposed debit fee limits would "hamper the development of new payment and commerce systems, and limit the number of new entrants into a payments market already dominated by a few major networks."
The venture was already facing an uphill battle in competing with Visa and MasterCard, the world's two largest credit and debit card processing networks.
Isis originally said it would work with smaller credit card company Discover Financial Services (DFS.N) to build a new network. But more merchants accept Visa cards and MasterCards than Discover cards, meaning potential problems for people wanting to buy things using a Discover-run payments network.
The venture said last week that it still hoped to work with Discover, but it could not confirm that Discover would be among Isis' launch partners.
Verizon Wireless is a venture of Verizon Communications (VZ.N) and Vodafone Group Plc (VOD.L); T-Mobile USA is owned by Deutsche Telekom AG (DTEGn.DE).
(Reporting by Maria Aspan; editing by John Wallace)
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