Bloomberg News

Campaign Giving by Text Seen as Fee Source: BGOV Barometer

June 05, 2012

The Romney and Obama campaigns want supporters to be able to send contributions instantly using their smartphones, a step that would let telecommunications companies join in collecting fees that now flow to bank-card networks.

The BGOV Barometer shows credit-card companies including Visa Inc. (V:US) and American Express Co. and payment processors such as eBay Inc.’s Paypal have pocketed more than $14.4 million in fees for handling contributions to presidential candidates so far in the 2012 election cycle, according to data compiled by Bloomberg. In 2008, when both parties had presidential primary contests, the companies took in $30.4 million.

The payment networks could be joined by telecom carriers and aggregators in collecting revenue from political campaigns for processing donations if the Federal Election Commission approves a pending request to allow limited campaign giving via text messaging from mobile phones.

The eventual impact is likely to be more revenue for payment processors of all kinds as campaigns master methods for identifying small donors and simplify ways for them to contribute, said Michael Malbin, executive director of the Campaign Finance Institute, a Washington-based non-profit that analyzes political fundraising.

“It’s not a zero-sum game,” said Malbin. “Political participation has been growing.”

Vote Scheduled

The FEC is scheduled to vote June 7 on a request for an advisory opinion that would let phone users make as much as $50 in donations per monthly billing cycle. Contributions would be added to the subscriber’s phone bill.

“It’s both a frictionless way of handling donations and an easier way for donors to give,” said Craig Engle, an attorney with Washington-based Arent Fox LLP, who is seeking FEC approval for text donations on behalf of telecom aggregator m-Qube Inc., a subsidiary of Mobile Messenger Inc., of Los Angeles, and two political consulting firms, Red Blue T LLC and ArmourMedia Inc.

The campaigns of both President Barack Obama and former Massachusetts Governor Mitt Romney filed comments with the FEC in support of the texting donation proposal.

A similar proposal put forth by CTIA-The Wireless Association, of Washington, was rejected by the FEC in 2010 amid concerns that it could be used to circumvent the $50 federal limit on contributions that campaigns can accept without recording information including the name of the donor.

Maryland, California

Maryland and California have already approved giving by text message in state races. Officials in both states said the aim is to increase citizen involvement in the political process.

“It is going to be synonymous with campaign fundraising very soon,” said Jared DeMarinis, spokesman for the Maryland State Board of Elections.

Under the current federal proposal, each campaign would be issued a four- or five-digit code that texters would punch in to register contributions.

M-Qube would receive donations from wireless carriers, such as AT&T Inc. and Verizon Communications Inc., and advance the money to the campaigns after making sure contributions from individual phone numbers don’t exceed the $50 limit for anonymous giving.

In 2010, about $40 million was collected for Haitian earthquake relief in $10 increments through text messaging in 10 days, offering some sense of the scale of fundraising possible via the medium, said Mark Armour, the president of ArmourMedia, of Los Angeles.

Upselling Opportunity

Campaigns will have access to texters’ phone numbers, creating the opportunity to “upsell” them for larger donations, according to Armour, a press secretary in Al Gore’s 1988 presidential campaign.

Mobile carriers still must agree to permit political donations via their services, said Alan Sege, executive vice president and general counsel of Mobile Messenger.

“If the FEC approves it and the political campaigns want it, it’s my personal belief that the carriers will say ‘yes,’” Sege said in a phone interview.

Tim O’Regan, a spokesman for T-Mobile USA Inc., declined to comment.

Spokesmen for Verizon and AT&T didn’t return messages seeking comment.

Carriers’ Share

Political campaigns can expect to see 50 to 70 percent of a donation, with the rest going to fees to aggregators and carriers, Sege said. By comparison, a “card not present” transaction, such as one involving a credit card number entered into a campaign website, carries a fee ranging between 2 and 3 percent, according to Trish Wexler, spokeswoman for the Electronic Payments Coalition, a trade group that represents credit card networks and banks.

The Obama campaign may be especially well-positioned in the current election to capitalize on a new pool of small donors.

About 44 percent of the $217 million the Obama campaign raised through April has come from small donors, defined as those who contribute $200 or less, according to the non-partisan Center for Responsive Politics.

Small donors have supplied Romney with 12 percent of the $98 million he’s raised in the current campaign, the center’s data shows.

To contact the reporter on this story: Andrew Zajac in Washington at azajac@bloomberg.net

To contact the editor responsible for this story: Timothy Franklin at tfranklin14@bloomberg.net


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