Bling Nation’s PayPal Tie-In Gets a Boost from VeriFone

Bling Nation Ltd.’s decision to use VeriFone Systems Inc. terminals, announced this week, includes an agreement to harness VeriFone’s transaction gateway as well as its reseller network in a move that could bring PayPal Inc. acceptance to thousands of brick-and-mortar merchants.

Bling has been testing PayPal acceptance since the end of July with merchants in its headquarters city of Palo Alto, Calif. But now, with Bling’s decision to replace its existing terminal supplier with VeriFone, its point-of-sale devices will be linked to VeriFone’s PAYware Connect gateway, which currently serves more than 10,000 merchants. The gateway connection will allow VeriFone to remarket Bling acceptance through about 350 independent sales organizations and software resellers. “We’re not aware of any other commercialized service that integrates PayPal [for physical stores],” says Paul Rasori, senior vice president of marketing at VeriFone. “We expect we’ll have a lot of resellers interested.”

For now, the Palo Alto terminals are linked to Bling servers, with the connection to PAYware Connect expected to switch on at the start of next year. Rasori says VeriFone and Bling have to wait to allow merchants to get through the annual holiday rush, a period during which merchants are loath to make systems changes. Currently, about 100 merchants in Palo Alto are linked to Bling. “We’re definitely seeing a lot of interest and looking to bring in more merchants over time,” says Meyer Malka, co-chief executive of Bling, in an e-mail message.

Bling Nation offers proprietary direct debit and loyalty programs to merchants in communities where local banks hold both consumer and merchant accounts, allowing for on-us settlement. Consumers use contactless stickers, called Bling tags, affixed to their mobile phones to perform transactions at terminals called Blingers. When PayPal last year opened its platform to outside developers, Bling began working on an application that would let PayPal account holders use Bling, as well, a move that led to the pilot in Palo Alto.

With VeriFone’s gateway and reseller network behind it, the Bling-PayPal tie-in could put PayPal, up to now exclusively an e-commerce processor, in a significant number of physical-world stores. A selling point for these merchants is that PayPal has 87.2 million active account holders. This stands in contrast to the local arrangements Bling has made with community banks and local merchants in a handful of states around the country. “By adding PayPal to the mix, [Bling has] universal coverage,” says Rasori.

But PayPal, which historically has played down any interest in processing for brick-and-mortar retailers, is reluctant to trumpet this possibility. A PayPal spokesman says the company is “very pleased, very excited” about all of the 40,000 developers that have so far introduced applications on its platform. “I don’t think it’s appropriate to comment on any one deal,” he says. He adds, though, that PayPal liked Bling enough to incorporate the system into its San Jose, Calif., corporate campus for coffee purchases and the like.

Merchants may be attracted to Bling’s pricing. The company is charging a merchant fee of 1.5% , regardless whether the transaction is funded with a bank account or with PayPal. This rate, with its absence of a fixed-fee component, is significantly below both credit and debit card rates as well as PayPal’s standard rate for Internet transactions. But Bling and VeriFone are also counting on Bling’s ability to offer coupons, discounts, and other promotions to snag merchants. “The lower transaction fee and PayPal are huge selling points to merchants, but so are security and the ability to provide loyalty programs to their customers,” says Malka.

For now, the Palo Alto pilot continues to expand. Rasori says VeriFone has allocated as many as 800 devices for the project until the end of the year. These are VeriFone’s VX 810 Duet countertop terminal and its wireless VX 680 device, both with contactless capability.