‘We’re Betting on the Gesture of Tapping’

Transactors

‘We’re Betting on the Gesture of Tapping’
John Stewart

By building bridges between the online and offline worlds, Bling Nation hopes to popularize ‘tapping in’ at merchants. It’s all about going viral, says one of the mobile-payments startup’s top executives.

Scarcely two years old, Bling Nation Ltd. has already deployed a new strategy. Not that the payments network has abandoned its old strategy, which has brought mobile payments in the form of contactless stickers to small communities in Colorado, New York, and Texas.
Bling has marketed its community-payments platform, in which all transactions are on-us within the bank, as a way to process local payments that saves costs by not sending transactions on long-distance rides through the Visa or MasterCard networks.
But with its new plan, the Palo Alto, Calif.-based company is aiming for something even more radical—something that could fundamentally transform not just the company but the way online and brick-and-mortar payments are perceived.
“What we see is there are a lot of things you do in the online world you’d like to be able to do in the offline world,” says Meyer Malka, co-chief executive who founded Bling with fellow entrepreneur Wences Casares in 2008. Bling, says Malka, wants to “close the loop” between these two worlds.
To do that, Bling has started promoting a service that lets users automatically post updates to their Facebook page whenever they use a contactless Bling tag at a participating merchant. The tag adheres to their handset, just like the Bling tag used for payment, but instead of initiating a payment transaction it simply activates point-of-sale rewards for users who are Facebook “fans” of a particular merchant.
Tapping in
The program, called FanConnect, lets users check in with online friends while shopping in a physical store. It also lets merchants market to those friends by extending offers to them through the user’s Facebook post. “We call it a tap-in,” says Malka. “We think there’s a lot of value to a physical check-in.”
The company started shipping out “Bling Boxes” to FanConnect merchants in November. Each $199 box is a startup kit containing a contactless reader and a set of 200 Bling tags.
To bridge online payments to the point of sale, Bling last summer opened its network to PayPal Inc. That allows any PayPal accountholder to use a Bling tag to pay for merchandise in a store.
A few weeks later, PayPal launched an iPhone app that locates nearby merchants that accept PayPal. The app also lets those merchants send discounts and other deals to entice users to come into their stores. The app, a new version of PayPal Mobile for iPhone, started out as a beta product in the San Francisco Bay area and allows payments with PayPal and Bling tags.
By November, Bling had more than 15,000 PayPal users signed up in and around Palo Alto. “The PayPal connection is mutually beneficial” to Bling and PayPal, says Nick Holland, a senior analyst at the Yankee Group who follows mobile payments. “PayPal is keen to get into the physical space.”
And, with PayPal giving it nationwide coverage, Bling Nation is keen to extend its reach to more merchants. In September, it signed a deal with point-of-sale terminal kingpin VeriFone Systems Inc., based in nearby San Jose, to be its new supplier of readers, which the company calls “Blingers” (the name comes from the noise the devices make when they recognize the signal from a contactless tag).
That gives Bling access to VeriFone’s network of more than 400 resellers, including independent sales organizations that are calling on merchants across the country. “It’s obvious when you see their market share they’re the right partner,” Malka says of VeriFone, which last fall announced its own agreement with PayPal to add PayPal acceptance to its PAYware Mobile application for mobile merchants (box, page 22).
‘Viral Components’
Bling’s original strategy was to focus on local communities, building up usage by linking consumers with merchants that use the same bank. By keeping transactions local and on-us, Bling can keep merchant fees relatively low: It charges 1.5% per transaction.
Many payment startups fail because of anemic adoption and spotty usage, which in turn leads to lack of interest among merchants. Bling figured its community focus would overcome that problem. “The great thing about Bling is that it’s all about concentration—pick a community and blanket it,” notes Steve McRae, chief executive of Merchant360, a reseller and technology vendor that programs VeriFone’s Bling readers to work with merchant POS systems.
Eighteen months ago, Bling entered its first community, La Junta, Colo. There, it recruited The State Bank and began calling on local merchants who keep accounts at the bank. After an initial burst of enthusiasm among some merchants, things have cooled off, says Brad Rose, vice president of information technology security at the bank.
The merchant count has withered from 50 to five, while the transaction count has dropped from 1,666 in December 2009 to 750 in October. It was mostly “smaller mom-and-pops” that dropped out, Rose says. The blingers “sat on the back of the counter, they didn’t push people [to use them], so they didn’t get transactions,” he says. Meanwhile about 300 customers are using the tags. “That has dropped a bit,” says Rose.
But Rose says Bling has been “a positive experience for the bank,” demonstrating to customers that the institution can keep up with advances in technology. And now, with FanConnect, merchants can start giving out Bling tags to everyone, not just customers of a certain bank. That, says Rose, will likely pressure more banks and merchants to sign on with Bling.
That kind of thinking is bound up with why Bling has changed its strategy. While the community approach allowed Bling to build usage faster, it was still usage in a small footprint. “It’s linear growth at best,” says Malka. “It doesn’t allow us to go viral. For this to work, you need some viral components that don’t limit you to a geography or metropolitan area. We had to solve for that.”
The solution was to start forging links between the physical point of sale and the most viral medium of them all—the online world. Opening up to PayPal meant Bling could now be used by tens of millions of U.S. account holders. And FanConnect opens the network even more, letting any of Facebook’s estimated 150 million U.S. users check in at merchants by tapping their Bling tags.
Beyond Tags
For all that, though, there may still be some oomph left in the old community approach. Brookshire Grocery Co., a small supermarket chain, began accepting Bling late last summer at a store in Mount Pleasant, Texas. So far, the program “has to some degree exceeded my expectations,” says store director Tony Mize, without disclosing numbers. “I know we’ve picked up some customers we would not have had [without Bling].”
And there may some wrinkles left to iron out with the new strategy. The State Bank’s Rose is somewhat less than enthusiastic about the new PayPal connection, reflecting what is often an instinctive distrust in the banking community toward the e-commerce processor. “It is bothersome to me,” he notes, though he points out that there are still many bank customers who don’t use the Internet and so don’t care about PayPal.
And besides, he says, PayPal isn’t The State Bank’s major concern. “Community banks still compete against big banks,” he says, not against PayPal. “It’s a very logical and smart move for Bling Nation to expand their market area [with PayPal].”
Will Bling be ready to move beyond contactless tags, perhaps to near-field communication when it becomes commercially available in most handsets? Malka says yes, but downplays the role of technology. “We’re not betting on the technology,” he says. “We’re betting on the gesture of tapping.”

PayPal Rides VeriFone to the Point of Sale
One of the worst-kept secrets in electronic payments is PayPal Inc.’s ambition to reach the physical point of sale. In October, it took a huge step in that direction with the announcement that it will work with VeriFone Systems Inc. to let merchants accept PayPal payments on VeriFone’s PAYware Mobile application.
Starting early this year, merchants will be able take PayPal from customers on the application, which VeriFone introduced a year ago to allow mobile merchants to accept major card brands on Apple Inc.’s iPhone.
As part of the agreement, VeriFone will unleash its network of more than 400 independent sales organizations and software resellers to sell PayPal to merchants who are current or potential users of PAYware Mobile. Says Paul Rasori, senior vice president of marketing at VeriFone: “It seemed obvious to both of us a partnership would be required at some point given PayPal’s direction in bridging into the brick-and-mortar world.” As a result of the agreement, VeriFone has become “the first device manufacturer to join the PayPal developer ecosystem,” says a PayPal spokesman.
In a later phase of the deal, which Rasori says could be introduced some time before the middle of the year, PayPal will market PAYware Mobile to PayPal merchants who conduct face-to-face sales as well as e-commerce. One such market, Rasori says, could include eBay sellers who also hawk their wares at street fairs and trade shows. In this phase, PAYware Mobile will enable direct card payments for sellers who have PayPal accounts but may or may not have merchant accounts.
In addition to the mobile app, PAYware Mobile includes a special sleeve that fits onto the iPhone and allows for card swipes, as well as a connection to PAYware Connect, VeriFone’s transaction gateway. The gateway, which VeriFone sees as critical to its strategy to build recurring revenue, will handle transactions for both the earlier and later phases of the PayPal deployment. Rasori says he can’t comment on gateway pricing for PayPal transactions or card payments made on PayPal accounts.
To complete a PayPal transaction, a merchant using PAYware Mobile will use the so-called bump technology that transmits data from one smart phone to another when the two devices touch. PayPal introduced bump in March as part of its mobile app. If the consumer doesn’t have bump, the merchant can hand over his phone and have the consumer enter his PayPal credentials on a special screen.
Though PAYware Mobile supports only the iPhone for now, VeriFone says other smart phones, possibly including BlackBerry models and phones powered by Google Inc.’s popular Android system, are “on the road map.”