Like most banks and businesses, The State Bank of La Junta, CO, viewed the debit interchange fees charged by the likes of MasterCard and Visa as one of those unfortunate, inevitable costs of doing business. Then CIO Brad Rose heard about a technology startup called Bling Nation that aimed to eliminate those interchange fees through a contactless, mobile payments technology that also encouraged local commerce by making it easy for merchants and banks to pass along those savings to customers in the form of customized loyalty programs.

Rose invited Bling Nation to make a presentation to the bank and Chamber of Commerce in early 2009 and the interest was immediate. Says Rose: "Everyone fell in love with the program for the way it helps the local community." The State Bank, with $97 million in assets, agreed to become the first bank in the nation to deploy the technology and the acceptance was quick. Within three months of implementation, 50 percent of the bank's debit card customers had adopted the technology, 80 percent of the target merchants had signed up, and the number of debit transactions per customer was growing. And, significantly, the bank won 23 new business customers that wanted access to the technology.

"It was an extremely simple IT project," Rose says, and the security is robust. Bling Nation can hook into a bank's core data processor in about a week without any software development, says Rod Stambaugh, regional president of Colorado operations for Bling Nation. While the bank is responsible for signing up businesses and consumers, Bling Nation manages the Community Payments Service for the bank and businesses and provides the readers and tags free of charge. The BlingTag contains an RFID chip that attaches to a consumer's mobile phone. (It can be activated in just a minute or two.) Consumers tap and pay at the point of sales and their transactions travel over a wireless network, which Bling Nation monitors from its offices in Palo Alto, CA. "Bling Nation is really ideally suited to keeping transactions local. It's a closed loop transaction for the community between the bank, merchant and customer," Stambaugh says. However, he adds that consumers are free to use the BlingTag at any business with a reader, not just those within their own communities.

The debit transactions that flow over the system cost about half the standard interchange fee, and with these savings businesses can fund rewards programs for customers. Banks too can offer rewards points for consumers funded by the interchange fee savings. That's what The State Bank does. In fact, since the implementation cost the bank nothing, Rose is not concerned about ROI but is focused on the value the technology brings to the community. "It's very much a community service project," Rose says.

Ellen Carney, a senior analyst at Forrester, says the Bling Nation technology is unique and should be appealing to community banks for a couple reasons. As Rose and Stambaugh have said, by "taking MasterCard and Visa out of the equation" it gives businesses a way to fund loyalty programs and encourage local commerce. This supports the fundamental mission of many community banks, which is to support the local community. But that's not the only reason. The mobile payments aspect also appeals to a young consumer demographic that "lives and breathes by their cell phones. And there's not a bank that's not thinking how to get more market share of kids," she says.

For all these reasons, Stambaugh says, Bling Nation is starting to catch on. The State Bank was the first to implement the technology last spring, but now four banks are up and running with four more in the pipeline. All are community banks with assets of $100 million to $1 billion. Broadly speaking, Bling Nation targets communities with 10,000 to 100,000 people. And it's not just the banks and businesses and consumers that see the advantages of the technology. Some governments are also taking notice. Small town governments often depend on local sales tax for revenue and any initiative to boost local shopping is positive. One city government is mulling whether to allow all services to be paid for with a BlingTag, Stambaugh says.

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