Bling Nation's Presence Grows with PayPal App

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Overnight, the young mobile payment company Bling Nation Ltd. became visible to 4 million smartphone users.

Bling Nation, of Palo Alto, Calif., is now a part of PayPal Inc.'s iPhone app, which as of Tuesday was the fourth most downloaded free finance app on the iPhone. The companies have worked together before, allowing PayPal accounts to fund purchases made at the point of sale with Bling Nation's contactless payment system.

Their newest move also furthers PayPal's commitment to being a payment system in the physical world, where it could compete with the card brands on their home turf. As of the Tuesday morning update to the PayPal app, iPhone users can use the app to locate nearby merchants that accept Bling Nation payments.

PayPal, a unit of eBay Inc., has spent the past year forging relationships with many players in financial services, including Fidelity National Information Services Inc., S1 Corp., Green Dot Corp. and VeriFone Systems Inc. But in all of those other alliances, its partners did not gain the same visibility in a PayPal-branded product as Bling Nation has.

"This telegraphs that … [PayPal execs] are serious about this becoming a mechanism for finding physical locations where PayPal is accepted," said Nick Holland, a senior analyst at Yankee Group.

Since it was founded in 2008, Bling Nation's model was primarily what can be described as a hyperlocal approach: it entered a community and partnered with the largest community bank, which gave it access to most of that area's merchants and consumers at once. Merchants installed contactless payment readers in their stores, and consumers were given contactless payment stickers that they were encouraged to adhere to their phones.

Typically those consumers would be paying from accounts at Bling Nation's partner banks, but in August Bling Nation added the ability to fund purchases from a PayPal account. Bling Nation further expanded its potential reach through a September pact with VeriFone, which configured its terminals to accept Bling payments.

In early October, Bling Nation also announced a deal with Fifth Third Processing Solutions LLC, which agreed to market Bling Nation's system to its clients. Fifth Third Processing is owned by the private-equity firm Advent International Corp. and Fifth Third Bancorp's Fifth Third Bank.

Meyer Malka, Bling Nation's founder and a co-chief executive, said PayPal's app can help his company reach new users.

"When we go out and merchants are seeing this and consumers are seeing this, they feel much more confidence putting a Bling tag on their phone," he said.

Anuj Nayar, PayPal's director of communications, said "PayPal is incredibly committed to Bling Nation."

PayPal is "trying a number of different opportunities, experimenting and trying to push forward mobile commerce," he said. Another part of PayPal's update to its app allows merchants to broadcast whether they would be willing to accept PayPal payments for in-store purchases.

Unlike integration with Bling Nation, this method would not require any special equipment, as the payment itself would be made through PayPal's app, "the same way you would with any other payment," Nayar said. "Money is moving online."

Nayar said he could not comment in detail, as he was calling from a conference PayPal hosted for software developers Tuesday.

Holland said that Bling Nation has become an important part of an ecosystem that PayPal is building to break into the physical world. Alongside the Bling Nation news, PayPal also announced that VeriFone's PAYware Mobile hardware, which allows iPhone users to accept card payments through a sleeve that fits over the phone, can also be used to accept PayPal payments. VeriFone's system would connect with PayPal through PayPal's "bump" feature that allows users to move money when two phones are tapped together.

Part of Bling Nation's appeal is that it is not just a hardware gimmick; it also allows merchants to accept payments at a lower price than they typically pay for card acceptance. Because of this, Bling Nation's system would still have value even if its stickers are made obsolete by phone manufacturers someday deciding to build payment chips directly into the phones, Holland said.

"Bling Nation's essentially an acquirer working on behalf of PayPal," Holland said.

If this partnership proves key to PayPal's strategy for the point of sale, he predicted PayPal might choose to take this relationship to the next level.

"I wouldn't count PayPal acquiring Bling Nation at some point as being out of the question," Holland said.

Nayar and Malka would not comment on a possible acquisition.

Beth Robertson, the director of payments research for Javelin Strategy and Research of Pleasanton, Calif., disagreed with the idea that PayPal is planning to buy Bling Nation, but she said their partnership is nonetheless significant.

"It's a good thing for Bling Nation to get the visibility that PayPal might offer them," she said. "They're still very unknown to most people outside the industry — to the average consumer."

Robertson stressed, however, that PayPal's mobile audience is just a fraction of its 90.5 million active users, which PayPal defines as those that have made a PayPal or Bill Me Later transaction within the past 12 months.

Overall, she said, just 19% of U.S. adults said they used mobile banking in the past 12 months, according to a Javelin survey conducted in July.

However, this partnership could indicate that PayPal is returning to its roots of courting smaller merchants, Robertson said, and it would "give more of a physical-world access" to that audience than PayPal typically has.

PayPal also announced Tuesday a service called Mobile Express Checkout, which allows consumers to stay logged into PayPal across apps to allow for a two-click checkout process within those apps. Another system it announced Tuesday, Mobile Payments Library, allows consumers to pre-approve payments for subscriptions, and it allows developers to split payments among several recipients.

Discover Financial Services also said it is using PayPal's technology to offer a person-to-person payments service called Money Messenger. A user can send money online or with a smartphone using a recipient's e-mail address or mobile phone number.

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