Bling Nation Ltd. has struck a partnership with PayPal Inc. that could help the mobile payments network operator expand beyond its hyperlocal business model.

Bling has focused to date on partnering with community banks, which can bring in a ready-made user base of local merchants and residents.

But as the Bling service has gained traction, observers say its growth has been stymied by its focus on mom-and-pop shops, rather than large, national retailers where distant corporate bosses typically dictate what payment equipment their stores can use.

PayPal, which already works with many big chains, could open some important doors, Bling said.

"When we mention about PayPal being of help, it has to do with larger businesses," said Meyer Malka, Bling's founder and a co-chief executive. "We are planning to work with them on that."

Large retailers are also more likely to already have contactless payment readers for other card brands. Since Bling's technology works with those readers, and those retailers would also already have customers enrolled with PayPal, "it's almost a turnkey solution" for those merchants, Malka said.

Analysts agreed that PayPal will help Bling reach a new merchant segment.

"Think about all those merchants that PayPal acquires in the virtual world" that also have a lot of physical stores, said Red Gillen, a senior analyst for the Boston market research firm Celent. "This is a very big point" for Bling. "They could definitely leverage that."

Gillen said that Bling's community bank model could be hard to sustain as Bling tries to grow.

"It's a handful of banks they have signed up so far … it's less than 10," Gillen said. "They're trying to pick up speed. On their own, the bank acquisition/merchant acquisition business model is a long slog."

Bling's bank partners issue contactless payment stickers to customers, who can use them to make purchases at local merchants that have agreed to accept them. Those stickers are typically put on mobile phones, and users receive transaction receipts by text message.

Bling Nation has already shown signs of shedding its local approach to become a national brand. In February, Bling began putting its own logo on the stickers instead of the brands of its bank partners.

And while it once focused on just a single partner in a community, it has now signed up several banks in and around La Junta, Colo., effectively transforming a townwide network into a larger, regional payments system that people can use when they venture beyond their own banks' areas of influence.

But this growth also requires that Bling give consumers more places to use its system.

Aaron McPherson, a research manager for payments at IDC Financial Insights in Framingham, Mass., said that PayPal can help win over the corporate parents of local stores that want to accept Bling payments.

When it is "working with a local branch of a national chain, and … [the manager] can't get permission to do the installation" of Bling readers, "it strengthens his hand to go to the national to say: other stores in the chain can actually use this … because you can fund it with PayPal," McPherson said.

Beth Robertson, the director of payments research for Javelin Strategy and Research in Pleasanton, Calif., said that working with PayPal does not invalidate Bling Nation's strategy of working with banks. Since it is already collaborating with multiple banks in a region, it could also try to forge relationships with financial companies in areas where it has started offering the PayPal option.

PayPal, the payments unit of eBay Inc., could even help it gain access to reluctant banks, Robertson said.

"I don't see it as an either/or," she said. "With a relationship with PayPal, they could potentially gain entree into a lot of markets where they could follow with bank relationships and local relationships in that market."

This agreement does not cut Bling's ties to banks, Malka said. PayPal's involvement can actually bring more business to its bank partners even though it gives consumers an alternative to opening an account at that bank — the bank would benefit because PayPal's involvement would bring more business to the bank's merchant customers.

Bling is testing the PayPal feature in Palo Alto, Calif., using the PayPal X development system to link the online payments system to its own network. This enables users to fund their Bling payments from their PayPal accounts.

Bling Nation's strategy of playing up its own brand over those of its partner banks actually works well with PayPal's recent approach of downplaying its own brand in partnerships, Robertson said. With its PayPal X development platform, launched last year, PayPal has allowed companies to build services that use PayPal in the background.

Malka acknowledged the strength of PayPal's brand, and said it is considering putting Pay-Pal's logo on some of its stickers.

Gillen said this is a good move, and that for Bling Nation to get the most out of its work with PayPal, it would have to give the PayPal brand more prominence. "If you put them side by side — PayPal and Bling — obviously PayPal's a stronger brand," he said.