Meyer Malka promises a new era in which institutions have ample opportunity to leverage alternative payments technology for differentiation, relationship enhancement with consumers and merchants, and valuable community-based brand extension. But after banks check out his Bling, they'll have to win over consumers.
"This is definitely an opportunity to shop local," says Meyer Malka, a founder and co-chief executive of Bling Nation, a Palo Alto, Ca.-based contactless payments startup that enables the formation of local merchant networks designed to lower costs and increase payment revenue for institutions by outflanking national card networks. "Communities are trying to pitch this to their local merchants. Banks are starting to see this as their responsibility and as an opportunity."
Integrated Bank Technology, which has 175 institutional clients, will offer Bling's system. Mike Golebiowski, president of the Cedar Park, Texas-based Integrated Bank Technology - which will offer Bling to its 175 clients, says his firm sees promise in Bling Nation, which uses a contactless sticker placed on mobile handsets to initiate transactions that are routed across the automated clearinghouse network. Bling also provides merchants with contactless payment terminals that communicate over cell phone networks with the company's payment system for authorization.
IBT plans to offer the system initially to institutional clients that are using the core processing platform IBT bought in December from Goldleaf Financial Solutions. IBT picked up nine core processing clients through that purchase and has since added one more to the Goldleaf platform; Golebiowski says IBT has contracts for eight more users to go live this year. One of those clients, a Colorado bank that he would not identify, has been testing the Bling system for 60 days. IBT also plans to integrate Bling's payment technology into its flagship Integrated Banking Environment, which provides a standard interface for a variety of applications.
Bling's target is local markets where financial institutions have a strong position in consumer and merchant accounts. The strategy is to establish closed-loop local networks that charge lower interchange rates than the national card networks but offer local banks more revenue per transaction.
The challenge will be to convince consumers that the utility of using the system is better than "legacy" cards. "With alternative payments, the consumer side of the equation has to be addressed," says Red Gillen, senior analyst for Celent. "We really haven't seen that in the past ten years, with the exception of PayPal, which was the form of payment on eBay."
Though major card companies are developing contactless technology, Malka says the markets where his company is working now still have few contactless terminals. Malka says the goal is to establish a market position in preparation for a time when handsets with contactless payment chips become common. First Data and MasterCard have also developed stickers with payment capabilities, providing both competition and, in Malka's eyes, demonstrating the overall viability of the technology for eventual use as a widespread payments vehicle. "We don't need to sell the sticker anymore as a form factor," Malka says.
But Gillen says traditional cards have already set a high bar for consumers when it comes convenience, speed and availability. And he says history has largely shown that the benefits of making payments in a split second via automation - versus the five to ten seconds it takes to remove a debit or credit card from a wallet or purse to make a purchase - has yet to resonate with consumers in a substantial way. "[Alternative] payments have to be better than what consumers already have in their wallet," he says.