Sensing an appetite among community banks for more remunerative transaction processing, the vendor Integrated Bank Technology Inc. said Monday that it would offer financial clients an alternative payment system from the Palo Alto, Calif., start-up Bling Nation Ltd.
Mike Golebiowski, IBT's president, said the Cedar Park, Texas, company was intrigued by Bling Nation's system, which uses a contactless sticker placed on mobile handsets to initiate transactions that are routed across the automated clearing house network.
"We've been very focused on process-change innovation. This is clearly a different type of mechanism for making payments," Golebiowski said in an interview Monday. "We're not sure, but we recognize that this has all the signs of success."
The vendor has 175 financial customers and plans to offer the system initially to those that are using the core processing platform IBT bought in December from Goldleaf Financial Solutions Inc., he said.
IBT picked up nine core processing clients through that purchase and has since added one more to the Goldleaf platform; Golebiowski said he has contracts for eight more users that are expected to go live this year. One of those clients, a Colorado bank that he would not name, has been testing the 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, he said. "Once you integrate something into your central database, every ancillary application has access to it."
Meyer Malka, a founder and co-chief executive of Bling Nation, said the Colorado client may start offering the payment service commercially in the next two weeks.
Bling Nation is working with community banks around the country and expects to announce additional users this year, he said.
It is targeting markets where local 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 strategy fits with grassroots efforts to keep money circulating in local communities, Malka said.
"This is definitely an opportunity to shop local," he said. "Communities are trying to pitch this to their local merchants. Banks are starting to see this as their responsibility and as an opportunity."
Bling Nation provides merchants with contactless payment terminals that communicate over cellular phone networks with the company's payment system for authorization. Though major card companies are promoting contactless technology, Malka said the markets where his company is working now have few contactless terminals.
Bling Nation is also developing software that would enable its system to work with standard contactless merchant systems.
Both executives said the goal is to establish a market position in preparation for the day when handsets with contactless payment chips become common.
"The first step is to get these networks out in the market," Golebiowski said. "At some point there would be no reason for these local networks not to interconnect."
Companies such as First Data Corp. and MasterCard Inc. have developed stickers with payment capabilities, and Malka said such announcements have boosted his marketing efforts.
"We don't need to sell the sticker anymore as a form factor," he said. "The economics of the Bling tag are much more compelling that putting your credit card credentials on a sticker."