When The Fortunate Cup Coffee Cafe Inc. began accepting a new form of mobile payments last week, it also began to brew up more business for the bank that made it possible.
Three weeks ago, The Fortunate Cup installed readers from Bling Nation Ltd. at its counter and drive-through window, allowing consumers to purchase food and drinks through a contactless payment sticker adhered to their phones. Doreen Kamen, the cafe’s owner, says because Bling’s system sidesteps the national payment networks in favor of a hyper-local approach, it gave her a more direct relationship with her bank than she felt she had with just her company’s checking account.
“Now the bank sees me in a different angle as more of a merchant,” she says. “They see the business I’m doing on more of a day-to-day basis between my deposits and my Bling account going through them. They get to know me, I’m a little more familiar to them should I need to contact them for anything down the road. It may be a small business loan or anything along those lines.”
That bank is The Adirondack Trust Co. of Saratoga Springs, N.Y., which Bling, a Palo Alto, Calif., startup, plans to announce this week as its first deployment in the Eastern United States.
Whereas proponents typically pitch mobile and contactless payments as ways to shift consumer behavior away from cash, Adirondack sees it as a way to draw more business from local merchants.
“It’s a huge benefit to our local merchants,” says David Brown, Adirondack chief operating officer. “They’re customers of ours, and as a community bank, when our customers prosper, so do we.”
Aaron McPherson, a research manager for payments at the Framingham, Mass., research firm IDC Financial Insights, said this makes sense. With Bling, “they forge a new relationship between the bank and the merchant that’s a lot more positive and a lot more cooperative,” he says.
Bling tends to focus on communities with a vibrant commercial downtown area where many businesses are likely to have a relationship with a local bank. Saratoga Springs fits that description well, the company says, but it is not alone.
“New England is filled with wonderful communities with many vibrant downtown areas where the downtown area is the center of the community and that’s where people go,” says Charles Herel, Bling’s regional general manager for the East.
Bling also is in talks with banks in similar communities near Boston and Nashville, though Herel would not identify the banks.
Though Bling’s tags do not have to be placed on phones, contactless payment stickers often are described as a bridge technology meant to allow consumers to make mobile point-of-sale payments before the payment chips are built into the phones directly.
To further the illusion that the tags are integrated with the phones, Bling sends a confirmation notice to phones by text messages each time the user makes a payment.
These text alerts can serve as receipts, eliminating her cafe’s need to print a paper receipt for Bling users, Kamen says. Another advantage when Bling users pair the stickers with their phones is that The Fortunate Cup’s drive-through lane moves faster–motorists tend to keep their phones within easier reach than they keep their wallets, she says.
Kamen and her husband also own a Saratoga Springs life insurance agency, Complete Corporate Planning Ltd., and have entertained the idea of using Bling to accept insurance premiums. Like The Fortunate Cup, Complete Corporate Planning also keeps its deposits with Adirondack already.
Rod Stambaugh, Bling’s Western regional president, says that over time Bling merchants also see higher average transaction values.
This came to light two months ago when the first Bling merchant, the Copper Kitchen in La Junta, Colo., noticed that despite Bling’s promise of lower rates, the merchant was paying more in transaction fees to Bling than it was to the credit card companies, he says. After some examination, Bling and the Copper Kitchen determined the reason: though Bling’s rates were indeed less than half what the merchant paid for card acceptance, Bling users were spending nearly 50% more per transaction.
Elsewhere in La Junta, where Bling works with The State Bank, “one large convenience-store chain does not have Bling; everyone else does,” Stambaugh says. When that store tells consumers it does not accept Bling, “a lot of times the consumer will go out the door and cross the street to the convenience store that does.”
Although the chain cannot independently veer from its corporate payment setup, Bling is making progress in bringing the company’s La Junta location on board, Stambaugh says.
Bling’s strategy of sticking with community banks works well, McPherson says.
“A lot of the real innovation these days is actually coming at the community bank level,” he says. “They’re willing to put some real effort behind this and do the work to seed the market.”
Adirondack’s strategy, which involves mailing the Bling tags out unsolicited to existing customers to make sure the tags are readily available, “is exactly what they need to do,” McPherson says.
George Tubin, a senior research director at TowerGroup Inc., a Needham, Mass., research firm, says Bling’s early success stems not just from its community bank strategy but also its ability to determine which communities are most conducive to embracing its payment system.
“They focus on small communities where a couple of banks have a big share of the market,” he says.
Though Bling says it is still much too young to deploy its payment system on a larger scale, Tubin says eventually those small communities could overlap. “Maybe once you build up enough closed communities, you can do it on a larger basis,” he says.
