Bling Nation Harnesses Contactless for an On-Us Payments Network

A startup company called Bling Nation Ltd., which debuted this week, plans to combine contactless-payment technology with an on-us approach to debit transactions that it says will cut transaction costs for both community banks and merchants. The Palo Alto, Calif.-based processor is in discussions with five financial institutions and plans to launch a pilot with one of them in the first quarter, with a rollout set within three months of the pilot launch, Bjorn Ovick, the former Wells Fargo & Co. executive who serves as Bling Nation's vice president of business development, tells Digital Transactions News. Bling Nation is aimed at community banks that hold both consumer and merchant accounts, creating the potential for a closed-loop system in which transactions performed by the bank's customers at participating merchants that also keep accounts at the bank can be cleared and settled entirely within the bank. Currently, such local transactions performed on bank cards require handling by multiple switches and processors, Ovick says, adding to costs for both financial institutions and merchants. “We feel the bank owns that transaction,” Ovick says. The proprietary system, which relies on so-called contactless stickers that consumers can affix to their cell phones, will charge a 1.5% fee to merchants for each transaction. Of that amount, Bling Nation says it will collect 30 basis points as its network fee, with the bank pocketing the remainder as both issuer and acquirer, less an estimated 25 basis points for issuing costs, primarily for the contactless inlays. On a $40 Bling Nation transaction, for example, the merchant will pay 60 cents. Bling Nation will take 12 cents, while the bank will get 38 cents, including 18 cents as an acquiring fee and 20 cents as the issuer. The bank incurs about 10 cents in issuing costs. By contrast, the same transaction on a network-branded signature-debit card would cost merchants 3%, or $1.20, Ovick says, adding that number is based on research conducted by Bling Nation. Because of acquirer, third-party processor, and network fees, the community bank issuer ends up collecting only 9 cents of that amount, he says. Ovick says that with the money saved, local merchants and banks can afford to promote the Bling Nation system with loyalty and rewards programs. Bling Nation's platform, which has been under development for three years, connects to banks via an ATM switch, an online-banking provider, or a core processor. Merchants will be equipped with a so-called Bling Tag Reader, a terminal that can link to the contactless stickers, or Bling Tags, to complete transactions. The readers link wirelessly to the company's processing platform. After each transaction, the platform sends a text message to the consumer's phone to confirm the transaction and update the consumer's balance. The tags do not include account data. Ovick says the company is also talking to third-party transaction processors about marketing the Bling system to client banks, but says caution is required, since bringing on more third parties will diminish the share of transaction fees that ultimately flow to the banks. Indeed, Bling's system is in some respects a throwback to the very early days of bank credit cards, when local banks formed regional exchanges to trade card receipts. These regional associations eventually grew into what ultimately became Visa and MasterCard. Bling Nation's cofounders are entrepreneurs Wences Casares and Meyer Malka. They have raised $13 million in funding for the company and secured former Citibank chairman John Reed and Jeff Stiefler, former chairman of Digital Insight and former president of American Express, as advisors. The company name, says Ovick, comes from the sound a contactless transaction makes. “It's the sound of money,” he says.