The start-up processor Bling Nation Ltd. said that consumers showed strong support for making purchases with contactless payment stickers during a recent test of the emerging technology.
The Palo Alto, Calif., company has developed an alternative debit system that lets community banks act as acquirers for local merchants. Consumers would be able to initiate debit purchases with the stickers, and the transactions would be carried on Bling's proprietary network.
Because the transaction stays local, Bling has said its system offers merchants lower processing expenses than the established, global payments networks, while increasing per-transaction revenue for the banks.
Meyer Malka, Bling's co-chief executive, said last month that people who tested the stickers like them, and he compared their response to that of people who have become accustomed to using a Blackberry or iPhone for e-mail.
"It's one of those things that you don't realize that you need, and once you test it and you have it and they take it away, you feel like you've lost something," he said.
For the 10-day test in March, Bling offered 32 people prepaid stickers loaded with $50.
One user said he never realized how boring it was to pay with plastic until he tried the contactless sticker. Another said that after the test, he missed getting confirmation text messages on his mobile phone after every transaction; the messages note the merchant, purchase size and remaining balance.
Ninety-six percent of the people in the test group said they would continue to use the sticker if given the chance. People are encouraged to attach the stickers to their mobile phones.
The stickers also carried loyalty points that could be used to pay for goods and services. When users make purchases at participating merchants, Bling's system can be configured to automatically check their rewards accounts to see whether they have enough points to cover the transaction.
"We had both on the tag because we wanted to know what the experience was like for the user and merchant using both forms of payment," Malka said.
One community bank has agreed to offer Bling's system to local merchants, he said, and he expects to announce the client this month. "It's an ideal community bank that has a high market share," he said.
Bling expects to charge merchants a transaction fee of 1.5% of the sale. Bling will keep 0.3%, and the rest would go to the bank. About 0.25% will cover bank costs, leaving 0.95% as profit for the bank.
Malka said this fee compares favorably with established debit networks that typically charge 3% for small and midsize merchants.
Merchants that participated in the Bling pilot test included local restaurants, retailers and a dry cleaner. The smallest merchant pays about $8,000 a month in transaction fees, Malka said. "It's their single largest cost not related to merchandise."
Dennis Moroney, the research director for bank cards at TowerGroup, an independent research firm owned by MasterCard Inc., said merchants would be attracted to the cheaper fees.
However, consumers may not like the idea of placing a sticker on the back of a Blackberry or iPhone, said Nick Holland, a senior analyst at the research and advisory firm Aite Group LLC in Boston. "It's a low-tech entry into the market," he said; payments companies "should forgo this and move into NFC as much as possible."
Several payments companies and wireless carriers are working to integrate near-field communications chips into handsets that offer contactless payment capabilities.
Payments executives have described payments stickers as a bridge technology that would accustom people to using their phones to make payments until NFC-ready phones are available.
