December 6, 2010

Have Mobile Payments (Finally) Arrived?

Bling TagBased on the sheer volume of investments, predictions and hype about the potential of mobile payments, the above headline could have been written years ago.  But one tangible recent development indicates that mobile payments may finally be about to take off.


In the past, there have been many hurdles holding the mobile payment market back.  These included:

  • Handsets.  They lacked the appropriate SIM or RFID technology.
  • Networks.  Banks and credit card companies are notoriously slow, lack innovation and are conservative by nature.
  • Security.  Communicating over unsecure mobile networks is already an issue, and when it comes to financial transactions, security becomes paramount.
  • Merchant Acceptance.  Establishing a large enough footprint of national and independent merchants is very difficult.  In technology, we call this a problem of “scale”.
  • Consumer Behavior.  Consumers don’t change their behavior unless there is a good reason to do so. For any number of reasons, most consumers have not yet embraced mobile payments.

Have enough of the above hurdles been cleared to the point that mobile payments can now take off?

Bling Nation certainly thinks so. They are in the process of rolling out their new service nationally.

In Northern California, they focused initially on Palo Alto and are now growing in San Francisco, Mountain View and Los Altos. Our company, Savvy Cellar Wine Bar & Wine Shop was one of the first merchants in Mountain View to give Bling a try.

Here’s how it works:  Bling Nation provides participating merchants with small tags that are preloaded with $10 to hand out to their customers.  The consumers attach the tag to the back of their smart phones, and can then activate their account by texting a special code from their phones.

They also have the option to link the tag to their PayPal account.  (PayPal has an incentive currently that gives customers another $10 for linking their Bling tag to their PayPal account).

Once activated, consumers touch their bling tag to the merchant’s “blinger” terminal to pay a bill.  No handing over a credit card and no signature required.  For restaurants and bars, consumers can also be given the option to add a tip (without having to do the math themselves.) Payment is immediately deducted from the cash value on the card and/or the PayPal account and the customer receives a text message receipt on their phone.

So why would businesses sign up?  There are 3 main reasons why Savvy Cellar did so:

  • Cost.  Credit card transaction rates run 2-3%.  PayPal rates run 1-1.5%.  So a business can save 1 to 2% per transaction.
  • Convenience.  Servers can ring a customer through at the table or bar, without having to take the customer’s credit card pack to a POS. This saves a trip and gives customers peace of mind of not having to hand over a credit card and have it out of their sight for a period of time.
  • Marketing.  Bling Nation allows customers to share details of their purchases with their social networks (on Facebook and Twitter).  Just as businesses get exposure when customers “check-in” on Foursquare, Gowalla, Facebook, Yelp and the like, now a business potentially gets a mention when customers are spending money at their establishment.

Bling Nation also has a loyalty program where a merchant can reward a customer with discounts and other rewards based on her spending activity with your business.  I’ll experiment with this program in the coming months and let you know how it goes.

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