Paul O’Donnell bought a salad and bottles of chardonnay and cabernet wines at Putnam Market and its wine store next door without using cash, checks, a debit card or a credit card. He used his cellphone.
He’s one of more than 20 people who signed up for a mobile payment system known as Bling, which officially became available a week ago to consumers with a checking account with Adirondack Trust Company in Saratoga Springs. The bank is the only financial institution in the region participating thus far.
The system allows merchants to take payments with the tap of a computer chip glued on the outside of a cellphone to a portable point-of-sale device.
Money then flows electronically from the shopper’s checking account to the merchant’s account via Bling
The paperless transactions involve a text message sent to a user’s phone confirming a purchase has been made and then showing the user’s account balance.
“I see this as a new cousin to the debit card,” O’Donnell said. “I am really excited about it catching on in our downtown. You don’t always have a pocket full of cash on you, but you do have your cellphone.”
So far 50 merchants in the Saratoga Springs area have committed to the system, and half of those signed up have had the system installed, according to Bling Nation representative Tim Shank.
Palo Alto, Calif.-based Bling Nation is a mobile payments service provider that connects financial institutions, consumers and businesses through mobile tap-and-pay purchases. The company, founded in 2007, ramped up efforts to spread its system nationwide last year, raising more than $20 million in venture capital funding.
Small businesses may find Bling appealing because of the lower processing fees, which are typically below 1.5 percent. Credit and debit card processing fees, by comparison, typically range from 3 to 5 percent.
Merchants also say the point-of-sale terminals are cheaper, costing less than $40, whereas a usual credit and debit terminal costs around $300 to $400.
Another selling point for Bling is a customized rewards program for Bling users, eliminating the cost and technical work involved for small businesses in setting up and maintaining such a program.
For Doreen Kamen, owner of the Fortunate Cup, which has been open for 18 months at 120 West Ave. in Saratoga Springs, Bling cuts out the middlemen involved that usually translate into higher processing fees.
“With a credit card, you’re going through VISA, a clearinghouse — it goes round and round. This goes directly to the bank and back to you,” she said. “It’s cash that’s coming back to me for product that I’ve already given away. I like the fact that I’m getting paid much more rapidly.”
Transactions are cleared within 24 hours as monies are transferred to merchant accounts.
“It will definitely cut down the fees I’m paying,” she said.
Kamen had her first Bling transactions on Wednesday with one customer inside the restaurant and the other in the drive-through.
“They were pleasantly surprised how quick everything went,” Kamen said. “It just seemed like something that would be very convenient for the customer and more economical for me. It’s something new and I can see a lot of uses for it.”
Impressions of Saratoga owner Marianne Barker said she expects the program to grow within the Saratoga Springs area because of its buy local emphasis that also boosts cash flows and cuts expenses for retailers who are still grappling with the recession and its effects.
“We’re all in the same boat and it’s simple, too. You just tap the thing on the machine and it’s less paper. It’s less stuff that you have floating around,” said Barker, who already has had a few Bling transactions in what traditionally is a slower sales period.
Other financial institutions using Bling are mostly based in the West, but there is one scheduled to launch soon in Massachusetts, according to Bling officials.
How successful Bling will be among Capital Region consumers is unknown, but Adirondack Trust President and CEO Charles Wait said it is a gamble with more positives than negatives. He hopes to boost individual customer accounts by 10 percent and have at least 200 merchants sign up this year.
Adirondack Trust has 20 percent of the market share in Saratoga County and 50 percent of the market share in Saratoga Springs, according to the Federal Deposit Insurance Corporation’s latest Summary of Deposits report.
“We were pretty cautious about the technology at first and wanted it to be proven in the market first,” said Wait. “We began to see the benefits right away, the benefits to our customers, our store owners and our commercial customers.”
But what attracted Wait to the proposition of offering Bling the most was a way to improve market share. The bank has 13,000 individual accounts now, and if it were to sign up 1,300 more in an 18-month period, Bling would have been worth the investment, he said.
“It’s a service offering for us to improve service,” Wait said.