Bling Nation Ltd.’s deal with Fifth Third Processing Solutions LLC could give them the entree they need to promote the company’s postage-stamp-sized contactless payment sticker across the country.

The Cincinnati processor said Monday that it will offer its clients BlingTags sticker acceptance at their terminals. Fifth Third Processing says it has more than 180,000 merchant and financial institution clients.

Fifth Third’s merchants will receive a simplified acceptance kit, called a “BlingBox”. The starter kit provides tools needed to use the payment system, including BlingTags and marketing materials, according to a release.

Customers can link a BlingTag, which usually affixes to the back of a mobile phone, to PayPal or a bank account.

Fifth Third has a history of going after emerging alternative payment methods, says Adil Moussa, an analyst for Aite Group LLC in Boston. The company made some deals with person-to-person payments startup Revolution Money (see story),  before Revolution was bought by American Express Co., earlier this year (see story) . And, Moussa says, Fifth Third was one of the first processors to support PayPal Inc.’s payment system.

“I think it’s a good move,” Moussa said of the Bling deal. “With someone like Bling Nation, it’s really a complimentary type of service, so instead of seeing them as a competitor. They really reached out to them, and worked with Bling Nation, as an ally.”

And, if Bling Nation takes off, Fifth Third could end up being six months to a year ahead of its competitors—with a better deal. Most likely, Fifth Third will see a transaction fee on each purchase made with a BlingTag from its merchants, Moussa says.

As for Palo Alto, Calif.-based Bling, since its launch in 2008, the company’s business model has been simple: focus on signing up community banks that have connections locally to both merchants and consumers.

But Bling’s small sales staff has only been growing merchant acceptance slowly—town by town, market by market. That’s something Bling has vowed to change.

“I think that right now, with this, we should be able to grow in triple digits every other week,” says Meyer Malka, Bling’s co-chief executive, adding that he could not release specifics of the deal. “We’re growing, and doing our part to make this a real business.”

Currently Bling is signing up about 1,000 people “every few days,” Malka says.

Bling views the pending overhaul of debit interchange regulations as an opportunity.

“With the thought of payment interchange being reduced bank card issuers have to look at all types of payment products,” said William McCracken, chief executive of Synergistics Research Corp. in Atlanta. “Mobile payment is one of those growing areas. [Banks] can’t be left behind.”

Already, Bling has been getting more inquiries from smaller banks for its closed-loop, automated clearinghouse debit card network, partly as these banks look for new sources of revenue.

In September, Bling announced a deal with VeriFone Systems Inc. (see story). The San Jose, Calif.-based terminal maker said resellers of their products will include Bling transactions tied to PayPal Inc. payments in their offerings to merchants, starting next year.

So far, about 15 banks operating in five states have begun offering Bling in local markets since the company’s start-up in 2008.

But the company still has a lot of room to grow.

“Bling, to some degree, is well known, but it still has a small market share,” said McCracken. “They’re feeding to their customer base, they are saying: ‘We’re the most innovative.’”

Customers initiate Bling payments at local merchant sites with the contactless payment sticker. Bling sends text message confirmations to customers’ cell phones after authorizing the transactions.

But that doesn’t leave banks out of the equation.

While  merchants pay 1.5% of the sale for Bling transactions, about half what they must pay to accept credit cards, there are no intermediaries. That means banks retain a larger share of the fee than they do with traditional network debit programs.

“If we didn’t have the recession, if we didn’t need the banks, we could have gone out and deployed. We could have done either done PayPal or Fifth Third. But it’s a combination of these things that will allow us to grow, and gives us a reason to be in business,” Malka says. “It takes scale.”

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