Most bank apps do not allow retail payments, a situation Indian startup has set out to remedy using sound.
Say, you were driving towards Varanasi and made a pit stop at Chandauli—about 35km from your destination—and decided to buy a bottle of water from a general merchant. There's a good chance the merchant will give you a packet of biscuits in lieu of the balance change due to you.
That is what happened to CEO Kumar Abhishek (photo above) when he was testing contactless payment systems for his startup, ToneTag. "In India, when you pay cash, the shopkeeper may not have the exact change to give back after a transaction, so he gives you candy," he said. "You can dip the biscuits in your tea but you can't do much with candy," he added recalling the Chandauli test.
Kumar had left his job at Infosys, where he worked on banking software Finacle, with the idea that consumers should be able to do a lot more with mobile banking than merely check bank balances—the situation with most bank apps at the time. You could not make retail payments and ended up with lots of candy at the end of the day. Kumar wanted to address this challenge through contactless payments.
He started testing possible solutions late 2012. He first tagged phone numbers with the balance that was due to the customer. As soon as the balance would reach Rs.20, it was paid towards the consumer's phone bill. He then began to look at scenarios where providing phone numbers to the merchants could be simplified.
In early 2013, — around the time Kumar and co-founder CFO Vivek Kumar Singh with a clutch of angel investors, founded ToneTag — they started distributing NFC tags so that it's easy for the consumer to share the information with the merchant. In the eleventh month of prototyping, when they were hitting 2 lakh transactions per month, they realised that none of the solutions they were testing were efficient enough but they did take away 3 lessons:
- Mobile penetration in India is quite good. Everywhere they went, the merchant and the consumer had a mobile phone.
- A mobile payment platform must work on all phones. "Apple or Samsung, smartphone or non-smartphone, it shouldn't matter,” said Kumar. “The product [that] you build should work on every phone. Then only it will be a scalable solution. A customer can come to the merchant with any kind of phone and it should work."
- The product should give a better user experience than what he's already used to—that is, with cash and card.
Process of technology elimination
They tried NFC but it doesn't work on all the phones. "In India the penetration is less than 7% [of NFC-enabled devices]. Then we tried QR code and bar code but we were not satisfied by the experience. I can close a card transaction in 8 seconds and I end up positioning my camera and scanning for 10 seconds," said Kumar.
Moreover, ToneTag found that sub-$200 phones were prone to errors with QR and bar code scanning. The company also felt that it was relatively simple to replicate QR codes making the process vulnerable to fraud.
ToneTag R&D, therefore, started working on understanding what types of protocols they could use for a contactless experience on every phone. Sound waves were the only medium that satisfied the key design requirements from the 3 key lessons.
The startup has now replicated the NFC experience without the NFC hardware. According to Kumar, they can process transactions under 300ms, which allows the technology to be used at turn gates in metro stations, at toll plazas and for parking payments. All using sound waves.