Startup ToneTag has replicated the NFC experience without the NFC hardware. CEO Kumar Abhishek says they can process transactions under 300ms using sound waves.
During an interview with EE Times India, ToneTag CEO Kumar Abhishek said that other companies have tried sound waves for contactless payment. But they've used sound for data transfer. That's old technology, which means there's no novelty to be patented. ToneTag understood that whatever they implement, it should be handshake enabled and should support some of the key encryption algorithms which regulators may impose.
Armed with their prototyping experience, "we raised close to a million dollars from Reliance Capital to build a business on top of the product," said Kumar.
"Within 2 months we realised that this was a chicken-and-egg problem. If you are building a consumer side story, then there needs to be a lot of product acceptance. If you are building an acceptance side story, then you need a lot of issuers," explained Kumar.
According to Kumar, if he had chosen the consumer side, he would have had to change consumer behaviour as well. That would have meant incentivising the change and it would have required much more capital. Kumar therefore thought of building a large offline ecosystem. He said, "There were already players in the [online payment] business with [enough] capital and a large consumer base but what they didn't have is a platform [sic] which can enable those consumers to come offline and make a payment. Let me take the example of Apple Pay. While they have the consumers—they went ahead and built up a commodity around NFC. They are still struggling with increasing acceptance…"
So ToneTag went for the low-hanging fruit by aiming to convert card swiping machines to become contactless. But they needed to do that in a way that didn't require any additional cost to the merchant or the aggregators who provide the merchant with the card swiping machines. "If there's no cost, it has to be software. But none of the card swiping machines has a speaker and microphone—and that's the basis of the sound protocol we had built," said Kumar.
They looked at the components that all card swiping machines use. They discovered that all of them, including those from the largest suppliers Ingenico and Veriphone, use a certain set of resistors, capacitors and monotonous buzzers, according to Kumar.
"You cannot use the buzzers by themselves because they are monotonous," explained Kumar. "They will not generate the wave[form] you can use to transfer data. But using the other components, we can generate waveforms, which our algorithms sitting on the consumer device can understand and do a bidirectional flow."
ToneTag's technology is fairly robust against ambient noise. "We don't use sound to transfer data only. In our protocols, we do a handshake [between devices]. The ambient noise gets taken care of the way the handshake arrives. Data will not pass if you cross 70dB of noise." Kumar assured me that you can make a successful transaction in a noisy pub with your device 20cm from the terminal.
The company has filed patents on 32 frequencies, including a combination of audible and ultrasonic frequencies. "Our algorithm handles the intelligence part of it—which frequencies to use. For instance, if you are using ultrasonic alone, then you won't get consistent performance over the cheaper phones. The speakers and microphone are designed for audible sonic frequencies," explained Kumar.
The startup has also implemented security measures to prevent fraud. "When there's fraud, the customer and the bank come to know once the transaction has happened," said Kumar. So, ToneTag uses blockchain technology.
Figure 1: ToneTag's transaction secure flow.
The general idea is to have a shared ledger maintained across the network, which is private to the parties involved and secured using, say, standard cryptograhy. The ledger is replicated and distributed and transactions require a consensus across the network, which means it is difficult to change data at one point and get approval because ledger consensus would be missing.
ToneTag uses blockchain to maintain a public ledger to alert the system whether a device is compromised or not.
With 200 merchants paid to conduct live testing, ToneTag CEO believes they are now ready for prime time rollout.