Talk about cashless and contactless. How about payments made at the speed of sound — to be specific, using encrypted sound waves to make offline payments? Sound is the ancient method of communication, of commerce, where a promise to sell or buy in days of old would be — and was, and sometimes still is — conveyed by voice, of course, and proximity between buyer and seller.
Now, it’s not the sound of voice that carries commerce. It’s sound waves emitted by phones.
In sound-based payments (done in the modern age), sound waves transmit payments data and do not need to rely on the vagaries of the physical environment — such as smartphones or even electricity — that set the stage for other types of contactless transactions.
FinTech firm ToneTag said earlier this month that it has linked with First Abu Dhabi Bank, the largest bank in the United Arab Emirates (UAE). The latter will deploy sound-based contactless payments.
The FinTech firm — which offers software that enables sound-wave-based payments — is used by investors such as Amazon, Reliance Capital and Mastercard. Through the partnership between ToneTag and First Abu Dhabi Bank, customers of the bank are able to pay using their PayIt app and make the payments from their mobile phone. The relationship is one that enables payments to go digital globally, and yet not be dependent on specific hardware, QR codes or even the internet.
In an interview with PYMNTS, ToneTag CEO and Co-founder Kumar Abhishek said the use of sound-based payments helps solve a problem faced by retailers and their customers, who are used to dealing in cash: They have “to struggle to find the exact change to complete a transaction.”
Even in the movement away from cash transactions and toward contactless payments (notably in ToneTag’s home market of India), constraints emerge. The fact remains that the consumer base in India contains 800 million mobile phone users. Only 200 million of that tally, said Abhishek, have smartphones. Of that number, he said only 6 million phones are near-field communication (NFC)-enabled.
“In such a scenario, a vast majority of 1.3 billion Indians can’t access pre-existing digital payment systems,” he told PYMNTS, “and fewer still can access the evolving developments or leading technologies which make payments easier.”
On the other side of the commerce equation, merchants may find it inconvenient to invest in complex payment systems, especially in the event that access to the internet is inconsistent. Embracing sound-wave-based technology to facilitate payments, said the executive, enables both payments and proximity engagement services across any device in a manner that remains “independent of the instrument of infrastructure.”
He said that, thus far, ToneTag’s tech has reached 50 million consumers, with the number expected to touch 100 million users within the next quarter. The larger addressable markets include person-to-merchant payments at $224 billion, and merchant-to-merchant transactions at $176 billion.
The adoption comes, he said, as sound — which travels at 767 miles per hour (MPH) — effectively addresses these challenges associated with QR codes and NFC. “While QR code scanning requires a working phone camera, NFC [hardware] works only on smartphones,” he said.
In broad terms, audio signals make their way between merchant’s machines (such as a ToneTag “pod”) and the customer’s phone (possibly a feature phone), and a “tone tag” carries an encrypted code that is valid for a set length of time. The audio signal alerts the consumer to authenticate the transaction, say, with a PIN code.
Use cases that might see early adoption, including digital toll collections, are slated to reach $2 billion, the CEO said. Other nascent areas, such as the emergence of smart parking, could be greenfield opportunities. But, of course, it is retail in general that will prove to be the most promising for sound-wave-based payments. After all, he said, the retail market in India alone may touch $1 trillion in 2020.
When asked about the mechanics, Abhishek said ToneTag has partnered with issuers and acquirers, which in turn enable the technology inside merchant terminals to enable sound-based payments.
“ToneTag, being a B2B company, does not have direct interaction with [end] customers,” he said.
Inevitably, as with any novel conduits to payments, the conversation turned to security. Abhishek stated that sound-based payments are conducted through multi-layered encryption and time-based, one-time password features, among other attributes. As the executive told PYMNTS, “end-to-end encryption of the transaction data, even before the information leaves the source device and the decryption key or code, is available only with the bank or wallet partner.”
Ideally, he said, sound-wave-based payments will “allow customers to pick up products and walk out of retail stores, their payments being conducted automatically via sound wave and their phones. We aim to explore the transport and consumer-internet sectors in the future.”