ToneTag makes strong headway in sound-based financial transaction

By Anusha Ashwin Smartphones have eased financial transactions and enabled app-based payments at retail stores. However, mobile-based payments sector in India is still at best in early stages of evolution. One big gap is contactless payment at the point of sale (POS). This is primarily because Internet is yet to get more integrated in our lives to qualify as intrinsic to our lives. Not all times, the consumer is connected to the Internet to enable mobile-based payments and also perhaps because the smartphone is not NFC enabled.

A startup called ToneTag that enables digital payments without Internet has come up with a solution. The company has uniquely positioned itself in the mobile payments industry by using sound waves to enable offline financial payments at retail stores. Founded in 2013, ToneTag founders Kumar Abhishek and Vivek Singh have ensured that they leave a permanent footprint with their technology in the mobile-based payments industry. ToneTag operates out of its Bengaluru office with a team of 36 technically sound enthusiasts.

Exploiting sound as an out-of-the-box idea

“I came up with the idea of starting a company on my own at Singapore, where I was working as a business consultant in information technology, retail, financial services and core banking applications for Infosys. In a conversation with my friend, he jokingly questioned me as to why in India we get candies instead of balance cash of 50 paise or 1 rupee? The question made me realize that there is a need for a better payment mechanism in India that does not use cash. And these days a person might step out without a wallet but will never do so without a mobile phone. I immediately started doing extensive research on the viability of digital payments in India. I came to India to study the market, the usage patterns of people and the problems they faced during payments. I met people from urban as well as rural India, which gave me tremendous insight into the pain points of payments and how we can solve it. In a country like India, where cash is the most used payment method, millions are locked out of formal financial services,” says Kumar Abhishek, Founder of ToneTag.

After doing extensive research and gaining expertise, with his friend Vivek Singh, Abhishek established ToneTag to provide contactless payments facility in India. They experimented with various existing payment technologies such as NFC, QR codes, etc., but they came across a number of issues with these, primarily the high cost of deployment and lack of interoperability.

Working on pros and cons of all the technologies that enable contactless payment, Abhishek was not convinced that he could form a company based on any of these. In a casual chat with his father, one day,Abhishek explained to him about the struggle of creating a business with digital payment as the idea. Abhishek explained to his father that his intention is to use a technology that enables contactless payment at ease and he was very clear that this application should not be dependent on hardware/Internet and at the same time should be easy to deploy. His father, an engineer too, casually expressed why Abhishek cannot use sound waves to make payments.

The two words, “sound waves”, gave Abhishek sleepless nights. He researched, probed, into all aspects of exploiting sound waves as a technology for digital payments. Like an answer to his prayers, Kumar fortunately found an expert in sound technology somewhere in Europe. As the days progressed, subsequent interactions with the European sound technologist yielded a brighter picture on using sound vibrations for contactless transactions. The workability and efficacy of using the technology was deduced and proved in field tests. Kumar derived the confidence that he has broken ice with this unexploited technology and he knew that this would be his forte to build his company. And thus ToneTag was born!

The duo finally concluded that just like radio waves, sound waves can also be used to carry any information, and the best part they realized about using sound waves is that it is completely hardware independent.

“We made a breakthrough with sound technology. ToneTag’s one-of-a-kind technology uses sound waves to enable contactless proximity payments. The technology developed by us was interoperable and hardware independent, as it just needed a speaker and microphone to work on any device with a speaker and a microphone such as laptops, desktop PCs, Tablets, EDC Machines, mPOS devices, Feature phones and Smartphones. You don’t even need an internet connection on the customer device to make the transaction. Our software algorithm plays a tone that goes through three layers of encryption and uses tokenization to relay information required to make the transaction. It is a reliable, accessible, secure and frictionless way to make mobile payments with ToneTag. This reduced the costs associated with digital payments, making the technology viable not just for the young urbans but for everybody we met during our journey,” explains Abhishek.

ToneTag’sSoftware Development Kit (SDK) encodes data into sound waves which could be transmitted using any basic speaker. The only requirement for mobile payments through ToneTag is the integration of the ToneTag proprietary SDK on the merchant (EDC, POS, Phone) and customer (mobile banking, wallet, payment apps) side.Once integrated, the customer can make payments using any payment instrument such as mobile wallets, credit/debit cards, bank account, supported loyalty cards etc.

“There are companies which use sound technology to transfer data from one device to another but they also use other communication channel like SMS or internet to complete data package. Their technology is hardware dependent where they cannot be used on every device other than mobile phone and limitation of data makes it tough to enable multiple payment options to transact on their platform, in some cases SMS needs to be sent from customer device which is charged at premium rate. Other than the data restriction, these technologies can’t be used in a noisy environment or a place with lots of disturbance/ interference, and even the orientation of mobile or steadiness of the device effects the transaction,” elaborates Abhishek talking about the ToneTag differentiator technology.

Going the Beacon way to deliver hyper aware content

“Apart from contactless payments, we also provide other proximity communication solutions such as location-based customer engagement services, etc. In four years, the company has grown to offer big data analytics based on real-time loyalty services; in-store payments; omni-channel customer engagement through ToneTag Beacon technology; invisible payments; brand and service discovery,” says Abhishek.

The company integrated Beacon technology that alerts consumers of attractive offers when they enter the retail store. Beacon is a low-cost hardware that uses battery-friendly and often low-energy Bluetooth or Wi-Fi-enabled connections to transmit messages. The technology allows a consumer, who is 20-30 meters from a mall, to get notifications through ToneTag or a ToneTag-enabled mobile wallet about special offers or discounts available in the store or mall.

“The idea is to locate the individual through sound technology when they are within proximity, then engage them through bi-directional communication and facilitate contactless payments through partnerships with mobile wallet providers. This opens up a lot of future use cases and possibilities. All our merchant touch points could potentially become beacons, that can transmit messages, providing a great real time tool to brands and marketers,” explains Abhishek.

Enabling banks and wallets for smooth digital transactions

Abhishek has confidently taken his company to a comfortable level where he can partner with other companies. He says, “Most existing players look at us as competitors rather than enablers. ToneTag being a software element is non-competitive to device specific payment instruments or any banking app or mobile wallets. We are providers of the technology and the ecosystem that will enable contactless payments.”

Being an innovative product, in a business vertical such as mobile payments, which is still in a budding phase in India, my initial days as an entrepreneur went in educating the customers about the contactless payment landscape and how ToneTag, which can enable payments without any hardware updates can deliver value and reduce costs for everyone in the payment ecosystem.

Quoting an example, IT services company Mphasis partnered with ToneTag in May 2016, to provide a range of digital banking solutions for the banking and retail industries. Mphasis collaborated to build solutions and to be an integration partner for ToneTag’ssound based technology, globally. This partnership enabled contactless proximity communication, location-based services, and customer engagement services along with a number of other solutions.

“Mphasis is the Systems Integrator (SI) partner to ToneTag’s sound based technology. With ToneTag we are redefining retail communication. When the location-based services are combined with big data analytics, such as accurate and comprehensive, real-time customer engagement insights, Mphasis and ToneTag are capable of delivering hyper aware content and personalized messages that engage customers and one which can convert customer’s interest into sales,” explains Abhishek.

ToneTag and Mphasis have come together to bridge the online and offline worlds. Abhishek believes that the partnership aims to enrich the retail experience in the offline establishments of both banking as well as commerce industries by providing ultra-modern customer engagement solutions. The improved customer interaction at offline locations will help stave off disruption and help them compete with newer retail channels such as e-commerce and also bring disruption in banking and payments. After the customer has made their choice they can pay offline with sound based ToneTag technology, thus concluding the three legs of the offline retail experience — Locate, Engage, and Pay.

ToneTag has partnered with 21 Issuers, Acquirers, Banks, Payment service providers in South East Asia, Europe, Middle East, Africa, Canada, Australia and USA. The company also has a large network of global SI partners like Mphasis who are bringing ToneTag to big retail establishments across the world, where the company is striving to provide consumers with an omni-channel shopping and payment experience. Some of other notable partners include Tech Mahindra and HDFC, who have already deployed products using ToneTag successfully.

Adopting Blockchain for security

When Abhishek adopted sound waves to make payments he knew he had to tackle security issues related to payments and he had to ensure that his customer’s data had to be protected. He certainly knew that the technology should be of the highest level, and hence his choice was Blockchain technology. Dubbed as the most important invention in financial technology, Blockchain technology has the potential to completely bring unprecedented advancements in fraud prevention.

Explaining in detail, Abhishek says, “We decided to adopt Blockchain technology to detect and prevent fraud in payments. ToneTag was one of the first to introduce Blockchain technology to contactless payments globally. While paying through ToneTag, customers can identify whether the merchant outlet they are dealing with is exposed to risks or if it has witnessed any fraudulent transactions in the past. Similarly, merchants can ensure whether a customer is genuine or not. They can detect if the transaction is unusual or if the customer was involved in fraudulent transactions earlier, since all transactions are validated via a public ledger.”

Streaming revenues, investors bet, growing steadily

Angel investors like Ram Sellaratnam and Rajesh Yohahanna had initially helped ToneTag gain footing. In August 2015, ToneTag received $1 million in funding from Reliance Capital’s Venture fund arm. That is not all. The company has seen revenues. The revenues are based on the licensing fee the company charges to its partners for the use of their technologies. Also, the company charges a small fee on every transaction.

Outlining the future, Abhishek concludes saying, “In the future we want to increase our revenues primarily through transactions. We are well-funded at this point. In the next few years, we aim to deploy our technology at most POS terminals around the world. We are a product company and wish to work closely with existing service providers so that a large number of consumers can be brought to the cashless ecosystem. In the near future, we will make customer and merchant interactions more meaningful by enabling operational and transactional interactions to go invisible.”