Audio Pod. (Photographer: Nishant Sharma/Bloomberg)

This Pod Is Trying To Stand Out In India’s Crowded Payments Market 

It looks similar to Amazon’s Echo, it allows you to make payments to merchants, but it’s not connected to the internet.

Tonetag unveiled its Audio Pod last October, joining myriad cashless payment options for phones without data connections. It has since distributed 50,000 of them in India, Kumar Abhishek, co-founder of the Bengaluru-based startup, told BloombergQuint in an interview. For smartphones, Tonetag’s payment feature will be added to banking apps. For feature phones, it will work through the interactive voice response facility.

“A smartphone or a feature phone connects through sound waves when brought closer to the pod,” Abhishek said. “Once a customer brings the phone closer to the pod, he or she gets a pop-up or will have to enter a PIN if using the IVR facility. Enter the amount, and the payment is done. It’s that swift.”

India’s digital payments markets is crowded with everyone from the government’s BHIM app and Paytm to Google’s Tez and WhatsApp trying to ride the wave after Prime Minister Narendra Modi’s decision to scrap old high-value notes encouraged cashless payments. They all have plugged into the Unified Payments Interface that makes transactions interoperable between various apps and services.

Before ToneTag launched the pod, it already offered a solution that allowed point of sale terminals to accept contactless transactions. The startup has converted 150,000 such machines to receive sound-based payments, Abhishek said. With tie-ups with banks, it expects to touch two-three million transactions a month in the next two quarters.

To be sure, it’s not the first startup to use soundwaves to enable contactless payments. In 2013, Alipay launched a system in the Beijing subway that used soundwaves to connect smartphones with vending machines. Most recently, Google introduced a technology called Audio QR that uses ultrasonic frequencies to transfer money using sound from one phone to another. Last year, a Slovenia-based company introduced its patented Data Over Voice solution in India that sends encrypted audio signals between two face-to-face phones to make payment without the internet.

(Photographer: Nishant Sharma/Bloomberg)
(Photographer: Nishant Sharma/Bloomberg)

Unstructured Supplementary Service Data or USSD also allows payments through feature phones. Flipkart-owned digital payments app PhonePe, in a bid to capture the offline market, recently introduced a low-cost POS terminal that doesn’t require an internet connection and works with Bluetooth. It not just supports cards but also PhonePe's wallet, Jio Money, FreeCharge and will soon support UPI.

ToneTag is betting on convenience as its technology allows existing POS machines and even ATMs to accept contactless transactions, Abhishek said. “This can happen with just a software update on the device, which can even be pushed from a central server.”

The startup has tied up with 23 partners, including ICICI Pockets, Bank of Baroda, Yes Bank, Airtel Money and even mobile wallets such as Freecharge. The customer simply has to download the banking app to make sound-based transactions.

ToneTag, which has so far raised $4 million, counts Reliance Capital, Mohandas Pai-backed VC firm and 3one4, among others, as its investors.

It partnered with some parking operators and toll plazas and even retailers like Shopper Stop to accept contactless payments. Abhishek said the company is working with Mastercard and Infosys’ Finacle to onboard banking clients.

(Photographer: Nishant Sharma/Bloomberg)
(Photographer: Nishant Sharma/Bloomberg)

The company said it has the intellectual property rights for the pod. The startup installs the software, but gets the product assembled by Bengaluru-based vendors, who source most of the parts from within India, and whatever is unavailable locally is imported from the U.S. and Taiwan.

It costs around Rs 750 to make one pod, according to Abhishek. The startup gives these to domestic merchants at Re 1 a day rent, which is waived when they do more than 10 transactions daily. To those outside India, they sell the pod at cost.

Abhishek said the startup has shipped close to 100,000 retail Audio Pods to the Middle East and South East Asia, North America and some parts of Africa. He didn’t provide more details.