Even as UPI has seen a steep rise in the value of transactions since August 2016, its efficacy as a payment medium for businesses is under test as merchants are still resisting it. While the NPCI is trying to ease the experience through innovations such as QR code integration with UPI, the adoption has been slow forcing the body to look for other solutions.
For instance, ICICI Bank’s pockets app has integrated Tonetag’s sound pay solution on a trial basis and it allows people to pay at accepting merchants by just having their phone in proximity with the accepting machine.
“There is a huge demand of moving person to merchant transactions away from cash. QR code is interoperable but it has experience and security challenges since QR codes are static and they can be replicated easily,” said Kumar Abhishek, founder of Tonetag.
He said the sound-based payments combined the interoperability of QR codes and security of near field communication payments. Tonetag has seven global patents in the space and has the largest network acceptance on soundwaves. In India, the company boasts of 120,000 accepting merchants and has 42 million customers who can transact through phones.
Tonetag’s claim to fame is that it removes the need of deploying new hardware on both customers’ and merchants’ end. The company achieves this by pushing out a software update to existing card swipe machines which can start accepting sound-based payments. Sound-based payments work through emitting a high frequency sound note which is captured by a speaker or microphone at the merchant end. That works as an authentication mode when payment is made in real time. The differentiating factor here is that sound-based payments can be integrated with any existing infrastructure including card networks, bank accounts, UPIs and even prepaid wallets, thus allowing for interoperability in the future.
NPCI released a request for proposal last September for proximity payments in the customer-to-merchant ecosystem for UPI. It asked firms with patented solutions to submit proposals for carrying out trials in proximity payments and indicated integration with UPI due to limitation of existing virtual payment address and QR codes.
“Remote and proximity payments in UPI are currently done only by entering the VPA or scanning a QR within the app or a web site, which limits the possible methods in which payment can be made,” the RFP stated. Tonetag, as a partner in these trials, is looking to boost small value transactions such as for groceries at on-ground retail establishments.
“The big problem with QR code is that the phone of merchant is linked with the owner of the shop who is rarely present there. So, the cashier doesn’t get the acknowledgement if the customer has paid or not and there’s a recipe for fraud right there,” Abhishek said adding that the company was already live with a lot of big banks and doing sound-based transactions.
A questionnaire sent to NPCI went unanswered at the time of publishing this story.
It’s not all smooth-sailing for the new technology, however. An industry insider speaking on the condition of anonymity said that there were challenges which the industry would face before reaching a tipping point. For instance, NPCI wants only patented technologies in its trials which means a lot of companies who may have a better product but are in the process of obtaining a patent or don’t have it, would lose out, he said. Also, there is the question of adding layers to the existing infrastructure and UPI is cumbersome because of its requirements for phone and internet connectivity. “So sound-based authentication needs to replace some layers to be successful,’’ he added
Naveen Surya, Chairman, Payments Council of India, said sound-based payments may sound like a big technological innovation but they are yet to be proven in the Indian market.
“Sound-based payments haven’t had that much traction yet as compared to other payment modes,” he said.