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Article: Can Digtial Innovation Disrupt a Billion Lives?

March, 2017

Kumar Abhishek, Founder, ToneTag describes how innovative technologies can potentially bridge the last mile and provide cashless payments to everyone

While we’re talking about the contributions in innovations that banks and startups have made in the fintech space and how the Indian financial market is rapidly changing today, we often forget that there are still millions of Indians who aren’t interested in these conversations as they have always been locked out of financial services.

Just two years ago, world bank statistics said that India was home to 21% of the world’s unbanked. The Pradhan Mantri Jan Dhan Yojana has significantly brought this number down by assisting a large number of Indians to open up a bank account. But it must be noted that just having a bank account doesn’t mean one is completely included in the financial ecosystem. The world bank has also said that 72% of the Jan Dhan accounts lay dormant. This is largely because Indians living outside major urban centers don’t have enough avenues to use formal banking services as the penetration of bank branches, ATMs and POS that accept card payments is very low and inconsistent in these areas.

According to RBI statistics there were 665 million cards issued in India but there are only 1.24 million EDC POS terminals. This means that there is just one card payment terminal for every 536 Indians who are card holders. This is a dismal number. Initiatives by banks and recent government directives are working towards increasing the number of POS terminals around the country but this is going to take some time to be realised.

With the recent demonetization initiative, the ones who have been affected the most are those who are marginalized without banking services. Today there is an urgent need to solve the problems of these individuals and bring them forward to a less cash, formal economy. There is a huge opportunity to be had here as well.

Though ToneTag was initially founded to solve the loose change problem which was a great friction point during cash transactions in India, after doing some primary research we soon found out that there were even bigger problems that people in India were facing.

Men and women in rural India had to miss work, spend their hard-earned money and travel great distances just to deposit, withdraw or check the balance of their accounts. They were forced to transact in cash as they had no other options, and more often than not, they were not able to acquire a loan from a formal bank due to a lack of banking and transaction history.

We decided to make it a point to solve this problem at the grass root level. We started experimenting with technologies that could potentially bridge the last mile and provide cashless payments to everyone. But these payments still had to be very simple to perform.

Though, smartphones were commonplace in India, we can see that even in 2016, smartphone penetration in the country is less than 30% of all active devices. Despite this mobile phones, especially feature phones and 2G cellular networks have spread across the length and breadth of the country. Hence we decided that if we were to make accessible payments possible, it’ll have to be via feature phones. Internet connectivity was also an issue at many rural and remote areas, so a completely offline solution was required.

With this information in hand we developed the sound based technology that forms the basis of ToneTag. The ToneTag SDK (Software Development Kit) encodes data into soundwaves. The sound encrypted data could be transmitted contactless over air or could be transmitted via a phone line as well.

Armed with this idea we were able to realise feature phone mobile payments that were as easy to perform as a phone call. The customer didn’t have to worry about internet connectivity either. We now knew that we could potentially enable anyone to make digital payments easily. But acceptance was the major hurdle with digital payments.

After significant research and development, we were able to integrate the ToneTag SDK into all platforms of smartphones to enable contactless payments as well as acceptance. We were also able to develop the technology so that it could accept payments from any POS device, regular desktop PCs, laptops and thin clients. But the biggest break was when we integrated the SDK into both legacy and EMV EDC devices. ToneTag is the first company to enable contactless payments on EDC devices through sound waves.

Since we have taken care of the technology part, now was the time to actually make it a reality. ToneTag has been forging partnerships with issuers, banks, PSPs and merchant acquirers to deploy the technology across India. Soon Indians living in remote areas with limited resources and infrastructure will be able to use their bank accounts to make payments without having to travel large distances to withdraw cash or check their balances. They’ll be able to perform certain important functions of a payment app without having a smartphone or internet connection, over 2G networks.

This, we think is a landmark innovation in enabling India to go cashless and digital. We’re delighted to have achieved such a milestone as a young company. We also urge other contemporaries in the fintech and banking industries to work towards financial inclusion as it’s a large sector with untapped potential for growth.

Opinions expressed in the article are the author’s own.

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