ToneTag claims to be the first service provider in the world to facilitate cashless payments from any device, with or without the Internet. "Being the first mover, ToneTag is certainly poised to be a leader in the sound-based contactless payment landscape," says founder and CEO Kumar Abhishek. ToneTag can be the Visa or Mastercard for the cashless ecosystem, since it plays the role of an enabler to carry out transactions, he adds. Abhishek says he would like to work closely with competing service providers like Alipay and Google Pay, by providing them ToneTag's API, to bring a larger number of consumers into the cashless ecosystem. In an interview with Fortune India, Abhishek discusses the company's new tie-ups, business strategy, growth roadmap, and fundraising plans. Edited excerpts:

We've seen rapid growth in the payments space, with new companies joining this segment every other month. What is ToneTag's USP to stand out in this very cluttered market?

At ToneTag, our technology is our very USP that gives us exclusivity. We leverage the most organic universal form of energy to transfer data and that is sound! This powerful medium can enable contactless communication, making it globally the first technology to facilitate interoperable digital payments without any hardware dependency, making it possible from even feature phones and without an Internet connection. In fact, ToneTag is the first company in the world to facilitate contactless payment acceptance on EDC [electronic data capture or card swipe] machines. Essentially, we have a variety of exciting use cases for people to leverage sound as a medium to communicate between two devices. Being the first mover, ToneTag is certainly poised to be a leader in the sound-based contactless payments landscape.

However, considering how the vertical of mobile payments in itself is very new, a lot of existing players in the segment perceive us as competitors than the enabler that we actually are. Being a software element, ToneTag is not a competitor to device-specific payment instruments, banking apps or mobile wallets. So, the fact that we enable other segment players to facilitate payments even in the supposedly ‘adverse’ conditions of no smart devices on either of the ends and no Internet connectivity also marks us apart in this intense market.

How do sound waves enable a customer to pay a bill without any interface with the cashier at a store?

Since every device is equipped with the basic ability to send and receive sound, our technology can be seamlessly integrated into any hardware and software. So all that a customer needs to do is have an account in one of our partner banks or mobile wallet applications. Basically, when the merchant or cashier enters the bill amount on their PoS/EDC machine, the customer simply has to unlock their phone and tap on the sound pay icon of the respective application, or just wait for a pop-up that they would automatically receive. The pop-up would indicate them to enter the PIN for authentication, post which the transaction gets done with real-time acknowledgement on both the ends. In this way, sound wave technology enables contactless payments for its customers.

So, essentially ToneTag is what Mastercard or Visa is to a credit or debit card. How seamless and different is the experience for a customer?

Yes, you can call us that for the cashless ecosystem. We essentially play the role of an enabler for the transaction to be carried out. ToneTag is globally the first service provider in the world that can facilitate cashless payments from any device with or without the Internet. Since we leverage the inherent yet powerful medium of sound, making payments using ToneTag is as easy as making a call. Considering how our technology can be seamlessly integrated anywhere without the need for additional infrastructure, there is no need for a device upgrade on either ends to initiate a transaction. Moreover, it is highly secure, and comes with real-time acknowledgement. Therefore, with ToneTag, customers get to experience an instantaneous, secure, seamless, and very easy process of making cashless payments even if they possess a feature phone or have no Internet connection at that moment.

What are the safeguards to avoid data theft and fraudulent transactions?

At ToneTag, safeguarding our customers from any security issues is of utmost priority. So, we have in place a variety of security measures including multi-layer encryption, host card emulation, tokenisation of data, real-time transactional OTP via a non-SMS channel, white box cryptography, and decentralised databases by leveraging blockchain technology. Along with these, the SDK [software development kit] that we offer also establishes a secure ‘handshake’ before exchanging any sensitive information. We have invested a significant amount of time and effort in research to develop and deploy a completely secure technology, and our solution exceeds international security standards.

You mentioned ToneTag can be accessed on feature phones too. While this is a step towards financial inclusion, to what extent has it been embraced?

Our product that can facilitate contactless payments on feature phones and drive financial inclusion has been developed and deployed. However, it needs a push from the stakeholders of this ecosystem for it to truly scale up and reach out to a wider audience. Recent government measures like the Reserve Bank of India’s announcement regarding the opening of first cohort under the regulatory sandbox which seeks innovations enabling feature phone-based payment services and offline payment solutions has given us hope. Now, we are looking forward to getting the boost that our product needs to bring the various strata of society aboard the digital payments journey, thus helping us further financial inclusion on an even broader scale.

You have 52 million customers, of whom about 7.5 million-8 million are active users, and daily transactions stand at 135,000. What's the growth strategy?

We are expanding to various geographies with multiple use cases for payments, mobility, retail, proximity marketing and so on.

You said you plan to add 1 million merchants in the next six months. Which pockets are you targeting, and what's the progress so far?

While online sellers have access to customers’ buying patterns and can offer custom-made offers and choices for the buyer, the offline retail space is not equipped with avenues for access to such customer identification. In the absence of a digital presence, customer traction and loyalty reduces. Therefore, we strive to target these offline merchants at present to facilitate a healthy communication between them and the consumers. By leveraging ToneTag’s smooth user-friendly technology, offline merchants can also extend personalised offers and have engaging interactions with their customers. We have had a great run so far with over 3 14,000 merchants on board, and growing.

Which consumer-facing brands are you looking to partner with in the coming months and which are the ones currently on board?

As of now, our partners include banks and mobile wallet platforms such as ICICI Bank, HDFC Bank, FreeCharge, YES Bank, Bank of Baroda, Airtel, Amazon, First Data, First Abu Dhabi Bank, Reliance, Shoppers Stop, Astro, and Hoopoun, among others. We are in expansion mode at present to scale up our solutions and bring more and more people under the ambit of digital payments.

What's the average transaction size and what commission do you typically earn from each transaction?

Our average transaction size is ₹150. We provide ToneTag’s API to businesses such as banks, acquirers, issuers, technology providers, etc. and the commission we charge depends on who we are dealing with. For instance, when it comes to payment instrument issuers, we charge a licence fee for our product. Whereas in the case of a merchant acquirer, we charge a nominal fee on every transaction that they process using our technology.

Is this the only revenue source?

No, apart from the contactless payments solutions, we also have some engagement solutions in place to help businesses streamline their operations and enhance their customer experience. Some of these solutions include smart dine-in, in-store concierge, attendance and time management, customer discovery and engagement, SonicCast, queue busting, and voice-assisted order and payments, among others. All these retail and mobility solutions enable us to generate revenue as well, apart from the payments solutions.

ToneTag is currently growing approximately 20% month-on-month. Given your plans to scale up to about 30%-40% in the coming months, and with the current revenue model, when do you expect to break-even?

At this growth rate (20%), we expect to break-even in the next 6 quarters.

ToneTag has raised $10 million over three rounds of fundraising. Are you targeting a series C round soon?


You are present in around nine countries and are looking to foray into Southeast Asia. How has the response been so far? Any learnings from these markets?

Different markets across the globe function differently and have different requirements. Developing countries are more focussed on driving financial inclusion while developed nations are looking forward to enhanced and effective engagement solutions. As ToneTag’s one-of-its-kind technology can enable multiple use cases in different sectors like payments, mobility, retail or proximity marketing, it fits well for the needs of all types of markets. However, it is easier to scale in countries like Japan where the technology acceptance rate is high.

Alipay and Google Pay also have the tech capability to tap into sound waves for person-to-person digital payments, plus competitive intensity is high in the payments domain. Would you consider merging with an established player to sustain and grow the business?

The digital payments market has witnessed a phenomenal boost in India in recent times, with many fin-tech platforms such as PhonePe, Google Pay, and Paytm etc. making transactions faster and easier. However, one needs to understand that ToneTag is a software element like I previously mentioned. So, a merger with an established player is not how we approach this. Instead, we would like to work closely with these existing service providers by providing our API to them, so that a larger number of consumers will be brought to the cashless ecosystem.

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