Voice based payments platform ToneTag lines up B2C foray, targets $100 mn revenues in 2-3 years

Voice based payments platform ToneTag lines up B2C foray, targets $100 mn revenues in 2-3 years
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Since December last year, when it became one of six startups to join the test phase cohort of the Reserve Bank of India’s regulatory sandbox, ToneTag has been working on ways to widen the scope of its platform for contactless payments – a market opportunity that has grown manifold with the onset of the pandemic.  

Founded more than eight years ago by Kumar Abhishek and Vivek Singh, mobile payments platform ToneTag, owned by Bengaluru based Naffa Innovations, was ahead of its times when it came to payments technology. Its core proposition is a sound-wave based technology to enable payments via regular near-field communication-based devices such as smartphones and point-of-sale (PoS) machines. 

Why sound-wave based? Back in 2013, when Abhishek and Singh were surveying the market to zero down on a problem they could solve in payments, simplifying offline payments felt like the way to go.  


“At that time cash and card were the primary ways of making payments. And even paying using mobile phones was a tedious process, which didn’t make much difference in the offline route. The only new thing that has come since then was scanning a QR code. Nothing else changed. In 2015 and 2016, nobody was thinking of easing this aspect for consumers,” Abhishek told TechCircle.

“We thought a of solution where the customer could just speak into his phone to make a payment, while connecting that to a PoS machine in the store. Using sound waves could be the only way to do it,” he said.  

The idea resonated with the Anil Ambani backed Reliance Venture Asset Management. “We were looking to invest in offline P2P mobile payments. At that point, ToneTag was far ahead of their time in the Indian context. It took them real courage, a lot of research and thorough understanding on how this industry would evolve in due course. We happen to be right on this one,” Kshitij Gupta, head of investments, Reliance Capital said. Reliance Venture Asset Management, which has since folded into Reliance Capital, wrote out a $950,000 cheque to the startup in 2015.  


The capital went into building the product and setting it up for trials by 2017. The trials involved testing the software and hardware component, the latter known as a ‘retail pod’ with prospective customers. The founders also filed for several patents. 

Abhishek’s life came a full circle when he approached his former employer, Infosys Finacle, in 2016 with his product.  

“When we approached Finacle in 2016 and explained our product, they were excited and came on board as a client in 2017 once our final product was ready. Through them we got ICICI Bank as a client, and eventually many good banking clients. It was a very surreal experience for me; from being an employee of Finacle to now working with them to solve various customer problems,” Abhishek said.   


By 2018, the product started scaling up and by early 2020, prior to the pandemic, the startup was already processing 250,000 transactions per day. The startup, Abhishek added, turned revenue positive in the financial year 2019-2020.   

Use cases for an unusual product 

Like any startup, Abhishek and Kumar didn’t get to a product-market fit at first go. 


“Pasting QR codes and trying to grow an ecosystem would have been much easier, than creating something very new … Trying to convince banks was way more difficult. The key queries were around the security of the network. It took some convincing and testing to get them comfortable with the product and demonstrate its safety as compared to a near field communication (NFC) device and QR code-based payment modes,” he said. 

The feedback, however, prompted Abhishek and Singh to transform the product. From being focused on only transferring payment data between PoS machines and companies, they started to look at using sound waves to create communication between devices. The company soon managed to sign up its first series of clients which included ICICI Bank, Freecharge (before it was sold to Axis Bank), and Airtel. 

The next challenge for the startup was to finalise pricing and a go-to-market strategy. It started as a B2B firm but transitioned to B2B2C after partnering with e-commerce major Amazon. In 2018, Amazon and payments provider Mastercard, along with a clutch of investors invested around $13.92 million in the startup, as per data from VCCEdge. ToneTag signed a massive contract with Amazon that year. Amazon was a B2B customer, wherein the ecommerce company’s customers could now make payments offline using ToneTag’s backend technology and Amazon’s app.  


“The product was live on Amazon by mid-2019, and that sorted our smartphone-based consumers, giving access to 110 million users. With this we had the maximum number of ecommerce users with ToneTag in a way installed in their phones,” Abhishek said. 

The P2P payment mode and pay-at-delivery is already live with Amazon. Amazon Pay shows an option ‘Near me’, which is powered by ToneTag’s technology. “You can transfer money to your nearby person when both of you open the app, no need of UPI, OTPs and codes,” he said. In 2019, the startup also onboarded Abu Dhabi Bank as a client.  

The startup recently also launched its smart store platform. “You enter a store and the catalogue shows on your phone. This has been installed at 40% quick service restaurants in Bangalore, and at some of the top cafés across the country,” he said.  


ToneTag’s has also found a dedicated client base in the marketing industry. The startup has onboarded 18-19 agencies across the world, processing around 8-10 million interactions every day. 

In terms of markets, the startup currently has presence in Southeast Asia, Middle East and parts of Africa. 

“FY20 revenue went up 6X as compared to FY19. We are an offline player but it still went up. But where we (ToneTag) were live, it contributed 30-40% volumes of the store,” he said. 

Growth targets 

Abhishek’s target is hit $100 million in revenue in the next two to three years. The startup’s revenue model involves charging a license fee for its B2B offering, which can range between $100 and $500,000 depending on the features and tech stack being used by the client. On the B2C side, if the merchant is just using the payments offering, then the startup changes around 1.5-10% as commission per transaction on goods sold and depending on the size of the store.  

After tapping B2B and B2B2C, Tonetag’s now wants to venture into the B2C market and target the next 600 million customers who either aren’t comfortable using sophisticated fintech apps on their smartphones or still use feature phones. 

“There are feature phone users who have no digital solution built for them but can speak. We want to use this to spread the network and make them comfortable with just using their voice at a shop and make payments,” Abhishek said.  

As part of the regulatory sandbox, Abhishek said, “We are using a combination protocols to let payments be done through feature phones. Apart from that, we are looking at advanced authorisation where your phone and speech can cover the OTP process. Looking at an OTP message and then typing it into app too is a risky method. On Android phones, multiple apps can access your messages, which makes it highly unsafe. We are looking to create audio OTP. Your bank senses it and validates but no one sees it,” he said.  

“We are also working with the NPCI to create a library of such products. This is what we are working on in 2021 for the consumer side,” he added.   

“On the merchant side, we are working on converting merchant mobile phones into a PoS system; build low cost IoT systems/ boxes for payment transactions; and galvanise consumer experience in developed markets like Metros and Tier-1. At RBI too, we are looking at low cost IoT device,” he said. 

Reliance Capital’s Gupta added, “They have been using their platform technology to evolve further, moving into inventory management for government agencies. It is a cost-effective rapid inventory management, which they have enabled on their platform. Now the same product and technology is being used for ecommerce delivery confirmation, which is contactless and there’s no need to sign. You can just confirm via app through sound waves. They have created a new niche in terms of product use and fulfilled it.” 

In May this year, the startup acquired global patents from Singapore and Malaysia, adding two more countries to its list of four -- the US, Japan, India, and South Africa. These patents covered all kinds of audio and sound communications between the devices and are set to redefine proximity engagement for customers using sound waves, eliminating the need for cash and card transactions in the future.  

Of the eight patents, four have been used to develop various P2P (peer to peer) and P2M (peer to merchant) services, which allows customers to send money to people nearby without asking for their phone numbers or UPI IDs. 

One of them, named SonicCast, enables audio and video advertisements to send integrated messages with customized promotions and call to action. Another solution SoundZone, is a technology that provides personalised dining experience to consumers where they can pick, order, and pay from their phones. It also allows merchants to broadcast curated customized content to their consumers and get a detailed analysis of customer behavior.

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