Indian government pushes start-ups to develop contactless payments
The Indian government is in discussion with technology companies about boosting take-up of cashless services such as contactless payments that use sound waves and NFC. Kumar Abhishek, founder of ToneTag, said that only 20% of mobile users in India have smartphones, so enabling them to transact digitally is a big challenge. ToneTag is a contactless payment app using sound waves to enable offline contactless payments on any device. Post-demonetisation, the government has been looking to enable digital transformation, especially in rural areas.

The government is in talks with technology providers to encourage the adoption of new cashless technologies such as contactless payments that use sound waves and near-field communication.

“We are looking at a lot of new technologies that enable cashless transactions with less investment on infrastructure. We are also looking at enabling digital payments with the use of voice-based and near-field communication (NFC)-based technology. The government is in talks with technology providers that can enable a simple mobile phone to become a mobile point-of-sale (mPOS)," said Aruna Sundararajan, secretary in the ministry of electronics and information technology.

“We are in talks with new companies like mPayGo, ToneTag and other startups which will change the way cashless payments are executed," she said adding that this could meet the needs of the bottom of the pyramid.

An mPOS is a smartphone, tablet or dedicated wireless device that performs the functions of a cash register or electronic point of sale (PoS) terminal.

NFC is a set of communication protocols that enable two electronic devices, one of which is usually a portable device such as a smartphone, to communicate with each other when they are within 4 cm of each other.

mPayGo, a fintech start-up, has launched an mPOS service that lets a merchant accept credit, debit card and net banking payments on their smartphone without the use of any external equipment like a dongle/terminal.

“It has been 3 months since the time merchants started using our application commercially for accepting digital payments. Currently, all that the merchants need to have is a smartphone and an Internet connection to process card payments," said Neeraj Tandon, co-founder and CEO of mPayGo.

“Eventually we will also enable transactions through unified payments interface (UPI) and Aadhaar-enabled payment system (AEPS) and even launch an app for consumers," Tandon added.

ToneTag is a contactless payment app that uses sound waves to enable offline, proximity-based contactless payments on any device.

“The major concern for government is that only 20% of the entire mobile-using population in India has smartphones. No application can be downloaded on a feature phone because of no Internet, so reaching out to this massive population and enabling them to transact digitally is a big challenge," said Kumar Abhishek, founder of ToneTag.

“Any customer whether he has a feature phone or a smartphone can use his phone to make payments from any bank account or any wallet using ToneTag as a technology to transfer money. In case of smartphones, the transfer is done by a single touch using sound waves and in feature phones, the users need to dial a toll-free number and the payment instruction is carried out through interactive voice response (IVR )," Abhishek added.

Rahul Matthan, partner at Trilegal, said the adoption of newer technologies will lead to added convenience for both merchants and consumers without compromising on the security of payments.

“In India, two-factor authentication is needed to make electronic payments above Rs2,000 i.e other than the device which is used for making payments digitally, another factor like a personal identification number(PIN) or one time password(OTP) is needed. This secures the payment process," he said.

Post demonetization, the government has been undertaking various programmes to enable digital transformation especially in rural parts. It has also been pushing for new methods of digital transactions which are convenient and easy to access or use.