Pay By Sound: the future of mobile banking payments and transactions
But harnessing audio waves for payments purposes is easier said than done, because it’s not like developing an app. It represents the development of a whole new technology, and reliability and security are just as important as speed — otherwise, this alternative payment method would be no better than the electronic payment methods that came before it.
Innovators in South Korea, France, Israel and the U.K., among other countries, have been working on audio payments for years. Even Google took a crack at it. In 2013, Silicon Valley startup Clinkle raised $25 million in funding to build the point-of-sale (POS) system of the future using sound, but the company later changed trajectories, creating more of a Venmo-like product primarily aimed at college students. LISNR, a technology startup based in Cincinnati, Ohio, has been working on sound payments since 2012.
“The tech is just hard,” said LISNR CEO and co-founder Rodney Williams. “It took years of innovation to get it to a capacity and reliability where we’re having commercial customers launch. People underestimated how long that would take.”
But LISNR has finally cracked it and, by the end of this year, pay-by-sound may be coming to a store near you — no POS terminal upgrade required. Retailers already have speakers in their POS systems, so if they want to offer sound-based payment methods, there’s no need to trash their old terminals. Williams said LISNR purposely built its capabilities on software rather than hardware to make it more compatible and scalable.
According to Williams, pay-by-sound uses an advanced, ultra-low power, wireless transmission technology to transmit data via sound waves that originate from the very same POS terminals that retailers are already using. Any phone with a microphone can pick up those waves to complete a transaction. No special features need to be present or enabled — unlike near field communication (NFC), which only functions on certain phones.
Device agnosticism isn’t the only advantage of paying with sound. To prove his point, Williams compared the LISNR technology with what’s already out there.
Why Sound Is Better
Security is going to be consumers’ first concern when they hear about this new payment method — as with any new payment method — and rightly so.
Today, the most encrypted way to transact is by Europay, Mastercard and Visa (EMV) chip cards. Any credit card with a chip is capable of tap-to-pay transactions in an EMV-enabled POS setting, but, more often than not (at least in the U.S.), the customer inserts the card into the chip reader and waits five to eight seconds for the transaction to go through. So the payment is secure, but not very fast.
Barcodes and QR codes are quicker, and they’ve certainly found success in the Starbucks app and at Walmart. However, there is no way to transmit sensitive data using a static code because it’s too easy to copy and share. Instead, scan-to-pay exchanges a transaction code and account information over the cloud, tapping into the payment card on file without exposing the actual credit card number.
That’s a card-not-present (CNP) transaction, like in eCommerce, and it costs more for retailers because it’s less secure. Plus, said Williams, it fails about 10 percent of the time due to the quality or the brightness of the screen being scanned, or the quality of the scanner or camera itself.
NFC has the security advantage of working only within a small radius around the point of sale — unlike Bluetooth, which is broadcast more widely and is therefore more easily hacked, or WiFi, which sends data to the cloud where it could be easily compromised.
Bluetooth and WiFi have other shortcomings. For example, radio transmissions introduce a lot of interference. The more stuff people program to run on radio waves, the more clogged and unreliable the airwaves become. Imagine walking around the house with an old radio, trying to position the antenna just right to pick up the transmission, or holding an old cell phone up to the window to get a signal. In 2017, alternative payments should not be a game of, “Can you hear me now?”
That would appear to position NFC as the winner. Yet NFC is exclusive, relying on the consumer to have an NFC-enabled phone, and it’s also intimidating. Consumers aren’t sure how to activate NFC, and they don’t want to introduce the friction of figuring it out while they’re standing at a point of sale.
Even for those who have embraced NFC payment methods like Apple Pay and Android Pay, the technology fails 10 to 20 percent of the time, according to Williams. All it takes is one or two failed attempts at using Apple Pay for a consumer to never try it again.
“I get really frustrated by technology failing,” Williams said. “We create these products and services on old technology. WiFi, Bluetooth — they’re old. I keep asking, ‘When is someone going to create something better to deliver the consumer experience that’s being marketed to me?’ That’s why we’re here.”
Sound combines the best elements from today’s payment methods to create tomorrow’s payment experience. It’s as encrypted as an EMV chip card, yet can be processed in under two seconds. It’s as localized as NFC — no broadcasts, no cloud component and everything happens on the mobile device — but works on any phone with a speaker.
Williams said that as a private company, LISNR uses a private decoding language unlike any system running on the internet, WiFi or hypertext transfer protocol (HTTP). Those use open languages any developer could open up and understand. While Williams concedes that everything is hackable, LISNR sure isn’t making it easy for the bad guys.
On top of that, said Williams, each transaction has built-in timing information so it can’t be recorded and played back. In addition, retailers can choose to mask the sound with their own custom chimes, making it even harder for hackers to pick transactions apart.
As if the cake needed icing, Williams reported the defect rate in LISNR’s seven to 10 active pilots has so far been under one half of 1 percent.
How We Got Here
When Williams founded LISNR, he didn’t set out to create the payment method of the future. He just thought sound could do more. What if people could use sound to unlock their homes or cars, or to get into their offices instead of using an access card?
“We didn’t know it could grow into this,” Williams said. “We just thought that sound could live in more places. We saw that sound was a better identifier, and we thought that was important.”
But that was five years ago. Since then, Williams said LISNR’s innovators, helmed by Andrew Singer, Ph.D., have opened up the ability to transmit text via sound — and that paved the way for transmitting credit card numbers.
In 2012, the data throughput was not yet sizeable enough to warrant significant use in the financial sector. Those limitations are now gone, and with that, greater data throughput comes greater security and encryption. Singer and the LISNR development team learned sound could transmit more data faster, and the shorter transaction was safer because it created less opportunity for criminals to intercept it.
“We always envisioned the world with a better connector,” said Williams, “so we built the best connector from day one. This will become the security protocol.”
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