January 17, 2023

Google is piloting its own ‘soundbox’ in India for merchants to get audio-based payment alerts

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Soundboxes — hardware used by merchants that emits sounds every time a mobile payment is made — have taken off in India, where point of sale activity can get busy and voice alerts from the soundbox help alert multitasking shopkeepers and assistants to a transaction going through. Now, to keep pushing ahead to build out its own payments business in the world’s second-largest internet market, Google is getting in on the act.

The internet giant, which is currently one of the mobile transaction leaders in India with Google Pay, is piloting a soundbox of its own in the country to alert sellers of confirmations for UPI payments — a mobile payment standard developed and now ubiquitous in India for instant payments and transfers between banks, or two mobile users, or a customer and a merchant. With UPI payments, providers typically do not take any cut on UPI transactions, so soundboxes have emerged not just as a convenience for merchants, but as a monetizing tool for payments providers, too.

The hardware features a built-in speaker that announces payment confirmations in different languages. Like its competitors’ soundboxes, Google’s device also includes a small LCD panel that shows the payment amount, battery and network status and manual controls. The soundbox is accompanied by a QR code of a merchant linked with their Google Pay for business account. Users can use any UPI-based app to make a payment by scanning the code. Typically, these soundboxes don’t support NFC payment as tap-and-pay is not a popular method for transactions in India. Plus, a lot of low-end smartphones don’t have integrated NFC hardware.

Google’s move into this piece of hardware is somewhat overdue.

The search giant has been slogging it out in India’s crowded payments landscape for some time now, and while a soundbox may sound novel to people outside of India, in the country it’s quickly become tablestakes in the mobile payments game. Google Pay competes directly with Paytm, Walmart-owned PhonePe and Tiger Global-backed BharatPe — all of which have already launched their own branded soundboxes with support for multiple languages.

That Google has had no presence on the soundbox front speaks (no pun intended) to how it has struggled to build fast enough to keep up with its rivals, and arguably to meet consumer demands in a timely way, too.

Roadside sellers, small merchants and hawkers have started using payment soundboxes to get audio confirmation of customer payments. And while the Google Pay for Business app already has an audio notification function, and Google also lets a business add an agent number so the agent can receive a confirmation on their phone; these features might not be helpful for a shop with multiple attendants and a loud environment, or where the cashier is not using a smartphone or tablet to facilitate transactions. In this scenario, a device that ‘announces’ payments loudly can be useful.

Soundboxes also serve other roles to promote more and faster transactions for merchants. They typically support different languages — critical for a multilingual country like India — offer multi-day battery life and a quick daily transaction summary.

A Google spokesperson declined to comment for this story, but when we asked Sharath Bulusu, the director of product management for Google Pay at Google, about the development at the sidelines of a Google India event in December, he did not deny the effort and replied that the company piloted ‘all sorts of things.’

‘If the person doesn’t have a smartphone, and they’re running a small business, the chances [are] that they will actually pay for a speaker product,’ he said. ‘You can look up publicly available prices that Paytm has been using… I think the chances are low. So, that is not the way to solve it,’ he said when asked whether Google targets the soundbox merchants who don’t have smartphones.

‘But do we want to solve for that user? Yes,’ he added.

Fintech startups take a low upfront fee and a monthly rental from merchants using their soundbox solutions. However, they also sometimes give the device away for free to many sellers to get them onboard. Paytm charges an average rental of $1.53 (125 Indian rupees) per month, while PhonePe charges $0.60 (49 Indian rupees) per month. The charges are relative to the merchant size and promotional schemes offered by agents.

According to data from the UPI-umbrella organization National Payments Corporation of India (NPCI), UPI transactions have seen significant growth, reaching 7.82 billion in December with a value of $157 billion. This represents a nearly 100% increase in transaction volume and a 55% increase in transaction value compared to December 2021. But despite this growth, companies facilitating UPI payments do not have a direct means of monetizing these transactions as they do not require merchants to pay a merchant discount rate or a small transaction fee.

Fintech companies have advocated for introducing transactional fees to change this model. Last week, the government announced spending $320 million to promote UPI transactions and its indigenous RuPay cards. However, the companies still have no direct avenue to generate revenues from UPI transactions.

As UPI has so far been a no-fee payments network, fintech players in this market offering compatible apps have to rely on other sources of revenue, such as lending and speaker rentals. In 2021, Google Pay started monetizing its service through user data, almost three and a half years after launching it in India.

Paytm was the first in the race to introduce soundboxes, which it did in 2020. That early mover status has been to its advantage so far: it is now a leader in the soundbox category, with the company claiming to have distributed more than 5.8 million devices to date. Earlier this month, the Indian payment company claimed it had distributed 1 million soundboxes each in its last two quarters.

Last September, Paytm said that its soundbox devices processed 5 billion transactions in FY 2022. A note from brokerage firm CSLA published last November noted that soundbox accounts for the company’s 38% net payment revenue.

Both Walmart-owned PhonePe and BharatPe launched their soundboxes last year. Last November, PhonePe said it deployed 1 million payment speakers across the country.

In addition to soundboxes, companies such as Google and Paytm provide businesses with QR code stickers and banners for easy UPI payments. However, there has been intense competition in the UPI market, as companies aim to reach the masses for small-ticket transactions, even without direct revenue generation. This is because the large user base can later be converted to customers for other products and services.

Per the National Payments Corporation of India, PhonePe and Google Pay command nearly 85% of the total UPI market in terms of transactions and own over 81% of the total UPI transaction volume. The government had planned to limit their market domination and provide other participants an opportunity to gain some share by setting a threshold of 30% of total UPI transactions per month. However, this rule was recently postponed until 2025.

Many merchants are eager to adopt the soundboxes once they understand their features, but some choose to return them once companies begin charging a rental fee. That points also to the issue of transparency and whether providers are being clear with customers over how fees are charged.

‘I do not want it once I understood that the device is charging me over a hundred rupees a month just for speaking out payment updates,’ said a chemist shop owner using a Paytm soundbox until last month.

Companies including PhonePe have begun taking cancellation fees in response to this behavior. Google’s model of how it will differentiate the game to retain merchants is yet to be revealed.

Reference: https://techcrunch.com/2023/01/17/google-pay-soundbox-india/

Ref: techcrunch

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