Soundboxes — hardware used by merchants that emit sounds every time a mobile payment is made — have become popular in India, where point-of-sale activity can be busy, and soundbox voice alerts help alert multitasking shopkeepers and assistants to a transaction in progress. Now, to continue building out its own payments business in the world’s second-largest Internet market, Google is getting into the act.
The internet giant, currently one of the leaders in mobile transactions in India with Google Pay, is piloting a proprietary soundbox in the country to notify merchants of confirmations for UPI payments – a mobile payment standard that has evolved and is 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 don’t take a discount on UPI transactions, so soundboxes have emerged not only as a convenience for merchants, but also as a monetization tool for payment providers.
Sources tell us that Google has started distributing its white-label speakers – under Google Pay’s Soundpod brand name – in a few markets in northern India, including New Delhi, initially in partnership with a limited group of retailers. Google’s soundboxes come with a QR code on the front – tied to the business owner’s bank-registered phone number – that can be used to make any UPI-based payment. These Soundpods are built by Amazon-backed ToneTagTechCrunch has learned.
The hardware features a built-in speaker that announces payment confirmations in several languages. Like its competitors’ soundboxes, Google’s device also includes a small LCD panel that displays payment amount, battery and network status, and manual controls. The soundbox is accompanied by a merchant’s QR code linked to their Google Pay for Business account. Users can use any UPI based app to make a payment by scanning the code. Typically, these soundboxes do not support NFC payments, as tap-and-pay is not a popular method of transaction in India. In addition, many low-end smartphones do not have integrated NFC hardware.
People familiar with the matter told TechCrunch that Google is distributing the speakers to select retailers at no additional cost. In some cases, Google Pay merchant representatives have allowed several days to receive and set up the speakers at their registered location.
Google’s move to this piece of hardware is somewhat late.
The search giant has been dabbling in India’s overcrowded payments landscape for some time now, and while a soundbox may sound new to those outside India, in the country it has quickly become tabletakes in the mobile payments game. Google Pay competes directly with paym, Walmart-owned PhonePe and Tiger Global backed BharatPe – all of whom have already launched their own branded soundboxes with support for multiple languages.
Google’s lack of a presence on the soundbox front speaks (no pun intended) of how it struggled to build fast enough to keep up with its rivals, and arguably also meet consumer demands in a timely manner.
Roadside vendors, small traders and peddlers have started using payment soundboxes to get audio confirmations of customer payments. And while the Google Pay for Business app already has an audio notification feature, and Google also lets a business add an agent number so the agent can receive a confirmation on their phone; these features may not be useful for a store with multiple employees and a noisy environment, or where the cashier is not using a smartphone or tablet to facilitate transactions. In this scenario, a device that loudly “announces” payments can be useful.
Soundboxes also serve other roles to promote more and faster transactions for merchants. They usually support several languages - critically important for a multilingual country like India – offer several days of battery life and a fast daily transaction overview.
A Google spokesperson declined to comment on this story, but when we asked Sharath Bulusu, the director of product management for Google Pay at Google, about developing on the sidelines of a Google India event in December, he didn’t deny the effort and replied that the company has controlled “all sorts of things”.
“If the person doesn’t have a smartphone and runs a small business, chances are [are] that they will actually pay for a speaker product,” he said. “You can look up publicly available prices that Paytm used… I think the chances are slim. So that’s not the way to solve it,” he said when asked if Google is targeting the soundbox vendors who don’t have smartphones.
“But do we want to solve for that user? Yes,’ he added.
Fintech startups charge a low upfront payment and monthly rental from vendors using their soundbox solutions. However, they also sometimes give the device away for free to many sellers to get them on board. Paytm charges an average rent of $1.53 (125 Indian rupees) per month, while PhonePe charges $0.60 (49 Indian rupees) per month. The cost is related to the size of the merchant and promotional programs offered by agents.
According to data from the UPI umbrella organization National Payments Corporation of India (NPCI), UPI transactions have experienced significant growth, reaching 7.82 billion in December with a value of $157 billion. This represents an almost 100% increase in transaction volume and a 55% increase in transaction value compared to December 2021. But despite this growth, companies facilitating UPI payments have no direct way to monetize these transactions as they not require sellers to pay a merchant discount rate or a small transaction fee.
Fintech companies have advocated the introduction of transaction costs to change this model. Last week, the government announced it would spend $320 million to promote UPI transactions and the native RuPay cards. However, the companies still have no direct opportunity to generate revenue from UPI transactions.
Since UPI has so far been a free payment network, fintech players in this market that offer compatible apps depend on other sources of income, such as loans and speaker rentals. In 2021, Google Pay started monetizing its service through user data, almost three and a half years after its launch in India.
Paytm was the first in the race to introduce soundboxes, which it did in 2020. That early mover status has worked to its advantage so far: it’s now a leader in the soundbox category, with the company claiming more than 5.8 million devices distributed going out. Earlier this month, the Indian payments company claimed it had distributed 1 million soundboxes each in the past two quarters.
Last September, Paytm said its soundbox devices processed 5 billion transactions in FY 2022. A note from brokerage firm CSLA published last November mentioned that soundbox accounts for the company’s 38% net payment income.
Both PhonePe and Walmart-owned BharatPe launched their soundboxes last year. Last November, PhonePe said it was deployed 1 million payment speakers through the whole country.
In addition to soundboxes, companies like Google and Paytm provide businesses with QR code stickers and banners for easy UPI payments. However, there is fierce competition in the UPI market as companies strive to reach the masses for small ticket transactions even without generating direct revenue. This is because the large user base can later be converted into customers for other products and services.
According to the National Payments Corporation of India, PhonePe and Google Pay assignment almost 85% of the total UPI market in terms of transactions and owns more than 81% of the total UPI transaction volume. The government intended to limit their market dominance and allow other participants to gain some share by setting a threshold of 30% of total UPI transactions per month. However, this rule has recently been postponed to 2025.
Many sellers are eager to adopt the soundboxes once they understand their functions, but some choose to return them once companies start charging a rental fee. That also points to the issue of transparency and whether providers are clear to customers about how fees are charged.
“I don’t want it anymore once I understand that the device is charging me over a hundred rupees a month just for speaking out payment updates,” said a drugstore owner who used a Paytm soundbox until last month.
Companies including PhonePe have started charging cancellation fees in response to this behavior. Google’s model of how it will differentiate the game to retain merchants has yet to be revealed.