How's this for a blast from the past? A speaker and internet connection are now all it takes to harness sound waves--the latest old-school technology that's promising to both eliminate costs for merchants and ensure secure mobile transactions.  

Soundpays, a mobile wallet powered by sound waves, enables you to make instant purchases on your mobile device while browsing in-store, shopping online, viewing an infomercial, or even listening to the radio. With sights set on mobile authentication, the founders hope the app can eventually replace your entire wallet, including your driver's license and insurance cards.

The innovative, patent-pending technology won the Toronto-based startup a best of show award at FinovateFall 2015, a two-day showcase of new innovations in financial and banking technology. 

The Shazam for mobile payment.

Soundpays co-founder Peter Misek first learned of sound-wave technology when he served as a venture partner and board adviser at London's DN Capital. The venture capital firm had made an undisclosed investment in Shazam, a London-based music-identification service. After two years of trial and error and the help of Jason Squire, creator of Canada's first 4G network, Misek launched what many outlets regard as the Shazam for mobile payments.

"The key ingredient was a lot of luck," Misek says.

The main challenge was creating a sound inaudible to human ears that could be picked up by the app in noisy environments. A breakthrough left the duo with a mobile wallet that works in any environment and on just about any mobile device, such as iPhones, Android phones, tablets, and non-smartphones. This includes cell phones with some internet capability but that can't download apps and traditional PCs. 

The result? Merchants can bypass expensive hardware and use Soundpays' free plug-in to complete mobile transactions. When prompted, the software assigns a basket of items a unique ultrasonic token that's then broadcast. The Soundpays app on a mobile device "listens" and picks up the frequency.

On PCs, laptops, and non-smartphones like the Motorola Razr and LG enV, the Soundpays website can perform the same function. The basket of items then appears on the app or your browser and can be purchased with one tap. The payment information and transactions details are matched in a secure cloud server. According to Squire, the system can process up to 59,000 transactions per second.

Overcoming security risks.

Though intrigued by the creative technology, Ben Knieff, a senior analyst at Aite Group's Retail Banking and Payment team, worries about the security of transmitting payment data via sound waves. "It's a new territory and prone to some vulnerabilities," he says.

With the potential risk in mind, Misek and Squire, who joined the company as co-founder and CTO, created multiple levels of security to keep hackers out. First and foremost, the system is unidirectional, meaning the only information ever broadcast is the basket of goods.

Payment information is also not stored on the mobile device. Users enter that information on a secure website and the cloud server uses IP addresses to match users, payment cards, and merchants. The network essentially self-destructs every 30 seconds and is reborn with new IP addresses. In other words, a hacker has only 30 seconds before a specific Soundpays IP address is no longer valid. 

Ending shopping cart abandonment.

Security aside, the most promising selling point of Soundpays is its true ubiquity. Merchants can create an ultrasonic token for a product they wish to sell and embed that audio file into any medium that features a speaker. Users can, for example, walk past a digital advertisement and purchase the featured product in a matter of seconds just by opening up the Soundpays app or website.

Unlike near-field communication technology, used by Apple Pay, which requires a physical terminal inside stores to share data, sound waves make mobile payments viable outside the store. "We think we can change how commerce is done," Misek says. "We think we can make it frictionless." The single click it takes to make a purchase helps reduce friction by eliminating online cart abandonment, a problem that plagues online retailers.

Research and information service Business Insider Intelligence estimates that approximately $4 trillion worth of merchandise will be abandoned in online shopping carts this year alone and about 63 percent of that can be recovered by savvy retailers. 

Knieff of Aite Group sees the most value in ubiquity across devices. "Ubiquity is very attractive, especially in markets like Southeast Asia and Sub-Saharan Africa, where a lot of folks are using feature phones and not smartphones," he says.

As for how Soundpays will fare in the United States market against formidable competitors such as Apple Pay and Android Pay, Misek and Squire remain bullish.

"The great part about technology is that you can disrupt the people who have a head start if your product is more compelling," says Misek, who expects his company's app to launch in the next few weeks.

Published on: Oct 22, 2015