Fintech companies go offline to coin cash in rural areas

Sunil Jha, a small-time vegetable vendor in Bihar’s Bhabua district, was more than surprised after he made his first electronic payment using a feature phone and that too without an internet connection. Hundreds of other shopkeepers and consumers in the entire district made similar payments and carried out banking transactions successfully with the help of technology provided by Bengaluru-based fintech start-up ToneTag that allows transfer of money from one person to another over phone using encryption technology over airwaves.

Several such fintech start-ups are enabling offline payment solutions in rural areas where internet connection is still patchy, and with the the country facing severe cash crunch following the demonetisation drive.

According to start-up research firm Tracxn, over a two dozen well-funded start-ups — such as PaySe, PayLo, Novopay, Ikaz and IndePay — have come up in the last two years and are working solely on technology that works without internet. All these companies have cumulatively raised over $2 billion in venture and private-equity funds.

ToneTag, which has got investments from Reliance and former Infosys CFO TV Mohandas Pai, among others, has been piloting in Bhabua for the past seven months before going live pan-India. The firm has created an open architecture, wherein customers have to dial a toll-free number and register their bank account number, VISA or MasterCard. They can then make payments by just placing the phone close to a device (a phone or PoS) that would accept the amount. The company has filed for a patent for its technology.

ToneTag founder and CEO Kumar Abhishek told BusinessLine: “We have been approached by different banks and NITI Aayog to demonstrate the feature in several parts of the country.”

PaySe is another such start-up that works on technology build on the concept of cryptocurrency or a physical card to deliver offline peer-to-peer payment solutions. Ashutosh Pande, founder, Payse, said: “A large population of the country is comfortable paying by cash as it is easy. So we wanted to create a solution that will not change the behaviour of the people, but make it more convenient.”

The company has a product called ‘Purse’, which acts as a physical wallet with a personal identification number. The wallet, which looks like a small calculator and is the size of a debit card, can hold up to ₹1 lakh with full KYC. But this initially needs some online connectivity, as users will have to move money from their connected bank accounts to the device through internet banking. After that, they will be able to make payments offline through near-field communication technology or Bluetooth.

“We are also looking to tie up with telecom players, payment banks, banking correspondents and DTH operators with last-mile operations for the distribution of this device across the country,” Pande said.

Amit Sachdev, co-founder of payments solutions provider CoinTribe, said that while fintech companies have products to significantly improve the offline efficiency, their efforts are constrained by the challenges in tech adoption by rural masses. “Partnerships with business correspondents and regional rural banks with right incentive structures will go a long way in solving the adoption problem,” he added.

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