In India, the fintech landscape is buzzing with the melodious chime of soundboxes as small businesses increasingly embrace instant audio payment confirmations. In a recent development, two major players have entered the fray, offering new devices designed for "offline payments." Pine Labs has unveiled 'Mini,' a visual and audio confirmation payment device catering to merchants, allowing seamless contactless card payments and QR code scanning. Simultaneously, Paytm has introduced the 'Card Soundbox,' a versatile Point of Sale (PoS) terminal that accepts both card and QR code payments while providing audio confirmations.
Yogesh Sharma, a senior executive overseeing Growth and Strategy at Cashfree Payments, acknowledges Paytm's unique proposition in this market, suggesting that the company might secure a larger share in the PoS space, which Pine Labs has dominated for an extended period.
While Pine Labs, primarily known for its PoS terminals, is making its foray into soundboxes, Paytm had hinted at a similar all-in-one device earlier. The motive behind Paytm's new offering is to make card terminals accessible to smaller businesses while consolidating its services (soundbox, QR, card) into a single device. Paytm already boasts a strong presence in this space, having launched its soundbox device in 2019 to assist Kirana stores in verifying payment receipts using loud audio alerts and notifications.
Notably, other fintechs like Walmart-backed PhonePe, BharatPe, Mswipe, and MobiKwik continue to offer soundboxes and card machines separately, or they are planning to introduce new devices. Even banks like IndusInd and AU Small Finance Bank have ventured into producing their soundbox products.
Meanwhile, giants such as Amazon, Google, Reliance, and the State Bank of India (SBI) are currently in the pilot stage of their soundbox endeavors. BharatPe is also exploring the addition of sound and digital receipt features to its recently launched Bharat Swipe Android PoS device. One thing is evident: Fintechs are engaged in fierce competition to bundle services cost-effectively for smaller businesses.
Why are Soundboxes Appealing?
Soundboxes, which typically come with a monthly subscription fee, offer a cross-selling opportunity for fintech companies. They also represent an important revenue stream, especially when compared to UPI payments (via QR scan-and-pay), which generate zero Merchant Discount Rate (MDR). Paytm has managed to enhance its revenue margins through a shift towards high-margin soundboxes and lending. In FY23, the company's payment revenue surged by 44% to Rs 4,928 crore, driven by increased payment volumes and higher subscription revenue from device merchants. Over 13.72 billion online payment transactions were processed through Paytm's Soundbox devices. This subscription model enhances merchant loyalty, which, in turn, aids fintechs in cross-selling their products.
Moreover, Soundbox technology has facilitated Paytm's expansion in the lending sector. Enabling card tap-and-pay also generates revenue for fintechs through MDR, which can reach as high as 3%, depending on the network. Many fintechs are considering integrating loyalty programs or rewards points to encourage small-value card transactions via these machines.
Upsana Taku, Co-founder of the digital payment app MobiKwik, highlighted that soundboxes enable fintech companies to gain deeper insights into transaction patterns and business operations. This data can be leveraged to create more targeted and effective marketing campaigns and identify new cross-selling or upselling opportunities for other products and services.
Is There a Front Runner?
It might be premature to declare a clear winner in this competitive arena, but several factors determine the success of these devices and their penetration into the market segment. Pricing plays a pivotal role as fintechs target lower- and mid-sized merchants, specifically 25 million medium-sized SMEs and 15-17 million smaller ones, as noted by BofA Securities. While a standalone soundbox is often provided free of charge or with a minimal upfront cost, Pine Labs' Mini is priced at Rs 1,999, with a subscription fee based on payment volume. On the other hand, Paytm's Card Soundbox starts at Rs 999 with a monthly subscription fee and allows a maximum payment of Rs 5,000 per tap.
BofA Securities research found that Paytm dominates the soundbox market in Mumbai, with some competition from PhonePe due to better pricing. The study indicated that Paytm's device was well-received due to its higher quality, battery life, and overall positive payment reconciliation, despite a slightly higher monthly rental fee. In some cases, merchants switched from using Paytm Soundbox to PhonePe's Soundbox due to cost considerations. Paytm's early entry into the market may help it gain a larger market share and potentially attract 15 million new soundbox customers in the next 2-3 years.
Procuring Merchant Identification Numbers (MID) and swiftly installing soundboxes and PoS devices pose significant challenges for fintechs, including Paytm, PhonePe, Pine Labs, and BharatPe. However, these players benefit from their comprehensive ecosystem, encompassing both offline and online payments, devices, and soundboxes. This presence may ultimately benefit merchants and customers by offering competitive pricing. In the words of a digital payments leader at a fintech firm, "Soundbox distribution to merchants requires local reach and manpower. Whoever holds the advantage in this will emerge victorious."
