Silicon Valley startup Naratte offers its own take on wireless mobile payments via smartphones that its founders say is available now, long before the much-hyped near field communications (NFC) technology will be.
Naratte has just introduced secure device-to-device communication that uses the audio signal between a smartphone’s microphone and speakers. With custom-made software that can be downloaded to a smartphone, the technology, called Zoosh, creates an inaudible signal that can be used to transmit data from smartphone to smartphone or from a smartphone to a point-of-sale (POS) terminal, like that found at most retail checkout stands.
The signal operates at a frequency that humans cannot hear, but that does not harm animals that might hear it (although your dog might pick up that you’re buying him Purina instead of Iams).
Besides the device-to-device app, Naratte has developed one device-to-POS app for payments and another for loyalty programs where customers can collect and then redeem loyalty points for purchases.
NFC has been building momentum of late as carriers, payment card issuers and other vendors have announced mobile payment solutions. Google recently introduced Google Wallet to use an Android-powered smartphone to make mobile payments. Other NFC initiatives are in development from such companies as Visa, American Express, AT&T Mobility and T-Mobile.
Naratte cites industry forecasts of the contactless payments market reaching $300 billion worth of transactions by 2014.
But widespread adoption of NFC is hampered by several hurdles that Naratte’s Zoosh avoids, said Byron Alsberg, co-founder and chief development officer of Naratte.
NFC requires devices to have unique chips built in to enable the generation of the NFC signal and it could take five years before there is enough of an installed base of NFC-enabled devices to make the service viable, Alsberg said.
Meanwhile, NFC adoption is also expected to be slow on the merchant side because it will be expensive for them to upgrade their equipment to accept mobile payments and loyalty accounts. “It will require a massive infrastructure investment by merchants” of from $250 to $800 per POS, he noted. If you multiply that by the number of POS terminals in each store and the number of stores in major chains like Macy’s or Target, the cost would be astronomical, he said, let alone the cost to an estimated 6 million “tier 2” merchants made up of one or a handful of outlets.
With Zoosh, which Naratte invented inhouse, the software provides the intelligence that, with NFC, a new processor is required to deliver. The infrastructure cost to merchants would be at most $30 per POS, in the form of a dongle plugged into the terminal to add the mic and speaker capabilities that terminals don’t otherwise have.
Zoosh secures the mobile payment process with software highly engineered to the capabilities of the device hardware, Alsberg added. Also, each transaction carries its own “perishable transaction ID” unique to each session. Even if someone manages to obtain that ID, they won’t be able to use it in a subsequent session.
Even though Naratte hasn’t identified technology partners for its Zoosh service, CEO and co-founder Brett Paulson said they include some of the same “name brand” companies that are supporting NFC technology. He believes those companies are hedging their bets on the promise of NFC by supporting Zoosh, which is available now.
“I see an opportunity for companies to bridge the gap to NFC. They know that NFC is not going to be on every device tomorrow,” Paulson said.
Although Zoosh is initially for device-to-device communication, device-to-POS payments and device-to-POS loyalty programs, Paulson and Alsberg are inviting application developers to invent other uses, which could include couponing, gift cards, file exchanges between devices, ticket redemption, exchange of music files, close proximity gaming and others.