CNBC Disruptor 50

Visa makes strategic investment in LISNR, a start-up that wants to rival technology used by Apple Pay

Key Points
  • Cincinnati-based start-up LISNR uses ultrasound technology for mobile authentication and payments.
  • Visa has made a strategic investment in the company.
  • LISNR retail partners are beta-testing the mobile payments technology, which is an alternative to the near field communication (NFC) approach used by tech giants like Apple Pay and Google Pay.
The mobile payments market is growing with smartphone makers Apple, Samsung and Google all offering contactless pay apps. Start-up LISNR just landed a deal with Visa for a rival payments technology that uses ultrasound.
Scyther5 | Getty Images

LISNR, a start-up that is using ultrasound technology as a mobile authentication and mobile payments solution, has received a strategic investment from Visa, and the financial services giant and LISNR will now begin to deploy the technology in merchant mobile wallets and with the everyday mobile transactions consumers are making.

The Cincinnati-based start-up announced on Tuesday that Visa took part in a recently closed Series C venture capital fundraising and is now working with LISNR on commercial beta-testing of its mobile payments technology with retail merchants. This investment comes at a time when large tech companies, like Apple with Apple Pay, are growing in the mobile payment market using near field communication technology (NFC).

Founded in 2012, LISNR uses inaudible ultrasound technology to transfer authentication and payment data through sound waves between devices.

"The way in which people are paying for things will dramatically change," said Rodney Williams, LISNR co-founder and chief commercial officer in an interview on Monday with CNBC. "This is a major validation and also a major market signal for the world of payments," he said of Visa, which he described as the "largest mobile wallet company in the world."

Visa did not respond to a request for comment by press time.

In late 2018, LISNR announced a deal with Equinox Payments, a payments technology company owned by Brookfield Asset Management, which was the first to test its ultrasound technology for payments through Equinox point-of-sales systems. Williams told CNBC that deal was focused on private-label cards, not "open loop payments," which link a credit or debit card directly to a device, a focus for consumer technology companies.

Rodney Williams, co-founder and chief commercial officer of LISNR
David Orrell | CNBC

Visa and LISNR do have a history together: The start-up was one of three young companies chosen by Visa back in 2015 to take part in a design challenge focused on future commerce and payments technology.

Williams previously has said Visa's Everywhere Initiative opened up the possibility of using sound to support payments and other financial services use cases. The company has worked with Visa to validate the concept in recent years, though the two never had a commercial relationship until now.

LISNR's plans for its payments growth include enabling merchants and payment providers to universally accept mobile payment data across scan-and-go retail, store pickups, pay zones, point-of-sale, home-based e-commerce, and even voice-enabled purchases.

"With this investment and commercial relationship, Visa further validates LISNR's push into retail as LISNR brings to market an improved mobile payment product across a wide range of use cases," the start-up said in a Tuesday release.

LISNR is also planning to work with Visa in additional payment use cases in mobility, transportation and ticketing.

LISNR vs. current Apple Pay tech and others

Williams said one advantage of the LISNR system is that it is safer and more secure than other contactless technology, like QR codes, which can be easily replicated. Additionally, it does not require expensive hardware like the near-field communication technology used by Apple's Apple Pay. Samsung Pay and Google Pay also use NFC technology.

"Our true advantage over NFC is that LISNR is all software and not restrictive to the OEM, as only the OEM provider can use NFC vs. any merchant having the ability to use LISNR in their mobile wallet," Williams said.

Arieh Levi, senior analyst at research and consulting firm CB Insights, said that while NFC technology is more secure than QR codes, it is much more expensive to implement.

"We will remove the open-the-app-and-scan (QR) or the tap (NFC) in a secure way that will speed up the transaction time and allow consumers to get in and get out faster than ever before," Williams said.

Mobile pay in the U.S. lags the rest of the world, and one reason is hardware cost. To use options like Apple Pay, Google Pay and Samsung Pay, merchants such as coffee shops and retail stores need the proper hardware. "It's acceptance, meaning the merchant has to sign up for it. It's expensive," Peter Gordon, CEO of PRMPayments, recently told CNBC.

U.S. mobile-phone payment transactions made at physical retail locations, typically using NFC technology, are expected to reach near-$100 billion in 2019, grow 31.8% to $130.36 billion next year, and by 2021 the total transaction value will reach $161.41 billion, according to a forecast from eMarketer. Apple Pay is expected to be the leading source of transactions.

Williams said merchant wallets are 62% of total mobile wallet transactions and the biggest players are actual merchants like Starbucks, Walmart, and Target. He said Apple Pay is a competitor to merchant mobile wallets.

Apple can do more with Apple Pay, says industry analyst
Apple can do more with Apple Pay, says industry analyst

In recent years audio has been adopted in a growing number of use cases to connect technology, from Google's Chromecast streaming connections to video game data transfers, and ticketing at events, an area in which LISNR has been a leader, working with Live Nation Entertainment's Ticketmaster.

LISNR's first big deal was with Ticketmaster for mobile authentication at events as a replacement for QR code-based scanning of mobile tickets, but more recently it has pivoted its business model to ramp up mobile payments.

Williams said payments and mobility authentication are the sole focus areas of LISNR today.

LISNR, which ranked No. 41 on the 2019 CNBC Disruptor 50 list, has partnerships with more than 100 other companies in various industries. Its existing investors include Intel, Jump Capital, Mercury Fund, R/GA and private-label credit card company Synchrony Financial.

Williams said payments is the biggest opportunity of all.

"Payments in general has a much bigger market opportunity for disruption than any other vertical. This announcement with Visa is the first of many commercial announcements of financial institutions and merchants moving forward," Williams said.

He declined to specify merchants currently in beta-testing through the new Visa commercial relationship.

Additional reporting by CNBC's Eric Rosenbaum

Correction: Rodney Williams is LISNR co-founder and chief commercial officer. Eric Allen is CEO.