One of Japan’s biggest credit card issuers is funding this music startup’s pivot to payments


Since its launch in 2011, Tokyo-based startup Beatrobo has evolved from an online service for sharing and discovering music to a hardware maker with hopes of replacing the CD. Founder and CEO Hiroshi Asaeda (above left) unveiled PlugAir last April, a customizable dongle that, when inserted into a smartphone’s audio jack, instantly downloads songs, music videos, and other relevant content from the cloud to your device.

Asaeda today announced Beatrobo will utilize PlugAir tech to enter the payments space. The pivot is being facilitated by Credit Saison, Japan’s third-largest credit card issuer, which also confirmed it will lead Beatrobo’s series B financing round. The firm declined to specify exactly how much it is contributing, but Asaeda says the round is expected to close in November to the tune of US$2.4 million.

“It’s actually not a pivot – we’re stepping up to a new level,” Asaeda tells Tech in Asia. “We realized PlugAir wasn’t just for music. It can be a physical key for anything in the smartphone age, replacing your IDs and passwords.”

Asaeda and Yoshiaki Miura (above right), Saison Ventures CEO, envision a future where a scaled-down PlugAir – perhaps hanging from a keychain or worn on a necklace – is inserted into your mobile device’s headphone jack to instantly authenticate and process ecommerce payments.

“Digital payments will change in the future,” Miura says. “Right now we have the plastic card with a 16-digit number. We know that’s going to change, but we’re not sure how. We want to get involved in these kinds of alternative [payment] opportunities, [like] PlugAir.”

Safer than plastic

Asaeda claims PlugAir is more secure than standard pin codes, passwords, and even credit cards. Its secret weapon? Inaudible sound waves.

“Four-digit pin codes and eight-character passwords are easily reused across multiple services, but if one is hacked all of the others are also going to be in danger,” Asaeda explains. “PlugAir generates a 256-digit, one-time passcode for each transaction, and sends it directly to your device via sound waves.”

A PlugAir for payments prototype.

A PlugAir for payments prototype.

PlugAir’s non-reliance on a Bluetooth or a wifi connection ensures its viability in places with slow or outdated mobile internet infrastructure, making it internationally scalable.

After its first insertion, the PlugAir dongle becomes locked to that device, further boosting security. Unlike a stolen credit card, a lost or stolen PlugAir would be rendered useless without the device it’s tethered to.

“PlugAir is a token – it doesn’t contain any actual information – with a serial number that’s locked to a specific device,” Asaeda says. “If stolen, it simply can’t be used. If you want to unlock it for use on a different device, you’d have to do so through your credit card company.”

Convenience and comfort

Credit Saison is looking for disruptors in the payments space both at home and abroad. The firm previously invested in Coin, a San Francisco-based all-in-one physical card startup; and Coiney, a Tokyo-based startup that makes mobile payment processing hardware.

Miura hopes eliminating the tedious process of inputting personal information for each ecommerce site will encourage PlugAir users to transact on sites other than Amazon or Rakuten.

“People don’t want to put their credit card number somewhere they don’t know,” he says. “We’ve found that many people return to the same ecommerce sites because they don’t feel like adding all of their information on another site.”

In addition to convenience, Miura thinks a solution like PlugAir will make users more comfortable making purchases on the go.

“Most people won’t take out their credit card and type in their credit card number in public,” he adds. “But if you have this on your keychain, you can just pop it out on the train and buy something on your way to work.”

Per-insert monetization

Asaeda’s monetization strategy might not be what you expect. Instead of charging the merchant a percentage of each sale, he’s more interested in earning a fee per insert “like how Google Maps monetizes its API.”

He also hopes the dongle will be used for more than just ecommerce payments: social media logins, online banking – “anything that requires an ID and a password,” Asaeda says.

The original PlugAir was much larger than the current iteration.

The original PlugAir was much larger than the current iteration.

He’s also not interested in charging for the device itself, but hopes the fee-per-insert model will cover the cost.

While the standard audio jack doesn’t seem to be going anywhere anytime soon – even the bare-bones new MacBooks retained it – PlugAir could be rendered obsolete if the status quo changes or vanishes altogether.

“Our R&D team is already working on alternatives without the audio jack, using NFC and Bluetooth,” Asaeda adds.

Beatrobo previously raised US$1.1 million in series A funding from Lawson last April and US$600,000 in seed funding from CyberAgent Ventures, KLab Ventures, and Movida Japan in April 2012.

This post One of Japan’s biggest credit card issuers is funding this music startup’s pivot to payments appeared first on Tech in Asia.