The pandemic has supposed a point of inflection for QR (Quick Response) codes, with numbers that are exponentially growing year after year, now with daily use in restaurant menus, NHS app for covid, and payments.
ACI Worldwide explains how QR codes have quickly replaced barcodes due to their capacity to store more information.
The payments industry is now seeing all the benefits of QR codes, both for users, with seamless, fast, secure, and contactless experience, and for merchants, with a wide variety of benefits like lowering acceptance cost versus POS (Point of Sale) terminals, cheaper infrastructure (vital importance for small merchants), efficient roll-out, interoperable, and standardized. All these reasons justify the sharp growth of QR code payments in developing markets, Asia, and Pacific. Although cards are a popular payment method, the onset of the pandemic has led to the revival of QR codes in countries like the United States, which is heavily card dominated.
In each region, QR codes’ adoption has been motivated by varied factors, in China, QR codes popularity grew due to the expensiveness of card readers, whereas in Europe the pandemic and the necessity for contactless payments have driven the use of QR code payments.
In some markets, there are an excessive number of different mobile wallet brands which can be daunting for consumers. For this reason, countries like Malaysia and Singapore have decided to introduce a unified QR code system so that merchants display a single QR code at checkout, rather than having a wide variety of QR codes from all wallet providers, leading to interoperability and a seamless experience for the end user. As an effort to promote QR code payments and facilitate interoperability, we see Central Banks around the world launching their own QR standards.
In Europe, the situation is slightly different, since QR codes are not used as a payment method as such, but as the vehicle into which the payment can occur via Apple/Google pay or card. This behaviour predicts that QR codes are not going to replace but coexist with cards. Despite the sharp increase in the cashless customers’ demand, it seems that QR codes are going to continue to grow but without becoming as ubiquitous as in Asia. Some countries like the Netherlands are setting an example for the rest of European countries on how QR code payments is a highly engaging and preferable channel for consumers.
In Latin America, the Brazilian government has taken the lead and is hoping to decrease the country’s dependency on cash with the introduction of PIX. PIX is now depending on QR codes to pay for goods and services, bills, and any government services. In contrast, cash economies, like Mexico, have a problem with merchants having difficulties on reporting income to tax authorities and are looking at this technology as means of financial inclusion in order to increase the banked population. In 2020, Cobro Digital (CODi) was launched as an overlay on top of the existing real-time payment rails to facilitate new digital modes like QR and bar codes, and NFC based payments.
In the United States, as mentioned by the Payments Journal – “Now QR codes are becoming more popular in the U.S. Mercator’s data show that while only 13% of consumers used QR codes on their smartphones prior to the pandemic, an additional 11% have used the technology since.” After the pandemic, QR codes have experimented a revival, with players like Venmo and PayPal who are offering QR code-based payments on their platforms.
Endless QR code use cases
On top of QR code payments, merchants and banks can be as much imaginative as they can to build new use cases that could help them differentiate, some examples are: QR code on bills, on PoS (Point-of-Sale), vending machines, at the check-out of e-commerce / m-commerce and at small offline stores. What most banks are developing is the integration between the QR-based payment system and the users’ payment wallet or the banking app all with the scan of a code. With this method, the users can be sure that none of their bank information was disclosed to the merchant, while the merchant can connect other services like loyalty points, membership discounts or cash registers to the systems.
A brief look at the future of QR payments
The future of QR code payments highly depends on each market’s conditions, it is expected that Western markets will continue to embrace NFC (Near Field Communication) payments and QR codes are going to steal just a small portion of the digital payments, while markets across Asia, the Middle East and Africa are likely to focus on QR payments due to its aforementioned benefits: ubiquitous, simple, cost-efficient, and operationally cheap. Moreover, these QR payments can have a front-end layer where merchants can build creative use cases to improve customers’ experience, which in fact is the main goal of using QR codes for payments.
QR codes will surely continue to be used after the touch-free period we are embracing now and will continue to evolve playing a key role in the payment industry’s future. Not only will suppose great benefits for consumers, with a more digital and frictionless experience, but also for merchants and businesses, with a highly engagement channel, cost-effective payment system and the possibility to increase customer loyalty with rewards and promotions.
Make sure you join Somya Patnaik, ACI’s Principal Product Manager for Real-Time and Digital Payments, next Tuesday 18th October at the Women in Payments ASEAN Conference, discussing how the payments need to be at the Center of the Customer Experience.
Learn more about ACI’s solutions and how to meet ongoing customer demands for emerging and new payment types, such as QR codes, across consumer, merchant and corporate payments.