The onset of the coronavirus brought concerns about the risks posed by traditional payment methods, especially those that required contact. As a result, people started looking for contactless, seamless, and secure payment options.
This could explain why, according to Statista, 18.8% of those surveyed strongly agreed and 27.95% agreed that QR payment usage had increased.
The use of QR codes for payment may still be in its onset stages in some countries now, but there are several reasons why more merchants will adopt QR more in the near future.
In this article, you will learn about what QR codes are, how they work, some use cases, and benefits for both the consumers and the merchants.
Table of Contents
The first thing you need to understand about QR (Quick Response) codes is that they are 2-dimensional codes comprising black squares and bars on a white background. When you scan a QR code, a scanner decodes the information in it, which is then used for payments.
It is important to understand the difference between static and dynamic QR codes.
There are two different payment modes:
The QR process here applies to the merchant-presented mode and can be visually seen in the diagram below.
The process is as follows:
The merchant (vendor) creates a QR code which the user can scan for mobile payment. The app makes a transaction request to the card issuer.
The payment results are transmitted to both the consumer (from their card issuer) and the merchant (from their payment network). The merchant and the vendor can now see the complete transaction results displayed to them.
There are many advantages of using QR code payment for your business. They include:
While QR codes as a form of payment are just gaining traction in the US, UK, and Latin America, China has been using them for years successfully.
In fact, according to CNN Business, in 2016, approximately a third of all payments in China were made using QR codes.
It is fair to say that in this country QR payments have displaced cash as the preferred method of payment. This is true at all levels of business, from street vendors to high-end stores, completely overtaking the use of credit and debit cards.
Therefore, China is rightfully considered ground zero for the QR code renaissance as there is no other country with as much widespread use of QR payments.
According to the Mobile Money Programme, in 2018 alone, China’s business and consumer mobile payment volumes reached USD 41 trillion.
Approximately 30 percent ($13 trillion) of that amount were QR code payments, mainly through the two main QR code schemes in China – Alipay (founded in 2004) and WeChat Pay (founded in 2011).
However, the rapid rise of QR code payments in China did not immediately translate into use in other markets. Initially, QR codes were indeed frequently considered a low-tech, high-risk solution not worthy of copying. But, the past few years have seen a considerable shift in perception.
In 2016, one of the first significant changes came with Visa launching a mobile payments application in Kenya, effectively challenging the incumbent M-PESA.
By partnering with four leading banks, they launched mVisa, enabling consumers to scan a merchant’s QR code to make a payment. Visa expanded the service, making it live in Rwanda, India, and Kenya, then later in Egypt, Indonesia, Kazakhstan, Nigeria, Ghana, and Vietnam.
MasterCard quickly joined the race by rolling out Masterpass in Tanzania, Rwanda, Ghana, Nigeria, and Uganda.
Other nations, like India, Sweden, Denmark, and South Korea, have increasing mobile payment adoption rates, followed by the US, Norway, Canada, and Japan not far behind. China’s visitors to Japan helped influence them to adopt and use QR codes for payments, and now they rank third in adoption rates.
In Europe’s QR payment adoption efforts, they are setting up collaborations between their mobile wallets and China’s Alipay. In Singapore, there are specifications for e-payments that assist merchants in getting QR codes through a central infrastructure.
Between 2020 and 2025, worldwide mobile payments adoption is projected to grow by about 27 percent.
Analysts also predict that consumer digital payments will go over $4.4 trillion in 2020, considering the effects of the COVID-19 pandemic on this industry.
About 75 percent of this is accounted for by the top five countries in QR adoption rates, as shown in the representation below. All African countries contribute just about 1.8 percent of the total.
So what industries do use QR codes? Here are some examples:
What are the examples of business applications of QR codes?
Let’s say you have a merchant that sells groceries. They have a payment processing system that allows users to pay with a QR code and can also scan QR codes generated by the user.
The user will therefore buy their groceries directly depending on their preferred mode.
QR code merchant payments are becoming more and more popular. In this section let’s look at some of the main trends in QR code merchant payments focusing on their key implications and impacts.
For this service to function effectively, you need internet connection. Some countries willing to implement this QR technology cannot do so due to this requirement. However, there is a notable effort towards improving coverage in such areas
In the past, the governments and regulators did not care about the merchant payment sector that much. However, times are changing. Now governments of many countries, especially the developed ones, want to reduce the use of cash to mitigate the circulation of counterfeit notes.
The other crucial objective is improving financial literacy and inclusion, fueling efforts to increase the banked population.
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To make digital payments more preferable, regulators aim to reduce non-cash merchant payment costs. The governments know that the increased money traceability more tax revenues for the country.
QR code payments are not possible without a smartphone. The popularity of QR is growing in tandem with smartphone penetration. This is why QR code technology is very widespread in the Asian markets, particularly in China.
The smartphone penetration is still slowly growing in Africa, with the feature phone still more popular due to its relative affordability.
To mitigate this challenge, regions with low smartphone penetration need to have access to affordable devices that allow them to use QR codes for payments.
The fast rise of QR codes for payments has many implications for banks and card schemes, just like other industry players.
Organizations should conclude how to play and come up with new methodologies rapidly to remain in the game. Shifting towards interoperability is one impact.
Though Alipay and Tenpay in China utilized exclusive QR codes, just as the primary variants of mVisa, utilization of interoperable QR code payments is developing.
These interoperable arrangements carry colossal productivity to traders and better adaptability for banks.
Card schemes, for example, Alipay and WeChat Pay that have exclusive QR code payment services, should decide whether to move towards full interoperability to offer a consistent installment experience worldwide or keep on attempting to protect their turf by offering restrictive arrangements.
Another critical effect of QR codes could be their impact on near-field communication (NFC) payments. While Apple Pay and Samsung Pay, just as other “Pay” arrangements have taken off with an incredible following, genuine utilization of NFC contactless services has regularly been low.
Besides, traders, for the most part, need to introduce a contactless card reader or update their POS terminal to acknowledge NFC payments.
Industry players may have to reevaluate their payments technique considering the new QR code choices. However, handset makers may have to consider how to manage NFC if QR code utilization starts to extend quicker.
All the more extensively, QR codes could massively affect monetary consideration and bank liability products. One of the troubles for merchants in distant regions has been utilizing digital cash, regardless of whether they have a plastic card or a telephone.
POS terminals were too costly to install in adequate numbers to make card or even mobile payments suitable.
Presently, QR codes give dealers a modest and straightforward approach to acknowledge digital payments.
When QR code installment acknowledgment becomes more comprehensively accessible, it will be simpler for shoppers to utilize the cash they store on their smartphones.
Whatever occurs, QR codes have opened up a considerable number of choices for additional payments more rapidly than many individuals expected.
Therefore, just as other payments industry players, banks should audit their procedures quickly to exploit this fast-rising payments initiative.
If you want to add a QR payment option to your store, you can hire remote developers to help you implement your payment project ideas. Here are examples of what they could do for you;
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The benefits derived from using QR codes coupled with the ongoing movement towards secure cashless modes of payment suggest that QR code payments will become even more popular in the future.
According to Juniper Research, the number of QR code users is expected to grow to 2.2 billion in 2025. The US is expected to see a 240% increase in users from 2020 to 2025, which could be partly spurred on by introducing of QR code payment in Paypal.
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