QR Codes: will COVID-19 be the great global equaliser?
Digital payments are growing the world over. In the UK in particular, we have seen a shift away from traditional payment methods such as cash. This has been accelerated by restrictions to visiting physical stores due to COVID-19 and consumers’ concerns around virus transmission from coins and notes. As a result, new digital payment methods are increasing in popularity, and the trend shows no signs of slowing.
The change that can be most clearly linked to COVID-19 in the UK is the growth in use of Quick Response (QR) codes. QR codes are decoded by smartphones and converted into characters that represent different commands, meaning smartphones can open browser links displaying information or confirming payments. They provide a digital infrastructure that small and medium sized businesses can use to provide completely touchless payment solutions and, unlike card payments, can be set up quickly and easily without needing dedicated hardware like chip and PIN machines.
Once set up, consumers simply scan the QR code and pay on their mobile device, which enables a more efficient customer experience. This is especially important in socially distanced environments where a seamless payment experience is still expected by consumers.
While QR codes are only just seeing mainstream attention within Europe, after a lacklustre launch several years ago, in Asian markets they have been a mainstay for some time.
Decoding Asia’s payment landscape
Across China QR codes are already ubiquitous, and the pandemic only accelerated user adoption. China saw offline scan-to-pay transactions grow 15-fold over the past three years, reaching CNH 9.6 trillion (£1.9 trillion) in total value in the fourth quarter of 2019 (SCMP, 2020). During the first months of 2020, WeChat saw its QR code economy increase by 26% in value from 2019, despite the economy contracting over the same period *(WeChat Report 2020).
QR codes were initially deployed in China out of a need to develop non-cash payment solutions in a market environment where access to card readers was scant and expensive. Solutions have grown significantly since then, with Chinese digital payment giants Alipay and Tencent (owner of WeChat Pay) leading the roll out with their proprietary solutions, creating mass market adoption. Today, players in China are now working on QR code standardisation and interoperability, to create a more open infrastructure for QR based payments.
Two other countries to promote standardisation are India and Japan. India’s National Payments Corporation developed two QR code standards with the intention of replacing private QR codes (Bloomberg, 2020). These government and regulator approved codes are the Unified Payments Interface (UPI) and Bharat QRs. UPI QR codes enable payments from a range of banking and third-party providers (TPPs) in addition to cards; Bharat QR codes are exclusively for use with banking applications. As a result, the country saw a huge increase in customer adoption across sectors. In 2018, Japan rolled out a similar initiative to promote mobile payments (and QR codes) for merchants and consumers. There have been 20 QR code based mobile-payment apps released in Japan since.
QR codes in the UK
QR codes have been around for over a decade but didn’t initially take off in the UK, largely due to accessibility. When they first emerged, slower internet speeds and the hassle of needing to install a separate app onto a smartphone meant that using QR codes seemed too long winded for many consumers. Plus, in the UK, infrastructure for card payments was already widely available, reducing the need for alternatives.
Then, major smartphone companies bought into the idea of making QR codes more accessible for their users. In 2017, software updates on iPhone and many Android devices allowed widespread smartphones to access QR codes through their embedded camera apps. Now, 91% of active iOS users have access to in-built QR code scanners, eliminating the need for a separate app, and by 2022, 1 billion smartphones will have access to QR codes globally (Juniper Research, 2019). Despite this, though, QR codes still did not become a common payment method in the UK.
As consumer behaviours have changed due to COVID-19, and preferences have moved towards contactless options, QR codes have become a much more viable digital payment option. Recent research concluded that customers across the UK and Europe are relying more on QR codes, with 80% of smartphone users saying they had scanned a QR code at least once (in their lifetime) and 40% adding that they scanned one in the last seven days (MobileIron, 2020). Although at first look this could be solely attributed to Track and Trace, respondents cited bars, cafes and restaurants as places where they used a QR code as a payment method specifically. Over half of all respondents also said they expected to use QR codes for payments in the near future.
QR code usage will be at an estimated 10.1 million in Europe by the end of 2020 (Beaconstac, 2020). It’s only a matter of time before the benefits of their payment functions are fully recognised by consumers.
Benefits for consumers
As QR codes become more common across the UK, consumers and merchants alike will benefit from numerous advantages.
First, their completely touchless nature enables merchants to continue operating in socially distanced environments. This is especially important for brick-and-mortar SMEs that have been hit hardest by this testing economic environment.
Another advantage of QR codes is the flexibility they bring to power and enable other payment options, rather than only supporting card payments. In particular, this has created a catalyst for the growth of open banking-based payment solutions.
With open banking, customers simply scan the QR code, select their bank, and then authenticate the payment in their mobile banking app, pushing the payment to the merchant. From a consumer perspective, no card or account details are disclosed – vastly reducing the risk of fraud. This means that payments are efficient, safe and automatically Strong Customer Authentication (SCA) and Payment Card Industry Data Security Standard (PCI DSS) compliant.
Funds are then transferred to the merchant in real-time, so payments are received immediately, providing significant cash flow benefit for merchants to help at this time of need.
A superior payment experience
QR codes enable consumers to make payments securely and safely as well as experience the benefits of Open Banking. Just this year the OBIE announced that over two million UK customers are now using open banking-enabled products, and users and payments continue to accelerate rapidly.
COVID-19 could prove to be the great global equaliser for QR codes – providing the catalyst for widespread adoption across the UK and Europe.