Biz Tips: Can QR Codes Make a Comeback as a Payments Technology?

Biz Tips: Can QR Codes Make a Comeback as a Payments Technology?

Biz Tip:

Can QR Codes Make a Comeback as a Payments Technology?

Technological advances lead to further, contingent advancements. Sometimes those new technologies stick around for decades, while others fade away within their first decade of mainstream use.

The Personal Digital Assistant and the beeper, for example, were both weigh stations on the path toward smartphone adoption. Speaking of which: remember back in the early days of smartphone adoption, when it seemed like the QR code—those blocky, pixelated barcode things—could be the medium of the future for data management and transfer?

It didn’t take long before QR codes transitioned from the technology of tomorrow into a joke. We all assumed the QR code was just another PDA or beeper. We tried it, it didn’t work, and now we’re moving on to more advanced technologies. With tools like mobile wallets available, which are powered by near-field communication (NFC) technology, who needs QR codes?

QR codes might have faded from the public space, but they’re still alive and well in the payments industry. You just need to know where to look.

QR Code Payments & Chinese Consumers

Credit and debit card payments are the norm in the US and Canada. Consumers here remain skeptical of alternate payment methods like mobile wallets; for example, only-third of iPhone users in the US have tried using Apple Pay, the device’s mobile payments platform. But, that’s not the case in most of the world.

Alternate payment methods like bank transfers or hybrid brick-and-mortar/eCommerce payments are popular in other markets for both online and brick-and-mortar transactions. If we’re talking about major markets outside the US, though, none exert as much pull as China. Now the world’s largest market by purchasing power, China stands to wield significant influence over global payments. If we look at that market, we see mobile options are surprisingly dominant.

As of 2017, Chinese processors registered about $15.4 trillion in mobile payments within the country, dwarfing every other market on Earth. But, rather than NFC-based tools like Apple Pay, Chinese consumers prefer to use QR code technologies. That’s right: most of that $15.4 trillion in activity occurred via QR-based tools like WeChat Pay.

So, why do Chinese buyers gravitate toward QR codes as a payment method?

It’s generally a combination of ease of access on the consumer end, but adaptability and affordability for merchants. Rather than making the up-front investment in card terminals and other technologies to accept payments, merchants can simply print their QR code on a sign. Customers then scan the code with their phones and pay in seconds. It’s fast, easy, affordable, and widely accessible in a country with 788 million mobile users.

Can QR Codes Catch on Outside China?

The question many would ask is whether the affinity for QR codes will impact markets outside China’s borders. The truth is, of course, that they already have.

With an influx of Chinese tourists in recent years, more and more Japanese businesses are looking to court buyers by accepting Chinese consumers’ preferred payment methods. Thanks to a deal between WeChat and Japanese tech firm Line, Chinese travelers can purchase goods in Japanese shops using QR codes.

It’s not only limited to locales in which Chinese tourists make up a major consumer cohort, though. Here in the US, for example, QR codes are widely employed by brands to make payments in their proprietary apps.

Typically, there is some incentive used to entice customers over to try the app, like incorporating a loyalty program. Users tend to stick around, though, for a variety of reasons including convenience, ease of use, and special promotions. For example, Dunkin’ Mobile®—an app I happen to use every day, personally—allows users to pay in-store using a reloadable gift card balance. You can order before you arrive, then pick up your drink in seconds, while also accruing points toward free drinks in the future.

Convenience and free stuff are powerful incentives. A recent survey of Walmart Pay users conducted in December 2018 found that 52.5% of respondents used the app “every chance [they] get.” That represents a near 100% increase in dedicated usership compared to just nine months earlier.

The QR code is an easy answer for brands who want to manage their own internal payments ecosystems. And, as more brands embrace proprietary mobile apps based around QR code payments, that will be the default option…at least within store-branded apps.

I don’t believe the QR code will supplant the credit card—or even mobile wallets apps like Apple Pay—anytime soon here in the US. The conditions in the payments ecosystem are completely different, with most consumers and businesses being well-adapted to credit and debit cards. Nor do we see same portion of tourist volume from mainland China that Japan does, thus creating little incentive to adapt.

Owing to the growth of proprietary mobile apps for retailers, though, the QR code has a promising future in the North American payments sector.

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