- Thierry Spanjaard
QR codes make a comeback
While the whole payment industry is after always better security thanks to smart cards and mobile payments, some application developers have chosen to privilege ease of use over hardware-based security.
QR codes were developed more than 25 years ago as a means of tracking inventory in a manufacturing environment. As they can represent any character chain, including URLs and payment data, and require very little dedicated investment, they are now widely used for a variety of purposes from identification to health, public transport and, of course, payments.
The latest movement in favor of QR codes is probably the announcement by eftpos, the Australian national debit card scheme, which plans to roll out a national QR code payment network available online, on mobile or at the checkout by 2022. Their announced goal is not only to deploy a low cost payment system but also to provide links to loyalty, offers, receipts and more. While eftpos has been using smart cards for years, the switch to QR codes is presented as “re-imagining the Australian payment experience” and providing a “a data-rich payment experience online, on mobile or at POS.” The project is specifically aimed at small merchants willing to grow their digital sales with low cost QR acceptance. In the Australian eftpos model, the QR codes are generated on the merchant side and read on the consumer’s phone to initiate a digital wallet payment. There are about 5 million prepaid eftpos cards and over 5 million credit cards with eftpos functionality in circulation in Australia.
The leader in payments by QR codes is obviously China: Alipay, which is recognized as China’s leading payment platform claims 1.2 billion users worldwide, the majority of which being in China, while its challenger WeChat claims 1 billion monthly active users, without specifying how many are actually using the service platform for payments. Alipay and WeChat are the best demonstration to the world that QR code payments can be efficient, if the whole ecosystem is in the same hands. Both of them can be seen as a close system where the merchant, the consumer, and the whole payment system are actually all connected to a single server. This approach is radically different from the one implemented in traditional card payment systems that leave the choice of issuer, acquirer and processor for each player and even sometimes for each transaction.
The strong position of private players Alipay and WeChat is often cited by industry analysts as a major trigger for the Chinese government initiative to have PBOC (People’s Bank of China), the Chinese Central Bank, launch the Digital Yuan project, the Chinese implementation of a Central Bank Digital Currency (CBDC).
QR codes are also widely used in healthcare, are they are the most visible part of many anti-COVID applications, for instance in China or in Australia. They are also used in mass transit fare collection, such as in Singapore, Hong Kong or Delhi.
A new study from Juniper Research has found that the total number of QR code payment users will exceed 2.2 billion in 2025, equating to 29% of all mobile phone users across the world in 2025. According to this research QR codes will be adopted firstly in emerging countries as their card payment infrastructure may not be well deployed yet, but also in the US as they are seen as an answer to the need for cashless payments stimulated by the pandemic. Besides Australia and China, many countries are considering national QR code based payment schemes, which, according to Juniper will account for 22% of all QR code payments by 2025. The analyst firm even recommends that national regulators make QR schemes a priority.
The secure transactions industry has demonstrated that payment systems secured by hardware thanks to the intrinsic security of the EMV chip in the card and the secure payment terminal, are a widely implemented solution that allows to have a fully standardized and interoperable ecosystem that preserves competition. QR codes as they need a full online ecosystem and are essentially national schemes, work well only in closed environments where all players actually connect to a single server system.