Quick Response (QR) code payments were tipped to make a “comeback” of sorts in 2018 by Juniper Research, a representation of how long the technology has actually been in the public sphere.
At the time, the analyst company identified the introduction of camera scanning technology in affordable handsets in Asia as a major driver, prompting wider deployments.
Indeed, the forecast proved accurate, and the revival of QR payment across Asia-Pacific came sooner than expected. Two years after Juniper revealed its findings, the Covid-19 (coronavirus) pandemic led to lockdowns around the world and provoked a shift in consumer behaviour.
The transition to real-time payments via smartphones was most noticeable in emerging markets in Asia-Pacific, particularly in nations where cash had a stranglehold on the economy.
With social distancing in place, the adoption of mobile wallets started to take speed and companies providing these services began to integrate QR payments in their offerings for in-person market transactions and peer-to-peer transfer.
Philip Benton, principal analyst of financial services at Omdia, told Mobile World Live (MWL) the reduced requirements of “complex point-of-sale integrations” and “high connectivity”, in addition to user popularity, make QR scanning more attractive than other methods including m-banking and card transactions in core Asian markets.
He added QR payments also have cheaper processing fees and higher conversion rates, driving adoption across retailers in the informal economy.
In 2021, QR payments gained strong traction in Asia-Pacific compared to the rest of the world, a study by Mastercard showed. It noted 63 per cent of respondents claimed they deployed the technology more frequently than in the year before. It also found the number is highest in Thailand and India, figured at 64 per cent, above the global average of 56 per cent.
And a recent report by Future Market Insights revealed the QR code trend might be here to stay, branding the technology as “the new normal” in Asia-Pacific. It also pointed out the region held a 28 per cent share of the global QR payment market in 2022.
Cross-border, less dollar
A deal for cross-border QR linkage between the central banks of Indonesia, Thailand, Malaysia, Singapore and the Philippines further reaffirmed Asia’s fintech ambitions.
The pact, signed in November 2022, will enable nationals to simply scan QR codes displayed by merchants when traveling between the regions, and payments will be settled using local currency – bypassing the US dollar as an intermediary. The Association of Southeast Asian Nations (ASEAN) pledged deployments of integrated QR payments across all member states by end-2023.
Popularity of the system also has the added benefit of reducing reliance on US payment networks, while progressing usage of local currencies from the dollar, which has long ran the economic vessel across the region due to its stability and liquidity.
Deployment of a trans-border QR ecosystem as part of de-dollarisation moves made headlines since the US announced sanctions to Russia’s financial systems, prompting conversations on the potential of sovereign fintech platforms to ease the US grip on payment networks.
India is among the nations vocal about the issue, with Prime Minister Narendra Modi branding the country’s rapidly evolving Unified Payments Interface (UPI) earlier this year as an alternative method in an economy where a “trust in international financial institutions has eroded”.
UPI was launched in 2016 and has since integrated mobile payments from different apps into a single ecosystem. Today, it has booked more than 300 million users, with small businesses benefitting from QR payments.
Recently, Walmart-backed PhonePe launched a cross-border QR linkage based on UPI in UAE, Singapore, Bhutan, Nepal and Mauritius.
Omdia’s Benton shed light on emerging markets as a mover and driver of QR payments – long being ahead of the West when it comes to the technology – noting South Africa and Saudi Arabia are also testing unified QR code systems “to enable banks, wallet providers and fintechs to interact seamlessly within an interoperable platform”.
The catalyst of the QR payment trend in Asia-Pacific was the mass adoption of Ant Financial’s AliPay and Tencent’s WeChat Pay by Chinese tourists, noted Benton. “This, in effect, trained merchants on how to operate QR code payment and spurred an ecosystem of payment facilitators and banks that supported QR enablement”.
AliPay and WeChat Pay are available in more than 35 countries and account for more than 90 per cent of China’s m-payment market, with QR codes being the most popular method for 96 per cent of users, the Payment and Clearing Association of China estimated.
There are plans for China’s central bank to push ahead with a universal QR infrastructure to promote its digital yuan, which could potentially threaten the dominance of the app duo.
Meanwhile, Ayush Narain, Research Manager for retail insights at IDC Asia Pacific, told MWL the spike in QR payments in the region is also driven by low credit card usage, naming India, Indonesia and Vietnam as markets with less than five per cent credit card penetration.
Narain said QR system is “easy to understand”, and “customers are comfortable since they know exactly where they scanned the code and what amount is being deducted”.
“Smartphones have become increasingly affordable” across the region, in turn driving the uptake of QR codes, he added. This reflects a step forward in device accessibility in emerging markets, as GSMA Intelligence in 2020 cited the lack of affordable handsets as a pain point for QR adoptions in India and Sub-Saharan Africa.
With Asia-Pacific placing big bets on QR payments, will developed markets start to promote the use of the technology?
According to Narain, cross-border QR payments across Asia-Pacific will eventually trigger mature markets in the West to hop on the trend to make travelling more convenient.
However, he noted users in mature markets have grown accustomed to contactless card payments for a long time. He also highlighted privacy concerns around QR code scanning where a phone number or email is shared.
Benton said “the Covid-19 pandemic saw QR payments rise in popularity” across developed markets, although “it has largely been unable to displace contactless payments as the preferred method and unlikely to do so in immediate future”.
“However, long-term, if open banking payments, real-time payment networks and CBDC were to utilise QR codes as the basis for payments which was, crucially, cheaper than traditional payments, then it could start to compete.”
The editorial views expressed in this article are solely those of the author and will not necessarily reflect the views of the GSMA, its Members or Associate Members.