Digital Payments

COVID-19 Breathes New Life Into QR Codes

Up until recently, QR might have been an acronym for: Quaint Relic. In the United States, anyway.

The QR code is shorthand for the “quick response” barcode that was first designed in 1994, and which initially surfaced in Japan. QR codes had made some inroads here and there, and yet did not become the go-to repositories of data and information – scannable, naturally, across mobile devices – that some had predicted.

They may have had their first adoption in supply chains, in the tracking of items as they made their way from raw material to finished goods to destination. But now, they’re more easily recognized by the masses – used, perhaps, at a restaurant to scan the menu, or at the grocery as a means of finding information about the ingredients/sourcing of food on a shelf, or as a hands-free, truly contactless way of transacting.

As for the “quaint relic” mindset – well, that may have been the prevailing consensus here in the States, where the codes had been slow to take off. But indications hint at a change.

As for the inroads QR codes may be making toward greater visibility, if not ubiquity: The U.S. may take its place alongside markets in Asia and, say, Brazil (where instant payments can be done across PIX, and all wallets that use QR codes are interoperable).

Last month, PayPal and Venmo began offering a credit card that features users’ QR codes, which allows the platform’s more than 60 million customers to shop, split purchases and earn cash back wherever Visa cards are accepted. In terms of mechanics, a customer’s unique QR code is printed on the front of each card. The code can be scanned in the Venmo app by friends to send payments or split purchases.

And in a nod to the traction that QR codes are seeing, in July, PayPal reported a second quarter that saw total payments volumes soar by 52 percent to $37 billion, where QR code-based contactless payments helped underpin results – and Venmo’s growth.

Karen Webster recently spoke with Jeremy Jonker, senior vice president and head of consumer in-store and digital commerce at PayPal, as the company is rolling out QR code pilots across 28 markets.

“[PayPal] accelerated the efforts around QR codes … because our consumers and merchants are demanding and requesting contactless payments, [but] a lot of payment methods today aren't necessarily contactless,” Jonker told Webster. “You still have to do a signature … you still have to put in PIN codes. What we developed … is purely and truly contactless.”

Over the summer, Instagram began rolling out its new QR code feature globally. As reported, the new tool enables people to open a profile via any camera app that is able to read QR codes, without having to get into the Instagram app itself.

In reference to commerce itself, Apple was reported in July to be working on functionality within its Apple Pay offering to make payments via QR code and iPhone camera.

There is a greenfield opportunity for contactless payments – and thus, QR-facilitated payments riding various payments rails – even if some firms (like Starbucks, which began using QR codes over a decade ago) have been earlier than others to leverage its potential in the U.S. Recent earnings reports show that, for the payments networks, an increasing percentage of face-to-face transactions are touchless. Visa, for example, said that 43 percent of face-to-face transactions are done through contactless means. That comes as debit activity is rising at twice the rates seen before COVID-19. Mastercard said that contactless transactions represented 37 percent of those made in-person during the quarter, up from 28 percent a year earlier.

Playing Catch-Up 

In QR codes becoming more entrenched in U.S. commerce, the States would follow in the footsteps of Alipay, Tencent and others in Asia that have been on the path to making digital wallet payments a streamlined experience – such as when PayPal linked with JCB to leverage QR codes to enable payments via digital wallets. Tencent said in a recent report titled “2020 Pandemic and the QR Code Economy Report” that in the first quarter, the WeChat QR code economy increased by 25.86 percent in value from the prior year. The use of the WeChat QR codes topped more than 140 billion scans.

But it is the melding of QR codes and payments choice that can serve as rocket fuel. In a recent interview with Karen Webster, Joel Neoh, founder of leading regional online-to-offline company Fave, said that “if you couple QR together with cards and provide that full suite of payment acceptance that captures different formats, that is what the merchant needs.”

In a nod to payments preferences (which would include different types of accounts) and QR codes merging in India earlier in the month, the central bank mandated a move toward interoperable QR codes, as Bloomberg reported. Visa and other payments networks, stretching back a few years to 2017, had debuted the world’s first interoperable QR code acceptance solution in India. As part of the latest mandate, Bharat QR and UPI QR — the two available interoperable codes — will continue. But any new QR codes will need to be embraced across a range of payment options.

Shapes and stickers, then, are poised to grab an increasing share of commerce – here in the States and abroad.

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