QR Codes Set To Move From Sideshow To The Main Payments Stage

While QR codes have become an extremely prominent part of the payments landscape in the Asia Pacific region in general and in China specifically, in the U.S. they’ve mostly been relegated to the periphery of the payment and commerce ecosystems. But they weren’t totally ignored in the country, with individual brands and merchants using them in specific one-off applications.

But, as Citcon CEO Chuck Huang told PYMNTS CEO Karen Webster in a recent discussion, that may be about to change.

“The QR code is certainly part of the mobile payment effort,  but I would say U.S. merchants were quite distracted over the last couple of years, because the industry gave them other solutions in terms of [contactless] mobile payments at the point of sale,” Huang said. “I think the open-loop wallets like PayPal or Venmo are gaining ground, but the merchant side of the solution has not completed the end-to-end payment experience that would enable those wallets to consistently transact at the point of sale in a store.”

But in the wake of the COVID-19 pandemic, U.S. merchants are starting to change, he noted – and QR codes are pushing more into the mainstream each day. But the experience isn’t perfect yet, and has presented the same bugs and glitches that were seen in China in the early days of the QR code rollout almost a decade ago.

But the consumer demand for the QR code is there – and with it comes merchant interest, not only for its ability to enable payment. The real power in the QR code lies in the additional functionality that can be integrated into the software to create an enriched consumer-merchant interaction.

Pandemic-Fueled Acceleration

The pandemic did act as a major tailwind of QR adoption, Huang said, as it meets two needs.

For the consumer, it offers an easy and accessible path to a contactless payment via a mechanism with which they are already familiar and comfortable. PayPal and Venmo users are using them to shop online or make P2P payments, and so bringing them in-store via a QR code was easy. For the merchants that Citcon has already onboarded, they’ve seen rapid daily adoption from some users – remarkable in many regards, said Huang, because the company has yet to promote its availability.

Merchants have been on the slow side of the equation when it comes to U.S. QR code adoption, he noted. But the pressure of COVID-19 has created a world where merchants need to “be able to engage with the customer digitally” in a quick, affordable way – two conditions that NFC-based payments have a hard time meeting.

“QR does require some integration, but it is a software-based upgrade,” Huang explained. “It takes some effort, but it will be much quicker than NFC, because that technology involves hardware changes that are difficult to put in place, adjust and upgrade. In our experience, the software upgrade can be done fairly quickly and efficiently.”

Which is not to say it can be done overnight. There are a lot of moving pieces still in place that need resolution. To get to scale, Webster pointed out, there still needs to be a standard, interoperable QR technology that enables any wallet to complete a transaction. Huang agrees, but he said those standards will be worked out over the next few years. Until then, Citcon has worked with the technology to equip the merchant’s scanner to simply recognize the QR code of the wallet it is scanning and automatically understand how to process the transaction.

And there will be workarounds for a few years, Huang predicted, as QR is for the first time really coming online in the U.S. and reaching toward its greater potential.

A Bright Future

The future for the QR code in the U.S. market is bright, said Huang. He expects to see notable growth in 2021, but adoption still won’t break the 10 percent mark by the end of next year. But by the end of 2022, he predicts that it will have grown at closer to a 20 percent rate annually, and by a year after that, the figure will be closer to 40 percent.

“It’s about building that momentum up to a snowball effect. Soon, everyone gets to know, ‘Oh, yes, it’s better.’ We see QR is sticky, and once people try it, they will use it,” Huang said.

And they’re sticking with it in ever-widening use cases. Consumers are already using QR codes to look at menus in restaurants today, he said, and tomorrow they will also use them to pay for their meals. Consumers who want to travel in the future will likely need to find a way to show proof of vaccination. The QR code is the best technological platform to make that easy and seamless, as China has already demonstrated.

The day of the QR code – and built-in rewards, loyalty offers and incentives for consumers – is coming, Huang predicted, even if it won’t be here tomorrow.

“I think it’ll be a really powerful technology platform that does a bunch of different things,” Huang said. “I think five years is a reasonable timeframe to see the overall adoption by merchants we are expecting.”