The QR code hasn’t always seemed like a world-changing technology. When it first appeared in the developed world approximately two decades ago — the technology was first invented in 1994 — to most consumers and corporate onlookers, it seemed like a mildly interesting technology with perhaps a few use cases that would probably never scale.
“When Visa started building specs for QR [code-based payments], most people thought they were old and not really that interesting,” Visa’s senior vice president of digital products, Sam Shrauger, told Karen Webster in a recent interview. “But we built specs anyway, because it is better to have them on the shelf in case you need to use them.”
As it turns out, putting that spec on the shelf helped to inform the development of the EMVCo QR code standard, which was released yesterday into a payments ecosystem that looks at them as anything but uninteresting.
“We found, in a lot of cases, places where QR has a lot of applicability that no one thought of back when we initially did the work,” Shrauger said.
These days, use cases can be seen all over the world — and seen pretty clearly. China is a prime example as, over the course of the last five years, the QR code-based mobile payment has almost entirely displaced cash in the country — and leapfrogged credit and debit cards — to become Chinese consumers' preferred alternative for payment. There are $5.5 trillion worth of mobile payments made in China per year, the vast, vast majority of which are handled via QR code.
But perhaps most striking is India and its government’s November 2016 decision to move toward a cashless society. That led the country to the accompanying adoption of a QR code-focused payments scheme based on Visa’s mVisa standard.
“There is a broad trend — one that has certainly been accelerated with India’s demonetization — [in which] developing markets are really pushing electronification of payments,” Shrauger remarked. “At this point, 70 percent of the world has a smartphone mobile device of some sort, and what is needed is the ability to present something in a simple, technological way. The other big driver here is every government in the world is studying payment electronification for disbursements, commerce and a host of other functions — and those things are really creating a growth vector for QR technology. I think QR comes in as the right solution for the right problems in a lot of ways.”
What types of problems? Shrauger was happy to elaborate.
Leap Frogging POS With A More Accessible Commerce Solution
Historically, Shrauger told Webster, to support point of sale (POS) infrastructure, merchants needed to have an electrical outlet and access to a landline into which they needed to plug to ensure connectivity for transactions. At face value, neither feels like it should be much of a limitation in the developed world, though it is worth noting that electrical outlets aren’t always a guarantee and landlines have now largely been replaced by mobile phones.
“The new world of commerce with the QR code can be conducted anywhere there is an outlet — you can stand on the surface of the planet and get a cell phone signal,” Shrauger explained. “It is quite likely, in many of these markets, that plastic and legacy POS will leapfrog almost entirely.”
A leapfrogging that doesn’t make things any easier, even with 70 percent of the human population carrying the technology that will enable that leap. That’s because the type of enabling technology varies greatly from consumer to consumer — even in the same market — meaning the solution needs to be broadly scalable. Shrauger said it is not possible to assume everyone will have a smartphone capable of dynamically rendering a QR code to customers. The standard must also be capable of enabling a secure payment via a static QR code on a merchant placard.
And, it must be interoperable, Shrauger emphasized, because to make mobile payments work in these new markets, they need to work everywhere — and they need to be secure.
“If you look at the history of payments systems that have been out there, mobile payments that have been limited to a single bank or carrier network don’t tend to really ignite,” Shrauger said. “We thought this is where the real power of the Visa networks is — the ability to interconnect and make it possible for anyone to pay anyone else seamlessly.”
Getting To Scale
Visa is currently developing mVisa as a worldwide solution. The key to scale, Shrauger told Webster, is making it useful and accessible for their two client groups — merchants and their customers. On the consumer side, the service must be present in the uses that connect most to the daily habits and lives of everyday people.
“The first step of consumer habituation is becoming a part of those uses cases that customers are doing daily, or even multiple times a day — [like] riding in cars or getting food," said Shrauger. "These are the use cases people adopt and gravitate toward most, initially, because they are so frequent. From there, as other things come around, they start to move across categories. This is the everyday purchase phenomenon expressed a little differently, and it’s definitely an area of focus for us.”
On the merchant side of accessibility, he noted, the goal is to make the solution as close to “flip-a-switch” easy as possible. Smaller merchants in developing economies aren’t well-suited to technology that requires a lot of integration assistance or education.
According to Shrauger, that lesson informed Visa’s QR code go-to market strategy in these markets, something he calls “mVisa-in-a-Box.” Merchants can obtain the suite of materials they need to provision themselves on a self-service basis and get up and running quickly. Shrauger said it is a far more scalable process.
So, is QR a payments endpoint, or is it the start of a development path in payments that might eventually lead to a new technological form factor? That was Webster's parting question in her chat with Shrauger.
“A QR code is a pointer to an underlying credential to initiate and receive a payment,” Shrauger said. “The pointer now is a QR code — I don’t know if it will always be. But, in these markets, QR is about getting credentials in everyone’s hands and getting the usage understood. From there, is it is an easier evolution to provide other use cases to people based on something beyond QR.”
Today, those use cases involve a broad range of payment encounters, including paying a merchant, receiving a disbursement or even paying a cable bill by scanning a QR code on the consumer’s TV screen.
But QR is a story that is still very much in progress — and one about building digital payments credentials for a world of consumers who, until now, haven’t had them.