In a year that saw a surge in contactless payments, QR codes have risen with the tide. As reported in several PYMNTS research projects, contactless payments have surged by 150 percent in the U.S. since March 2019, which, in turn, has boosted QR code adoption by 11 percent since the pandemic began. According to the recent How We Will Pay Report, more than one-third of consumers who prefer paying with QR codes say they won’t complete a purchase if that option isn’t available to them. The report found that consumers who prefer shopping with QR codes are among the most loyal users of all.
And according to PYMNTS’ most recent QR Codes Payment Tracker, the technology is expanding to new use cases as its adoption continues to provide contactless options for restaurants, retailers and even contact tracing for COVID-19 tracking in the U.K. The introduction of dynamic QR codes, for example, allows merchants to scan the consumer’s code where the system will automatically detect fraud. The dynamic code then generates new images every 60 seconds and tracks pricing details so that the consumer can validate that the transaction. In short, QR codes are expanding their use cases, vertical adoption and merchant integration.
As Citcon CEO Chuck Huang told Karen Webster in a recent conversation, an area to watch for the expansion of QR codes is in the digital-first economy. In fact, he said, QR codes are moving online. According to Huang, using his company’s application programming interface (API) to link to a QR code at checkout allows consumers to skip the process of entering credit card information or other payment data by scanning the screen with their smartphone and using their digital wallet. Huang says QR integration to an online retailer’s site can sit alongside other payment methods already in use. He sees online usage as a new payment option for the digital-first economy.
“I think that, for the merchant, the primary goal is to enable the QR online and offer the consumer the choice,” Huang said. “For example, for online merchants, if they don’t include the use of online QR codes outside of the U.S., if they go to Asian or Chinese consumers without offering the QR code, they lose 80 percent of their audience. Even for the U.S., if a younger consumer has a QR code option to pay before they go pick up food at a restaurant, they’re going to use it. They already use PayPal or Venmo, so why not offer QR codes as a payment option for them? Because if you don’t offer those options, your competitor offers those options.”
Still, he says the use of QR technology is slow to be adopted, with only a 1 percent penetration rate. Huang sees this changing rapidly though — not just in Asia, but the U.S. as well.
“So it will take us some time,” he said. “But for the merchant side, the enabling part of this kind of QR is not that difficult. They just need to use our API to enable them. And I think by the nature of mobile wallets expanding, those kinds of QR code usage is getting more popular, and QR itself will become a very good context option for many merchants. I expect that we will get better populated in the next two to three years.”
Geographical Differences
The pace of that change and the differences between geographic areas were evident in the QR Code Tracker. For example, the Chinese consumers’ use of QR codes has seen a 15-fold increase over the last three years — now, between 70 and 85 percent of the country uses some kind of QR technology to pay. As the QR Code Tracker showed, however, the method’s popularity differs markedly from region to region and country to country. China is a global leader when it comes to QR code-enabled contactless payments, with such transactions reaching 9.6 trillion yuan (approximately $1.5 trillion USD) in Q4 2019 — before the pandemic led to a contactless renaissance.
The rest of Asia sees robust adoption as well, with 40 percent of consumers in India, 27 percent of those in Vietnam and 23 percent of Thai consumers also saying they regularly use QR codes to make payments.
These high QR code adoption rates contrast starkly with the technology’s uptake in the U.S. QR codes have made inroads in the U.S. during the pandemic, but one recent study found that just 11 million U.S. households were expected to scan QR codes to make payments by 2021. Merchants are working hard to turn this trend around, however, with CVS introducing QR code-enabled payments at 8,200 stores and PayPal waiving all QR code-based payment fees in May 2020. Reports have repeatedly determined that customers’ pandemic-driven financial shifts will most likely stick around once the health crisis passes, meaning merchants’ QR code initiatives are poised to have a positive impact on the technology’s future in the U.S. and beyond.
The popularity in China begs the question as to whether it is just a better POS mechanism or one that will exist along aside other payment methods. Huang decidedly favors the disruptive theory but allows that QR codes can work on several levels for merchants.
“First, the QR can be applied for both point of sales for the install, but it also can be used for the online checkout as we said earlier,” Huang said. “Also, it’s much faster than a check or a credit card. And it is more secure, in fact, because you get the authentication through your phone.”
One QR Provider, Multiple Wallets
Deciding to add digital wallet options to a payment structure can be a daunting prospect to some merchants, and with good reason, said Huang.
“Merchants have found that it’s very time-consuming because each digital wallet has its own settlement schedule and its own API which can constantly change,” he said. “So it’s very painful for merchants to do this kind of integration by themselves.”
But merchants continue to seek out partners to integrate QR codes even in the U.S. American consumers told PYMNTS that contactless solutions were their go-to purchasing methods by October. QR codes seem like a natural fit for these payments but have witnessed relatively modest adoption rates, with just 11 million U.S. households expected to have scanned QR codes by 2021.
Merchants, restaurants and other businesses across the U.S. have taken steps to drive greater QR code adoption. One industry that QR codes have gained a significant foothold is in the restaurant industry, where the technology is being deployed not only for contactless payments but also for contactless menu viewing and ordering. These tools allow customers and staff to spend less time interacting with one another, thus reducing their risk of infection, and are expected to remain in use even after the pandemic ends on account of their glowing customer reviews.
Next Evolution
Huang believes that, eventually, QR-linked digital wallets will have their functionality expanded from simple payment vehicles to sales points where merchants could offer related goods and services based on a consumer’s current purchase. For example, if you just used your Venmo account to book a flight, you might also be given the option to book your hotel or car, much in the same way current travel-related sites operate.
“QR moves the commerce environment to the mobile phone,” he said. “The wallet itself becomes an entry point of the commerce, right? So you can open your Venmo, and right there, they will probably provide it in a future provider entry point that you can book your hotel or your plane. That’s certainly on the roadmap,” he said. “And it’s already happening in China with WeChat Pay.”
As the Tracker report says, the ongoing pandemic has given a boost to the QR code industry in the U.S., but it remains to be seen how widespread the technology will be once social distancing becomes less critical. Merchants, restaurants and other businesses must continue to implement seamless and convenient QR code innovations to boost the technology’s use among American consumers now and in the future.
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