By Brad Goodall, CEO of Banked
The volatility of recent years has accelerated innovation in the payments space, leading to an increased range of payment options for consumers and businesses alike. Optionality has become vital as consumers expect seamless, secure payment experiences through their preferred methods.
One method becoming more prominent is the QR (‘Quick Response’) code, a collection of black squares and dots pointing to information like a URL. When scanned with a smartphone, the QR code prompts a specific action on the device, such as leading the user to an app or website.
Although Japanese company Denso Wave first invented QR codes in 1994, worldwide adoption rates have differed dramatically in the decades since then. In Europe, QR codes became popular for checking into locations during the pandemic and digital ordering in restaurants and other venues where in-person interaction needed to be minimised.
However, as a payment method in the West, it is still a relatively new concept.
Asia remains the globally dominant QR payment leader
Europe is late to the game compared to Asia, where QR payments have only risen in popularity over the previous decade. In China, QR codes have not only been used for authentication but also for redeeming coupons and accessing general information from merchants and retailers.
From as early as 2017, using QR payment codes in restaurants was a common practice. Most Chinese restaurants used mini-programs by Koubei and WeChat (platforms by Tencent and Alibaba) to introduce the consumer habit, with 50% of users in China soon scanning QR Codes several times a week.
QR codes exploded in popularity as a payment method throughout the East, with WeChat and Alipay driving the growth. Alipay saw 15 million businesses accepting QR Code payments, and in 2020, WeChat’s QR code feature rose by 26 per cent in value from the previous year.
Businesses drove mainstream adoption by incentivising customers. One restaurant in downtown Shanghai offered customers 10% of their first order if they placed their order through QR code on WeChat.
After all, when orders occurred through QR code, the business not only saved labour costs but could also gather, track and aggregate important customer data around experiences, preferences, and interactions. This data could be the most cost-effective and reliable form of customer feedback available to retailers and merchants.
Beyond China, QR code payments took off throughout Southeast Asia, not only with big businesses but also with street vendors and smaller family-run businesses. As hardware and point of sale terminals are not required for the transaction, vendors who did not have plugs could use a smartphone to make digital sales. For consumers, QR codes were seen as a safe and familiar way to make payments wherever they were.
This trend was helped by the fact that in emerging markets throughout Asia, there has been a tendency towards ‘legacy leapfrogging’ where legacy infrastructure seen in established markets can be skipped to further innovation. For example, China bypassed 3G to go directly to 4G networks, fostering the ideal environment for mobile payments generally.
How Europe can learn from the East
Comparatively, in Europe, QR payment is still perceived as a relatively new payment method. A lack of standardisation has prevented Europe from seeing the same rapid growth rate of QR payments as in Asia – although this may change in the year to come, as the trend has been starting since before the pandemic.
In 2019, Alipay introduced a collaboration with European mobile wallet services to create a “unified” QR code enabling Alipay users to make payments at any location that already accepts one of the payment services. This allowed Chinese travellers to use a familiar payment method across 190,000 merchants in 10 European countries.
Boutique Portuguese chocolatier Arcádia became the first shop in Portugal to accept Alipay, as they wanted to serve the more than 260,000 Chinese tourists visiting the western European country each year.
Spanish cosmetics brand Primor introduced the service in over 115 stores and immediately saw more first-time users, a higher level of brand recognition, and repeat usage from existing customers, alongside weekly increases in total sales.
Beyond catering for international tourists, more European retailers are bringing on a broader range of payment methods for local customers that emphasise loyalty and engagement. Recently, Tesco and Sainsbury’s have been competing with Amazon on checkout-free store experiences, which have been enabled through QR codes.
Customers use a QR code to walk into the Sainsbury’s store, and then no further scanning is required at checkout or otherwise, as shoppers put their items in a bag and then leave. Sensors, cameras and software decipher the items a customer has taken and automatically charge their card.
QR codes also enable businesses to offer promotions or charitable donations at the point of sale with greater ease. At Banked, we also created Payment Links to enable QR code scanning on television so that charities can accept donations during live televised events.
What 2022 holds for QR code payments in the West
Businesses of all sizes are feeling this drive towards efficiency after the turbulence and loss experienced over recent years. As merchants adjust to tighter budgets, everything is coming under more pressure: there is an increased emphasis on cost efficiency and using economic operational methods to streamline costs.
This has paved the way for Open Banking, which has a low cost of acceptance and is particularly popular when the average transaction value is high. It also creates a more hospitable environment for payment methods like QR codes, which are highly convenient and cost-effective.
QR code payments are cheaper to set up than manual point of sale equipment and can easily integrate with new financial instruments and tools. A primary advantage is sheer speed, as it tends to be far quicker than many traditional payment methods.
As more consumers turn to the latest digital payment and mobile solutions, there is renewed pressure on the West to keep up with Asian technological advances, and retailers in both Europe and the USA are taking new measures to bring QR payments more into the mainstream.
At Banked, we have integrated with billing and invoicing platforms to help consumers instantly pay through QR codes and dynamic payment links. In a recent study, Banked found that when presented with a QR code alongside traditional bill payment options such as telephoning a call centre, logging into an online payment portal or creating a payee in online banking, over 30% customers chose the QR code, rising to 50% in the over 45’s demographic.
This is the future of payments, and we can see it rapidly unfolding all over the globe. Square has helped retailers produce food and drink menus with a QR code to display at their locations in the UK and US. PayPal temporarily waived QR code-based payments fees in Canada, and American pharmacy chain CVS brought on QR code-powered payment methods at over 8,000 stores. These are only a few examples from a much broader trend.
Looking ahead to 2022, the shift towards QR payments is only going to increase. As cash fades away in relevance and online transaction costs become more of a concern for retailers, efficiency and convenience are poised to become a top priority for merchants, which are two key features of the method that has already been embraced by the East.
Banked powers Pay by Bank provides businesses with a fast and secure way for their customers to pay directly using their bank. Payments settle instantly and in full, helping with cash flow and reconciliation. In addition, Banked provides value-added services for a business to enable customer engagement and loyalty with incentives and rewards integrated into the payment experience. Banked payments allow the transaction costs to be significantly lower than other payment methods, reduce fraud costs and are simple to integrate. Consumers experience a faster, simplified payment experience at checkout – no need for card details or payment information to be stored on browsers or with merchants and no hassle of account set up and delivering direct communication with your bank, allowing you to check funds as you pay.
For more information, visit www.banked.com