QR codes in the digital payments era and the benefits of standardisation | Blog

01 / 11 / 2022

QR codes are, for many, an instantly recognisable invitation to interact with some form of media or process, from restaurant menus and event information to payments, applications and more. With the digital revolution, QR codes have been used even more significantly thanks to smart devices enabling instant connectivity between the camera and installed apps, seamlessly allowing users to process mobile payments and use their smartphone's data and credentials. Facilitating payments is one of the many benefits that QR codes offer, but what is their current status within a rapidly digitising world? What potential could standardisation bring and how can QR codes continue to tap into the myriad benefits of digitisation?

Woman holding smartphone scanning QR code

Wolf Kunisch, Head of Group Strategy, Public & Regulatory Affairs at Worldline, offers his thoughts on the current payments landscape and the position of QR codes within it.

 

What do QR codes offer regarding payments, and how might standardisation impact their use? 

QR codes represent a touch point between consumers and merchants and are a physical gateway for many into the digital payments process. Many payment providers and banking services incorporate QR codes into their offerings, integrating them into banking apps to create added value and a better customer experience. One major benefit that QR codes offer is accessibility, being available for use by anyone with a smartphone – now ubiquitous across Europe.

QR code technology is widely used for payments worldwide. However, a significant barrier to increased adoption, especially in Europe, lies in the fact that QR code technologies differ greatly between providers. This means that merchants wishing to integrate and support the use of QR codes often have to implement various types, depending on each provider.

"It's important to have an element of standardisation for complex processes such as payments," indicates Wolf. "Standardisation across providers will lower deployment costs, increase the speed of payments, enhance the diversity of payment methods and provide an efficient customer journey, among other benefits."

Providing a superior customer journey has become crucial, as more is demanded of services by customers now than ever before. Integrated QR codes can be key to this, as Wolf suggests. "QR codes are a visual prompt, so by introducing some standardised look, you ensure better efficiency, lower ambiguity and instil trust in the service among consumers."

This element of trust is especially relevant as the world around us becomes more interconnected. Standardised approaches offer many benefits to counter security issues, such as fraud. By contrast, fragmented technologies and lack of cohesion can open the door to potential bad actors.

"When discussing payments, trust is incredibly important," Wolf indicates. "For individuals to use their smartphone, which holds a staggering amount of personal data, to scan a QR code and send payments directly from their bank, most people would want to feel that they can trust the process. Recognition is key in this - if users can easily distinguish a standard looking QR code and associate it with a trusted service - it aids in uptake and users on a wider scale."

Beyond the benefits for consumers, QR codes also offer merchants and retailers many of the same benefits; the speed of payment, lowered costs and better brand image via an enhanced experience. However, additional benefits can also allow them to create added value for their customers. Retailers can combine loyalty points and discounts or coupons with a QR code and customer account to design seamless and evolving customer experiences with added value at the point of sale.

 

What is the relationship between QR codes and evolving payment methods? 

QR codes' use saw a rapid deployment rise during the global COVID-19 pandemic. Consumers adapted to touch-free experiences and continue to favour customer experiences whereby their payment experience is condensed into a few taps of their smartphone or scanning a code. Because QR codes are so accessible and recognisable, they enable providers to introduce new payment processes and experiences, adding value for new and existing customers.

"For instance, if you were to launch a new payment method today, mainly at the point of sale, you're likely going to go with QR codes because of their wide reach and ease of integration," suggests Wolf. "Because QR codes exist, it's now easier to introduce new payment methods at the point of sale."

Due to this, QR codes are a valuable asset in product development and release. As digitisation progresses and the digital world grows, the QR code can act as a link between what consumers current recognise and what opportunities lay on the other side of digital. In many cases, QR codes drive the adoption of digital payments and emerging payment methods over cash and other traditional forms such as card payments.

"QR codes offer a solid alternative payment method to NFC (near-field communication) payments," says Wolf. "In many regions, they are either currently prevalent, or their use and influence are growing, particularly in many parts of Asia. For example, in China, a third of transactions are now QR code-based."

In fact, in China, payment methods such as QR codes and apps, including Alipay and WeChat Pay, have become the dominant form of payment, replacing cash and card payments across the country. This level of dominance is yet to be realised in other global regions, including Europe and North America, where QR code uptake has been slower, mostly due to lower awareness and, critically, a lack of standardisation.

In China, a unified standard has been established, spearheaded by Alipay and Tencent, that has rapidly expanded and bolstered the burgeoning appetite for contactless and seamless payments. A recent report from Grand View Research indicates that the overall contactless payment market is expected to top $4.68 trillion by 2027. This projection and the successes already evident in China show that QR codes remain a valuable asset to tap into the ever-expanding potential of the digital landscape.

 

How has digitisation impacted QR codes and their use in payments and beyond? 

It can be argued that QR codes are currently enjoying a renaissance. As previously mentioned, they are effective at forming an essential link within the payment chain, often at the point of sale or physically on a consumer's device. In the past, during the early days of the smartphone, QR codes were often clunky, not easy to use and often broken. Thanks to advancements in digital technology, including the introduction of QR code readers within smartphone cameras in 2016, users are now more aware of their effectiveness than ever before.

Increased digitisation, such as the development of smartphone apps and enhanced banking services, has opened the door for QR code use. In many cases, the availability of QR code technology and suppliers has directly driven the development and production of digital technologies. Because of this, QR codes can be seen as both a beneficiary of and a significant enabler of the digital revolution. Today, users can simply point their device's camera at a QR code to be taken to a web page, payment portal or app. This makes them a valuable tool in UX design and development.

"In recent years, we have seen that COVID has also been a major push in digitisation and something that, in particular, exposed more people to the use of QR codes for more than just payments," suggests Wolf. "For example, for restaurant menus or retail pickup and other forms of contactless interaction necessitated by global lockdowns. Older generations not native to digital technology were either already aware and familiar with QR codes or could rapidly adjust to them thanks to already having a smartphone. This experience means that further developments in digital technologies become less of a barrier, whether the consumer is a digital native or not."

 

What future changes can be expected?

Digitisation is not slowing down, and introducing new technologies and approaches rapidly changes our lives and the world of commerce. But what next for QR codes and alternate payment methods? "If we look at QR codes, I think we're certainly not at the end of their development," suggests Wolf. "I think that they will become more widespread and continue to grow, but I do not think they will totally replace all other forms of payment, instead acting as a solid alternative within a selection of other options."

As seen in China and other parts of the world, QR codes are an efficient method of processing mobile and digital payments, yet the barrier to standardisation remains in Europe. While other aspects of European life have become more interconnected in a broad line with the values of the European Union, the world of payments, in particular, QR-based payments, remains fractured. Wolf indicates that this is the next challenge to overcome. "The next step is interoperability. Today we see too many isolated QR code initiatives in different countries, so I think that products such as the Worldline QR code, which offers users the ability to pay with different QR-based payment methods in one product, will become increasingly important."

"What would be most beneficial is the establishment of standardised approaches, as seen in China. This can bolster confidence in the technology and provide a stable platform for development, implementation and wider use by consumers. Some initiatives, such as EMPSA (European Mobile Payment Systems Association), promote the 'roaming' of international QR codes. I think that the future lies here, at least for some."

When looking to the future, it's also important to recognise the limitations and potential challenges of the technology itself. While QR codes do have a bright and sunny future ahead of them, there is still room for improvement within an ever-growing and expanding roster of payment methods, a notion that Wolf supports. "There are some downsides to QR payments. Normally, QR codes require both parties to be online, so there may be situations where a reliable mobile connection may be an issue, especially in underdeveloped regions. QR codes also tend to be slower than NFC payments, so there is certainly room for development in QR technology and other established alternatives."

Much like with other aspects of digitisation and the relationship between the physical and digital sides of payments and commerce, only time will tell just how far our current and future iterations of technology can take us. For now, despite its humble and rocky beginnings, the QR code looks set to take centre stage within the new and exciting era of mobile payments.

Wolf Kunisch

Head of Strategy, Public & Regulatory Affairs
Wolf Kunisch is a graduate of the Technische Universität Berlin and of INSEAD’s Executive MBA program. He began his career as a project manager at Roland Berger Strategy Consultants in Stuttgart, Germany and in Paris. He joined the Atos group in 2000, where he performed management functions in innovative and international business development. In 2010 he was appointed as Managing Director of Atos Worldline in Germany and was made responsible for the group’s Financial Processing & Software Licensing global business line as well as its German and Eastern Europe geographical zones in 2014. In 2016 he became deputy CEO of equensWorldline. In March 2020 he was appointed as Head of Worldline Strategy, Public & Regulatory Affairs.