What are QR Code Payments?
A Quick Response (QR) code is a two-dimensional barcode that contains information about the item to which it is attached to. Examples include an identifier, location, amount or a link that points to a website or application.
Payments via QR codes involves one party using a camera or barcode scanner to scan the QR code generated by the other party. This mode of payment was first popularized in China more than a decade ago and has since gained acceptance in other regions China, Southeast Asia and Africa. These are usually areas with lower card penetration rates and slower internet connectivity.
Types of QR Code Payments
QR code payments are available both offline and online and there are two main ways the payment is performed.
- Consumer Scan Business (also known as Merchant Present or You Scan Me 你扫我).
- Business Scan Consumer (also known as Consumer Present or I Scan You 我扫您).
Consumer Scan Business
This is the most common and original form of QR payment. It involves the merchant or store showing a QR code (either on a piece of paper or on their POS machine) and the consumer or user using their payment app to scan the QR code.
Static QR
QR codes are printed on a piece of paper and placed at the cashier. Customers can scan the QR code using their app to make payment. This is commonly used by low tech businesses such as coffee shops, markets and even beggars!
Pros:
- Low cost and no need for dedicated hardware to support.
- Easy to scale for acquirers.
- Customers are familiar with this payment option.
Cons:
- Customers need to enter the amount manually and this is prone to errors.
- Merchants will need to verify payment on a separate device or from the customer’s phone.
- Reconciliation is manual and not integrated with the ERP system.
Dynamic QR
This is an upgrade from the static QR as QR codes can be dynamically generated on a screen. This is commonly used by larger F&B outlets, retail stores, vending machines and online sites.
Pros:
- Amount is pre-populated by the cashier or software and is embedded into the QR code and reduces the need for customers to enter it manually.
- Usually integrated with POS machines or system so cashiers can verify the payment status directly from the same machine.
- Integrated with merchants’ backend (and finance systems) and reconciliation can be automated.
Cons
- Requires hardware with a screen to display the QR code.
- Longer lead time to activate as technology effort is required to perform integration of payment APIs into POS systems or software.
Hybrid Model
This is a hybrid between the static and dynamic QR methods. Customers will still scan the static QR codes at merchants. When the payment is completed on the mobile app, the payment provider sends a notification to the POS system to notify the cashier of the completed payment.
Pros
- Low cost and easy to scale.
- Cashiers can verify the payment status directly from the same machine.
- Integrated with their backend (and finance systems) and reconciliation can be automated.
Cons
- Hardware is still required to ensure that it is able to receive the notification from the payment provider.
- Longer lead time to activate as technology effort is required to receive the notification and update the display on the POS.
Business Scan Consumer
This is the alternative way of making QR payments and involves the merchant or store scanning the QR code shown on the consumer’s app. This is commonly used by supermarkets and convenience stores due to the prevalence of barcode scanners.
Pros
- Devices with a barcode scanner or camera can be used and this is more common than POS machines with screens.
- Usually integrated with POS machines or system so cashiers can verify the payment status directly from the same machine.
- Integrated with merchants’ backend (and finance systems) and reconciliation can be automated.
Cons
- Customers are less familiar with this payment method but this can be solved through marketing and education.
- Longer lead time to activate as technology effort is required to perform integration of payment APIs into POS systems or software.
Closing Thoughts
QR payments are currently adopted by e-wallet players and banks in the SEA region. Examples include Alipay, GrabPay, GoPay, ShopeePay, Boost,G-Cash and DBS Paylah!.
However, with the prevalence of Buy Now Pay Later (BNPL) options, QR payments are no longer just constrained to standard e-wallet payments. BNPL providers like hoolah and Atome are also utilizing QR payments as a payment channel for their customers.
Furthermore, due to Covid-19, many governments are pushing heavily on cashless payments and for a unified national QR to allow for interoperability between all banks and e-wallet partners. Examples include SGQR in Singapore, DuitNow QR in Malaysia and PromptPay QR in Thailand.
As QR code payments are low cost as opposed to credit card payments, it is easy for merchants to adopt and for payment players to scale their merchant base. As acceptance points increase, consumers will also be more likely to adopt QR payments and be more willing to store and use money on their phones. This ultimately results in greater financial inclusion in the region and allows for more of the underbanked and unbanked to gain access to financial products.
Chan Jing Wei 