QR code payments are growing rapidly across the world. China leads this growth where merchant payments using QR codes have surpassed cash transactions now. WeChat and AliPay dominate retail payments space.
Source@ WSJ
Merchant payments using QR codes are furthermore increasing in markets such as India, Indonesia and Singapore among others. This is due to the high penetration of smartphones and helpful regulatory environment for mobile payments.
A typical merchant QR code payment implementation involves printed placard or sticker displaying the custom QR code that uniquely represents a merchant’s mobile wallet or bank account. The customer scans the QR code with a smartphone app provided by mobile wallet (or bank) and enters the amount to be paid. Once the payment is made, a notification is sent to merchant’s mobile through SMS or an app completing the QR code payment transaction.
While the above solution suits an owner operated business such as Taxi drivers, it fails to scale for retail merchants that have multiple employees or points of sale.
There are two major limiting factors – The user experience and lack of merchant trust at the point of time of sale.
User experience complexity
Merchants in China display QR codes for just two dominant mobile wallets, Alipay and Wechat.
Image Source@ marketing2china.eu
Unlike China, most countries have cluttered QR codes visible on retail counters as there are many payment apps in these countries.
India leads in removing this clutter through a single unified QR code payment solution for all apps called “Bharat QR” similar to that of Singapore initiative called “SGQR”. This is possible because of a mature national payment backbone that is connected to all payment providers. Countries without a similarly sophisticated payment ecosystem find it difficult to implement such a solution and the QR Code clutter remains a major user experience deterrent.
Single unified QR code payment in India
For such countries, an electronic display at the Point of Sale that can store all the QR codes and permit selection as per customer’s choice can solve this problem and improve user experience.
Merchant trust gap
A merchant payment is not complete until the salesperson has proof of receipt of money at the point and instant of sale. Merchants do receive a real-time SMS or in-app message once a QR code payment is completed, triggered through an online debit channel. These messages land up with the Business owners whose mobile phones are usually linked to the wallet or bank account to receive such notifications.
But business owners are rarely present in person at the time of the transaction in retail scenarios. Supermarkets collecting payments at multiple checkout tills, petrol stations collecting payments across multiple dispensing pumps and small shops or service outlets where the business owner is absent at the time of sale are frequent daily occurrences where the lack of notification adds to distrust in QR code payments.
Confirmation seen on customer mobile phone can also not be trusted any more as many rogue apps faking popular payment apps are now appearing regularly.
The lack of payment confirmation to the salesperson at the time of sale remains a major trust gap for a typical QR code payment implementation.
“Push” transactions furthermore aggravate the situation of QR code payments as it is the customer that needs to enter the payment amount so the salesperson is liable to carefully check the amount for each receipt. Most salespersons find this change annoying as compared to conventional POS payments where they usually enter the amount and “Pull” the payment.
A Dynamic QR can solve this problem by generating a unique QR code for each payment which includes the amount due but it needs an electronic display.
A simple solution for QR code payment success
A simple step for the big success of QR code payments will be thus to have a point of sale solution that would address the following:
- Generation of dynamic QR code so the amount is entered by the merchant and not the customer
- Ability to display different QR codes to avoid counter clutter and easy addition of QR codes for new payment providers
- Notification of payment receipt from the merchant’s wallet or bank account
Conventional POS solutions can address most of these demands, but they are costly and will disturb the excellent ROI equation that permits QR code payments to achieve mammoth scale. Thus, there is a need for innovation to meet all the above demands including the affordability.
The QR POS terminal
An ultra-low-cost custom POS terminal, dedicated for QR code payments would meet all the challenges.
This terminal would have an LCD display to show multiple QR codes, a keypad for the amount so the QR code being displayed can be Dynamic QR and a connection to a notification server.
Retail needs will decide the form factor for such a terminal. A supermarket would have a desktop version that connects to the cash register so the amount can be directly received. A petrol station would need a portable version. A smaller shop would need a countertop product with a keypad to enter the amount. Connectivity could be over a mobile network or Wifi.
Such a terminal would reinforce simplicity and trust that are necessary drivers for widespread adoption of QR code payments.
A smartphone is apt for the customer end of the payments, but for the business owner his or her mobile is a personal lifestyle device. It moves around with him or her and cannot be trusted as a serious alternative to a payment terminal that needs to be available all the time at the point of sale. The lack of such a merchant terminal is a certain barrier to the growth of QR code payment ecosystem.
Nearex is the leader in merchant payment technology for modern payments that leverage smartphones and NFC. Click here for further information on the growth of QR code payment in retail.