QR-code payments is not about the QR-code
Introduction
The rise of smartphone penetration and fast internet coverage has led to a drastic increase of mobile wallet usage in the last years. When it comes to mobile payments, Asia is recognised as one of the most innovative and fast-growing regions. Among various mobile payment services across this region, QR-code based solution shows a strong dominance in terms of user base, usage and growth, according to kcFed´s payment system research briefing.
Outside Asia, the rest of the world has not quite settled yet. Depending on the region and country, different players are still fighting for market positions. For instance, due to the wide contactless acceptance and established user behaviour, Europe and North America in general sees exponential growth of mobile wallets based on NFC technology, especially those from the international giants. e.g. Apple Pay, Google Pay, according to MobeyForum and DazoInfo. At the same time, several markets have well-established local players with strong local presence and brand recognition. Examples include Twint (Switzerland), Swish (Sweden), Mobile Pay (Denmark), Vipps (Norway), Payconiq (Benelux) and many others. Due to various reasons, such as access to technology, complexity, maturity of acceptance network, cost and time-to-market considerations, those players have been utilising alternative technologies, such as QR-code, Bluetooth, etc.
Giving the coexistence of various technologies, people often start with comparing the technologies when talking about mobile wallets. However, the technology discussion is irrelevant without understanding the actual problems to solve.
This article tries to approach this topic in a different angle, by starting with the actual needs and then gradually zooming in to relevance around the choice of solutions and technologies.
So what is a QR-code
QR-code is short for quick response code, which was invented in the 60s by the japanese company Denso Wave to simplify the process of exchanging information in busy retailer scenarios. Since then the technology has been adopted in many other industries.
In general, QR-code can be used in many areas as a tool to exchange:
- Payment information
- Identity information
- Product & service information
- Or any information that are relevant to specific context. E.g. promotion, educational, etc.
The low implementation costs (both in terms of creation and reading), open standard and the simplicity to use have made QR-code an attractive option in many use cases.
Technology is not the goal, but the mean
Should we use QR-code, or NFC, or others, to build our mobile wallet? — Not a relevant question.
The starting point of any product development is to understand the goal. When it comes to mobile payments, building a mobile wallet is not the goal, but a mean. So what is the goal? In a very high level, the goal is to do mobile commerce.
Mobile payments v.s. commerce?
Here we use the term mobile commerce rather than mobile payments, because mobile payments is still a mean rather than the goal itself. It does not add much value by creating a mobile wallet that is just a simple digital substitute of physical payment instruments. Mobile commerce refers to the lifecycle of exchanging products and services among different parties, facilitated by modern mobile technology in a secure and seamless manner that the existing system cannot provide.
In contrast to traditional means, mobile technology can potentially turn a commerce into a closed-loop in which different stages of the commerce lifecycle are tightly connected and continuously evolving thanks to the “closed loop”.
Within the commerce circle, payment is a fundamentally important element but not the only one. Hence focusing only on payments may not necessarily help to bring sufficient values to the entire ecosystem.
It is all about creating values
Secure and smooth payment is the norm, not the differentiator. The real differentiator is how a mobile solution helps to optimize the overall process and business values for all participants in the commerce circle. This is not easy without viewing the complete commerce circle as a whole.
A good solution is the one that brings the most value in more or all phases of the commerce circle, for all participants involved. The value can be either simplicity, cost-reduction, process optimisation, or revenue creation, data insights, etc., depending on the pain-point of the use cases.
If we only look at the payment itself, QR-code based payment solution may struggle to compete on the pure payment experience with its rival, NFC. However, if we look at a bigger picture, QR-code can offer many other possibilities that NFC technology do not necessarily have, and support scenarios where NFC technology does not fit.
For instance, in a retailer environment where the checkout speed needs to be optimized for fast turnover, there could be multiple choices. The most straightforward option is to increase the speed of the payment itself, in which case NFC-based solutions might win over the others.
Some players, however, tackle the problem from a different perspective. Rather than focusing on payment speed, Walmart´s mini-program embedded in WeChat Pay is a good example of a parallel checkout option, which aims to optimise the whole shopping experience. Consumers can scan goods while they are shopping and pay directly from the app without going to a cashier. As a result of the payment, an “exit QR-code” is generated such that consumer can open the gate with the code and leave the shop. A hassle free experience. Similarly, Amazon Go provides a check-in and check-out experience with a consumer QR-code, while keeping the payment process invisible, or async from the check-in(out) process. In both cases, QR-code offers more superior overall experience due to its simplicity and flexibility to optimise a large process. Furthermore, we should not to forget about its possibility to easily include the retailer loyalty programs, promotions, delivery status and product information into the seamless shopping experience, comparing to its rival technologies.
Another use case worth mention is the drive-in experience, such as drive-in restaurants or toll gates. In those scenarios, a QR-code solution can again enable a different overall experience, from ordering to payments. e.g. imagine a driver just scan a gigantic merchant-presented product QR-code to place order directly from his/her car, and also pay for the order without leaving the car. The possibility to quickly and easily exchange information from a distance again makes QR-code a better choice to bring real value to the use cases.
In short, it is all about creating values that makes it easier for people to interact and to do commerce with each other. So, which technology is better? — not a relevant question without context.
QR-code is bridging products, services and people
Due to its open standard, simplicity, capability of carrying different types of information and low implementation costs both on issuing and acceptance sides, QR-code is a good tool to bridge people, products and services in many ways, not only on payments.
When talking about QR-code ecosystem, Asia, especially China has been recognised as a front runner. A key reason is precisely due to the fact that the state-of-the-art players, such as Wechat and Alipay, are focusing on solving real problems and creating values for both consumers and businesses when designing their products and services. Technology is considered as an enabler rather than determinator.
According to WeChat, the QR-code facilitated lifestyle ecosystem of Wechat (including payments, advertisements, mini-programs, etc.) has led to economical value of over 8 trillion RMB (around 1.2 trillion USD) in 2019, either directly or indirectly. A majority of the economic values are not on payment itself, but facilitated by payments.
Conclusion
The choice of technology depends on the needs. The core of the QR-code payment is not about the QR-code itself, but why and how QR-code could help to better address certain needs of the whole ecosystem, rather than purely the payment, comparing to other technologies.
At Vipps, our philosophy of product development is also based on solving real problems of people´s everyday life by properly utilising the modern technology. We are not limited by technology, but taking the best use of it to create real values. Among the diverse Vipps product portfolio, there are many QR-code based initiatives too, because we see the values of using QR-code technology in those scenarios.
To list a few examples, QR-code is used in Vipps wallet to allow people easily identify each other when initiating a P2P money transfer, hence making the transfer much simpler and quicker.
Next to that, to serve SMEs and seasonal businesses who require simplicity and low cost to accept payments, Vipps has a P2B solution based on static QR-code such that merchant can simply print out a QR-code sticker and let the consumer pay by scanning the code.
Of course, we have not forgotten the big retailers :). For them, the needs are different as they require low changes on business relations, process, existing infrastructures both on payments and loyalty, and at the same time offering a seamless mobile experience to allow the consumers use their preferred wallets. Based on the needs, Vipps has developed a merchant-presented QR-code solution, which reuses the existing commercial agreements and settlement/reconciliation process between the retailers and the domestic scheme BankAxept, hence offering a mobile experience to consumers in their most preferred wallet without interfering the retailers existing business relations.
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