Will Use of QR Codes Grow in the Age of Social Distancing and Eventually Displace Cards?

This QR code manifesto focuses more on lowering the cost of payments than it does on QR code technology and only at the very end identifies how QR codes enable fraud. Mercator conducted global adoption research of QR codes for a large payments industry leader and published” QR Code Developments May Disrupt the Disrupters” which highlights that the existing payments infrastructure has a key role to play in tamping down fraud. We also published “EMV Technology Update: EMV Classic, Faster EMV, and Now QR Code EMV” after EMVCo added QR codes to the EMV specification.  This article ignores security, KYC, device provisioning, access to the bank account, dispute processing, and liability ownership and other key obstacles that traditional payment networks have developed over the years. There are more challenges to QR code adoption in payments than identified here:

Pros and cons of QR code payments

The QR code payment infrastructure has a number of advantages over Visa and MasterCard’s offerings today.

Firstly, the cost of making QR payments is lower than that of Visa and MasterCard, since unnecessary intermediaries – Visa and MasterCard themselves – are eliminated from the process. Therefore, QR code based payment systems, at a minimum, can offer a reduction in commissions, which is very attractive to businesses, who can then offer more competitive pricing to customers.

In the future, QR payments may even become free due to the distribution and legalization of open source solutions by regulators. In the meantime, commissions will depend on the greed of the banks and their willingness to change business models, reducing their share of transaction income, in favor of, for example, a more honest business model, such as subscriptions. Judging by the fact that most progressive fintechs have chosen a subscription model, the future of this option looks bright.

Secondly, to organize digital, non-cash payment by QR codes, entrepreneurs do not need expensive equipment, and no payment terminals. All that’s needed is a smartphone, which almost everyone has today. Price tags with QR codes can be printed on stickers using a regular printer. The buyer also needs to have any phone with a camera and an installed banking application.

Thirdly, thanks to QR codes, the digital payments infrastructure is becoming more open, as it is easier to integrate new financial instruments, including cryptocurrencies, into it. QR codes can be used not only in ordinary stores, but also in e-commerce, in instant messengers and on any screen, any app and any surface they can be displayed on or affixed to.

Of course, QR code payment technology also has disadvantages. The main problem is the risk of fraud, which is directly related to the main advantage, being the simplicity of generating codes. Attackers can replace existing codes with their own, hacking an online store or replacing a printed code in an offline retail outlet. However, there are already mechanisms that can deal with this. The British regulator has ordered the country’s largest banks to send push notifications to users with information about the seller and additional confirmation for the transaction. The Bank of Scotland was first to introduce this procedure, and the other major banks in the U.K. should do this before June 30, 2020.” 

For the original article quoted in this coverage, please click here.

Overview provided by Tim Sloane, VP, Payments Innovation at Mercator Advisory Group.

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