QR Code Payment: What it is and Why It Matters for Your Business

February 23, 2021

QR code payments have been around for a while. While they caught on in Asian countries, and notably China, Europe has been much slower to adopt them. But things have been changing in different parts of the world, with QR payments moving up on the list of preferred payment methods. So, let’s take a look at what QR payments are, how they work, and how they can benefit your business as a merchant.

What is a QR code?

QR stands for quick response. QR codes are 2D codes similar to bar codes, but they’re square and made up of a pattern of small black squares on a white background.

But the way they look is not the only thing that differentiates them from traditional bar codes. They can store more information than bar codes and can be read by smartphone cameras from both paper and digital sources like websites or apps.

A while ago, it used to be necessary to use a dedicated QR scanner app on smartphones. But these days, most native cameras on iOS and Android devices will read them instantly.

QR codes were invented in Japan in the 1990s by a company called Denso Wave. They weren’t used for payment at first – the main uses were things like production tracking and shipping within the automotive industry.

Gradually, they became adopted in other industries and for other applications like item identification or marketing, with, e.g., website links embedded in them that could be opened on a phone when scanned from an offline location like a billboard or leaflet.

At first, they didn’t become as widely adopted as experts expected, and some even predicted they would disappear altogether. But they did catch on in some countries, and most notably China, which was vital for the growth of QR code payments on mobile. One reason for this was that they enabled merchants to accept digital payments without having to invest in hardware like POS terminals.

Today, other regions of the world like Australia or Europe are picking up the trend. Some European mobile wallet providers start providing QR code payments to their users, and some US retailers already provide in-store payments using QR codes.

So what looked like a fad will probably stay with us as one of the many convenient digital payment methods that can be used both used online and offline.

Types of QR codes

There are two main types of QR codes.

  • Static QR codes have a URL embedded inside the QR code and can’t be edited or tracked. This type of QR code is used for quick payments in multiple industries like delivery services, taxis, street vendors, and retail. With static codes, the user enters the amount they have to pay, and the merchant verifies it.
  • Dynamic QR codes are editable, as the name suggests. They have various additional features like, e.g., device-based redirection. They can also be tracked, so merchants know how many people scanned the code, what device they used, and where they were located. All useful data when it comes to digital payment strategy but also things like marketing and defining the most profitable channels.

They also provide a better experience when paying. The merchant sending the QR code has more control over the payment amount, while the user who receives it simply accepts the transaction in their app.

What are QR code payments, and how they work

As already mentioned above, QR payments are simply payments made using QR codes. To process a QR code payment, you’ll need:

  • a smartphone or tablet with a built-in camera
  • a QR code scanner – or a barcode reader that reads QR codes

Today, both Android and iOS phones can read QR codes using the phone’s built-in camera. The user points at the code with the phone, the camera recognizes it and opens a push notification. When the user taps it, it takes them to the relevant action – like opening a website or app, finishing a payment, or processing a bank transfer.

There are several ways in which you can process a QR code payment:

  1. Smartphone scans the merchant’s QR code. The buyer opens a relevant app, then scans the code displayed at the checkout or on a product, confirms the price (if required), and taps to complete the payment. In most cases, the user needs to type in their credit card details to pay – unless they’re using a mobile wallet, in which case they’ll use one of the available payment options.
  2. The merchant scans the QR code on the customer’s phone. The retailer confirms the total on their POS system. Then the buyer opens a relevant app on their phone, which displays a unique QR code. The code identifies your card details, and the store assistant scans it with a QR code scanner to complete the transaction.
  3. App-to-app payments. Both the merchant and the buyer open relevant apps. The merchant scans the buyer’s unique QR code displayed on their phone through their own app. The merchant confirms the amount of the transaction and taps to process and complete the payment.

The benefits of mobile commerce

As one of the multiple alternative digital payment methods, QR code payments can have numerous benefits both for the merchant and for the buyer, one of which is obviously more choice (which often means more transactions.) But let’s look at other benefits your business can gain if you decide to offer QR code payments for your customers.

  • Easy setup

Setting up QR code payments is actually much easier than, e.g., in the case of card readers. Working with a payment provider who provides QR code payments, you get access to a mobile app that will allow you to accept QR payments. There’s no complicated or expensive hardware involved, and the point of sale can be your phone.

  • Easy integration

You can place QR codes anywhere you want – print them out, put them on product labels, on websites, in emails, etc. This means your customers have different opportunities to use them, no matter where they are, and it doesn’t take any additional complicated tech – you can generate the codes yourself. This also means that they’re a great way to bridge the online-offline gap for the customer.

  • Connecting online and offline

So when we’re talking about omnichannel shopping experiences, QR codes are definitely an essential part of the concept, effortlessly connecting the online and offline worlds for the customer and the merchant.

Say you have a restaurant that offers takeout (especially relevant considering all the covid-related restrictions):

    • You can point your customers to your online menu at your physical location. You don’t need a physical menu (which also eliminates paper, disinfection, etc.), and your customers can order and pay through their app.
    • Customers can order online while being in-store, avoiding queues, and going straight to collecting their purchases.
  • Security

QR codes are also a secure digital payment method – and definitely more secure than, e.g., cash payments or traditional payment cards. Your payment information is encrypted, and you don’t have to fill in your details like your credit card number and security code anywhere online.

Some payment providers also tokenize the payments like with digital wallet payments, where neither side of the transaction stores the payment details at all – and they’re impossible to intercept or copy during a transaction.

Of course, as another cashless way to pay, QR codes are also becoming more and more popular because they allow more social distancing. In some cases, the only moment you need to come near any other human being is to collect your order.

How to use QR codes for your business

If you’re still looking at creating a mobile experience for your customers, or want to improve your existing one, there are several things you should do.

Design with the mobile experience in mind

How you can use QR payments will largely depend on where in the world you’re located and what options your payment service provider offers. But here are a few examples:

  • Create a food-and-drink menu with a QR code to display at your premises. You can use it for table-side or takeaway orders.
  • Display QR codes in your point-of-sale app for your customers to scan off the screen.
  • Print QR codes for individual products for contact-free payments at your store.
  • Create QR codes for fixed or open amounts that merchants can display in-store or online for your customers to scan and pay for using their payments apps on their phones.
  • Generate QR codes on customer receipts or invoices to scan and pay for online using their mobile wallet, confirming the payment with facial recognition, fingerprint, or a PIN code.
  • If your payment gateway supports QR codes, you can also accept QR payments in your online store.

For example, in Thailand, some street food vendors offer QR code payments, mostly used by the younger demographic among their customers. This is a convenient way to accept payments for a small range of sold goods. What they can do is print a QR code for each product, and the customer scans it to confirm the payment on their phone.

QR codes can be used for public transport tickets, including buses, trains, underground or even flights, as well as tickets to the cinema, museums, etc. Some booking apps offer the QR code option, plus the QR code can be scanned at the entry to confirm the ticket was paid for.

The future of QR code payments

QR codes can play an important part in the transformation towards a cashless society. Especially when considered the fact that the user experience is very good with this payment method, and it doesn’t involve a lot of effort from the customers. Plus, it doesn’t place a lot of burden on the merchant, especially when it comes to the tech and additional costs and devices.

That’s why some experts predict that QR codes can make a comeback after being neglected for some time and even join the mainstream payment methods on some markets. This is, of course, affected by the dramatic growth of digital payments overall, hastened by the COVID-19 pandemic.

They probably won’t replace credit or debit cards in the nearest future but may become an interesting and convenient alternative to those who decide to go cardless, which is a growing portion of the global society.

There is definitely a consumer demand – and a growing one, so a lot now depends on the adoption among merchants. These have been on the slower side in markets like the US, but experts predict a bright future for this type of digital payment method, with considerable growth in 2021.

Since QR codes are beginning to be widely used as proof of vaccination for travelers, we can expect the platform will catch on again as a sort of a side effect of the pandemic. But we’ll yet have to see how this unfolds in the coming months.

Meanwhile, if you want to discuss digital payment methods for your business, reach out and schedule a demo with the DOCOMO Digital team – you can do that here. We’d love to help you offer more convenient digital payment methods to your customers.

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