A single QR code for payments across the world will let even kiosk businesses go global

Masahiro Hara, the Denso Wave engineer who invented the ‘quick response’ (QR) code, had never imagined that his system of labelling automotive parts would one day become crucial to monetary exchange. That innovation is a preferred form of contactless transfer of value across Asia and Latin America, starting with China’s Alipay and WeChat 12 years ago. Small retailers who couldn’t afford costly credit-card terminals and high fees have been the biggest beneficiaries, as have consumers who have traditionally lacked access to bank accounts.

Now comes the next big thing: A move toward integrating disparate apps so that one day a single QR will work anywhere in the world. Brazil’s Pix QR, India’s UPI QR, Indonesia’s QRIS, the Philippines’ QR Ph, and Singapore’s SGQR are all successful examples of the basic idea that a merchant shouldn’t have to display scores of barcodes to accept funds from various sources. A single image ought to be compatible with every consumer app and wallet.

To that, add a second objective. Foreign tourists must be able to whip out their phones and settle bills like locals. National payment systems such as India’s UPI are forging agreements that will let other countries use them. The major economies of Asean—Indonesia, Malaysia, Singapore, Thailand, Vietnam and the Philippines—are linking their QRs for the 18 million intra-regional tourists who spend around $19 billion annually. Assuming that it is able to capture 15% to 20% of transactions, Asean QR would facilitate $4 billion in consumer expenditure and inspire the rest of the world, according to BCG.

There is a lot of work to be done. Consolidating labels in a single repository doesn’t always solve the problem of multiple contractual relationships, each of which has its own accounting. For instance, Singapore shops that display the common QR need to individually sign up with a host of payment methods. Only then can they accept Alipay, GrabPay, ShopeePay, UnionPay, etc. This month, however, the city-state is piloting a new strategy. An improved version of its common QR (SGQR+) will ask retailers to enter only one relationship to accept payments from any of the 23 participating wallets and apps. So a mom-and-pop operation will have to deal with a single set of accounts that will consolidate transfers coming in via popular local platforms as well as China’s Alipay, WeChat and UnionPay, Thailand’s PromptPay and Malaysia’s DuitNow. Visa and Mastercard, which have also been offering their own QR-code options for the past six to seven years, will be joining in via XNAP, a cross-border network. Google Pay will do the same. In one of the pilot’s two tracks, merchants are being promised next-day settlement.

Policymakers in Europe and North America need to watch this Eastern experiment closely. So far, they haven’t paid enough attention to QR because their consumers’ demand for contactless payments is currently well served by near-field communication, a technology for wireless data (and money) transfer between devices that are in close proximity.

But then, Singapore, too, is a mature payments market with wide NFC usage. According to an EY-Parthenon analysis, 57% of retail transactions in the financial centre last year were settled with credit and debit cards. In the 18% of instances where a digital wallet was used, consumers chose to pay 97% of the time without scanning QR codes. They used faster methods, such as NFC-enabled cards stored in Apple Pay.

The reason why Singapore is still determined to fine-tune QR code-based payment is not its meagre 3% share in digital-wallet transactions, but its 72% compounded annual growth over the past five years. This rapid expansion is being driven by tiny enterprises that began to go digital during the pandemic. Considering that 19% of the city’s of point-of-sale transactions last year were in cash, the government’s Hawkers Go Digital programme still has a long way to go. Enabling food carts and street vendors to get the maximum possible share of tourist dollars (or yen, or yuan, or rupees) ought to be a worthy goal for greater financial inclusion in any economy, developed or developing.

A successful SGQR+ could emerge as the blueprint of a global initiative. The ultimate aim should be a vast open loop in which even the smallest of businesses can go cashless and accept funds from any customer, local or foreign. Overseas visitors would still be using their everyday apps, and earning regular loyalty points.

Efficient as they are in packing a lot of data into tiny black-and-white squares, Denso Wave’s QR codes are unlikely to be the last word in exchange of monetary value. But their full potential will only be realized when a single QR suffices for all of the world’s payments. ©bloomberg