Masahiro Hara, the Denso Wave Inc. engineer who invented the two-dimensional barcode known as quick response, or QR, had never imagined that his system of labelling automotive parts would one day become a crucial pillar of monetary exchange. That innovation has emerged as 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 — Southeast Asia alone has 80 e-wallets used by more than 200 million people.
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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 different 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 smartphones and settle bills just like locals. National payment systems such as India’s are aggressively entering into agreements that will allow other countries to use them. The major economies of the Association of Southeast Asian Nations — 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 the Boston Consulting Group.
There is a lot of work to be done. Consolidating the labels in a single repository doesn’t always solve the problem of multiple contractual relationships, each of which comes with 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, NETS, ShopeePay and UnionPay, among others.
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This month, however, the city-state is piloting a new strategy. An improved version of its common QR — SGQR+ — will ask retailers to enter into only one relationship to accept payments from any of the 23 participating wallets and apps. Consequently, 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 Inc. and Mastercard Inc., 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 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 center 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 meager 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 program 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 in tiny black-and-white squares, Denso Wave’s barcodes 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.
