Apple Pay

Can QR Codes Make a Comeback as a Payments Technology?

Technological advances lead to further, contingent advancements. Sometimes those new technologies stick around for decades, while others fade away within their first decade of mainstream use.
The Personal Digital Assistant and the beeper, for example, were both weigh stations on the path toward smartphone adoption. Speaking of which: remember back in the early days of smartphone adoption, when it seemed like the QR code—those blocky, pixelated barcode things—could be the medium of the future for data management and transfer?
It didn’t take long before QR codes transitioned from the technology of tomorrow into a joke. We all assumed the QR code was just another PDA or beeper. We tried it, it didn’t work, and now we’re moving on to more advanced technologies. With tools like mobile wallets available, which are powered by near-field communication (NFC) technology, who needs QR codes?
QR codes might have faded from the public space, but they’re still alive and well in the payments industry. You just need to know where to look.
QR Code Payments & Chinese Consumers
Credit and debit card payments are the norm in the US and Canada. Consumers here remain skeptical of alternate payment methods like mobile wallets; for example, only-third of iPhone users in the US have tried using Apple Pay, the device’s mobile payments platform. But, that’s not the case in most of the world.
Alternate payment methods like bank transfers or hybrid brick-and-mortar/eCommerce payments are popular in other markets for both online and brick-and-mortar transactions. If we’re talking about major markets outside the US, though, none exert as much pull as China. Now the world’s largest market by purchasing power, China stands to wield significant influence over global payments. If we look at that market, we see mobile options are surprisingly dominant.
As of 2017, Chinese processors registered about $15.4 trillion in mobile payments within the country, dwarfing every other market on Earth. But, rather than NFC-based tools like Apple Pay, Chinese consumers prefer to use QR code technologies. That’s right: most of that $15.4 trillion in activity occurred via QR-based tools like WeChat Pay.
So, why do Chinese buyers gravitate toward QR codes as a payment method?
It’s generally a combination of ease of access on the consumer end, but adaptability and affordability for merchants. Rather than making the up-front investment in card terminals and other technologies to accept payments, merchants can simply print their QR code on a sign. Customers then scan the code with their phones and pay in seconds. It’s fast, easy, affordable, and widely accessible in a country with 788 million mobile users.
Can QR Codes Catch on Outside China?
The question many would ask is whether the affinity for QR codes will impact markets outside China’s borders. The truth is, of course, that they already have.
With an influx of Chinese tourists in recent years, more and more Japanese businesses are looking to court buyers by accepting Chinese consumers’ preferred payment methods. Thanks to a deal between WeChat and Japanese tech firm Line, Chinese travelers can purchase goods in Japanese shops using QR codes.
It’s not only limited to locales in which Chinese tourists make up a major consumer cohort, though. Here in the US, for example, QR codes are widely employed by brands to make payments in their proprietary apps.
Typically, there is some incentive used to entice customers over to try the app, like incorporating a loyalty program. Users tend to stick around, though, for a variety of reasons including convenience, ease of use, and special promotions. For example, Dunkin’ Mobile®—an app I happen to use every day, personally—allows users to pay in-store using a reloadable gift card balance. You can order before you arrive, then pick up your drink in seconds, while also accruing points toward free drinks in the future.
Convenience and free stuff are powerful incentives. A recent survey of Walmart Pay users conducted in December 2018 found that 52.5% of respondents used the app “every chance [they] get.” That represents a near 100% increase in dedicated usership compared to just nine months earlier.
The QR code is an easy answer for brands who want to manage their own internal payments ecosystems. And, as more brands embrace proprietary mobile apps based around QR code payments, that will be the default option…at least within store-branded apps.
I don’t believe the QR code will supplant the credit card—or even mobile wallets apps like Apple Pay—anytime soon here in the US. The conditions in the payments ecosystem are completely different, with most consumers and businesses being well-adapted to credit and debit cards. Nor do we see same portion of tourist volume from mainland China that Japan does, thus creating little incentive to adapt.
Owing to the growth of proprietary mobile apps for retailers, though, the QR code has a promising future in the North American payments sector.

Are You Making the Most of Mobile Payments?

At this point, most of us have a smartphone in our pocket. In fact, you may even be reading this on your smartphone right now.
According to a consumer survey conducted by PYMNTS, smartphone penetration currently stands at 77% of all adults in the US. Of those, roughly 43.5% use an Apple device, while 52% are Android aficionados. But, while smartphone ownership is ubiquitous, smartphone-enabled payments have been much slower to catch on.
Apple’s mobile wallet tool, Apple Pay, debuted back in 2014. Now, five years later, only one in three iPhone owners here in the US have yet tried out the app. That’s just 13% of American smartphone owners as a whole.
Although mobile payments tech didn’t spread like wildfire here as they did in other markets like China, adoption is slowly catching on. The survey mentioned above also noted that 7% of all iPhone owners used Apple Pay to conduct the last transaction they made. This suggesting that a large portion of iPhone owners who eventually give the app a try will end up converting into regular users.
Although we’re still early in the consumer adoption process, it’s just a matter of time before consumers pick up mobile payments en masse. There’s a few why it’s in your interest to expand your payments options and get on the mobile payments bandwagon now.
Mobile Payments Present Opportunities to Engage Buyers
Mobile payments offer numerous benefits for your business. For example, this technology is a great way to cater to customers’ desire for convenience. In turn, you see boosts to you conversion and retention, making shopping cart abandonment less likely.
In a recent study, 42% of online shoppers said the variety of payment options available at checkout will influence their decision when deciding where to shop digitally. Plus, while the number of mobile payments devotees is still relatively small here in the US, accepting mobile platforms can broaden your appeal to international buyers.
Take China, for example. The country is a global epicenter of online retail, with a market valued at nearly $2 trillion in 2019. And, as mentioned before, Chinese consumers are big on mobile payments. eMarketer projects the number of mobile payments users in China will hit 577.4 million by the end of 2019. Many Chinese consumers don’t bother with payment cards at all, opting for platforms like WeChat Pay and Alipay instead.
A similar trend is underway in India, as well as other hot, fast-growing markets like Vietnam and The Philippines. If you can cater to consumer preferences in these various markets, you possess a clear advantage over other international sellers.
Not only that, but there are opportunities for potential integration with your existing or future loyalty program. Kohl’s, for example, integrated their program with Apple Pay, allowing customers to pay with their mobile device and rack up points at the same time. Other outlets like drugstores, restaurants, and even Coke vending machines, took similar steps.
Of course, this requires working through your processor, acquirer, and other service providers to make possible. But, some vendors are actually taking the first step there, recognizing mobile pay integration as a great way to add value to their services.
Most Important: Security
Appealing to customer convenience and opening to new markets are great reasons to embrace mobile payments. If there’s one key advantage to mobile wallets, though, it’s the security factor. In fact, it’s somewhat ironic that 43% of consumers believe mobile wallets are not secure. By any objective marker, these apps are far more secure than any other mainstream payment method.
First, mobile wallets like Apple Pay employ the same tokenization technology as an EMV chip-enabled card. As opposed to magnetic stripe cards in brick-and-mortar stores, or conventional card-not-present transactions online, a mobile wallet app doesn’t transfer any actual cardholder data. Instead, the app exchanges a token, which works like a placeholder for sensitive or valuable data. This gives bad actors much less opportunity to intercept and steal payment information.
Even more impressive is the mobile payment app’s reliance on two-factor authentication. This isn’t inherent to the app. But, in most cases, it’s a practical reality of using a mobile wallet.
Before authorizing a transaction, the customer will first need to unlock the device. This is usually achieved with either a passcode or a biometric scan like a fingerprint. Then, to authorize the payment itself, users must again verify their identities with a biometric scan. Compare that to a standard card-not-present transaction, in which the buyer simply enters their card information. Sure, tools like AVS or CVV verification can help pick our fraudsters, but some attacks will inevitably sneak through even the best antifraud defenses.
The combination of different verification techniques offered by mobile wallet technology translates to much greater payments security than any other method currently in wide use.
More in Store?
The future will bring additional opportunities for those who embrace mobile payments early-on. For example, integration with the recently-announced Apple Card could be a first step toward a revolution in payments.
For now, though, both businesses and consumers will enjoy substantial benefits from mobile payments adoption.

A Day With Apple Pay

The success of Apple Pay will in part be determined lies in the hands of the people behind retailers’ counters. How are those people doing two months after the service was introduced?