Scanning financial possibilities with QR codes

QR codes (short for “Quick Response”)—or those squiggly black-and-white mazes you know them as—have only increased in popularity lately, but they’ve been around for years. The first ones sprung up in the early 90s as an innovation meant to track car parts across Japan, much like a DHL parcel is tracked throughout its delivery. They were fleetingly hailed as the future of information-sharing, but they never really took off in the ways experts had hoped they would. Instead, they became known for their absurd uses, failed miserably and sank into oblivion. But as with all great things, QR codes found a way of coming back around. It turns out they were not so much futile as simply incompatible with their times, and have certainly come a long way since their development. Today, they’re being used for marketing, bookmarking web pages, adding friends on Snapchat, exchanging business cards or even by homeless people—many are seen dangling QR codes around their necks, by which they accept donations via mobile phones. (“Sorry, no loose change” is no longer a viable excuse to fend them off!)

QR codes versus barcodes

QR codes are readable faster and have a greater storage capacity than regular barcodes.

But what makes QR codes better than simple barcodes, and why are we only talking about them now? Industries outside the automotive one gained keen interest in them due to their fast readability and greater storage capacity than regular barcodes. While both contain machine-readable information, a QR code is two-dimensional, meaning it carries information both in vertical and horizontal directions, allowing it to hold up to some hundred times the amount of information a conventional barcode can; it can be read in 360 degrees, from any direction, and requires no other infrastructure than a smartphone.

One major trend has led this upsurge: the world is on the fast track toward a cashless society to boost financial inclusion for the unbanked (the World Bank estimates that two billion people are without a bank account)—enabled, of course, by the ubiquity of smartphones. With cash being more and more associated to money laundering, terrorism financing, obsolescence and inefficiency, there is a “war on cash” being played out today. Several countries are making a definite move towards digital payment solutions, which have proved to be particularly popular in countries with notoriously inadequate banking infrastructures. Nowhere is this trend more obvious than in China, who takes the lead when it comes to mobile payments: in 2016, the digital payment market hit over $5 trillion (50 times that of the United States’), leapfrogging credit and debit cards; and thanks to a savvy decision by Alipay to use QR codes, one-third of those $5 trillion transactions were made using QR codes.

The digitalization of “fiat” currencies and payment

Easy-to-deploy, inexpensive and secure, merchants are increasingly adopting them for payments

The global “electronification of payments” trend was accelerated (or arguably, even triggered) by India’s demonetization. In a desire to purge black money, the country eliminated 86% of all cash from the economy, paving the way for BharatQR, a nation-wide standardized QR-code payment method that combines MasterCard, American Express, Visa and National Payment Corporation of India (NPCI)—the first solution of its kind in the world. The popularity of M-Pesa also bears witness to Africa’s appetite for digital payments. Quick to realize that mobile phones are more accessible than bank branches, M-Pesa enabled 60% of the Kenyan population to access financial services with mobile money accounts, and no requirement for a bank account. As an easy-to-deploy, inexpensive and secure technology, merchants are increasingly adopting them for payments. It’s simple: customers just point and scan. Retailers are given a unique merchant code, which customers can quickly scan and make easy, direct payments. There is no need to type in convoluted numbers—therefore minimizing typos and errors—or to invest in expensive point of sale (POS) hardware.

As six billion people across the world are projected to own a smartphone by 2020, and as the likes of Bitcoin continue their meteoric rise, one thing is sure: cash is no longer king. The future of finance is upon us, set to bring millions of people into the folds of financial inclusion. And QR codes happen to be quite the fitting technology to that end.