The rise of the QR code
QR codes have made payments much quicker and easier; by simply opening their chosen payment app and scanning a QR code (or the merchant scanning the consumers code) consumers can complete a transaction safely and securely within a matter of seconds. This technology has been very useful for 3rd party companies in China since it allows them to bypass the traditional payment infrastructure, opening new revenue streams from fees and data generation. However, in Singapore payment providers are only able to leverage the existing technology. Looking forward, the adoption of a standardised national QR code represents a clear indication of how governments are taking this technology seriously and will cement the QR code as an integral part of future payment solutions.
The launch of the SGQR is major step forward in creating an interoperable system but the Singaporean government is not alone in pushing this policy in the region. Despite not yet having comparable levels of interoperability many countries have taken steps to unify their QR systems. Earlier this month Taiwan began rolling out a standardised QR code payments between Visa and Taiwan Cooperative Bank. Indonesia is also in the preliminary stages of creating the infrastructure for an interoperable QR system; in September this year Bank Indonesia announced it has completed the first stage of testing for a standardised QR code and expects this to be launched next year. In 2017 Thailand also launched a standardised QR code for Visa, UnionPay, and Mastercard.
Why all the fuss?
The benefits to consumers are clear, standardised QR codes remove any confusion when it comes to paying via mobile wallets thereby often smoothing the consumption process. In other regions, such as the US or Europe, tap and go cards offer a similar payment solution. However, the advantage of mobile wallets in Asia-Pacific is that they can serve the large proportion of people without bank accounts. Yet, as QR codes have grown in popularity the payment market in Singapore has become congested. With many mobile wallet providers available consumers are presented with several different codes at the point of purchase, which creates a cluttered and confusing environment. However, with the launch of SGQR consumers only need to open their preferred mobile wallet and scan the single QR code displayed. This makes the process of paying by mobile wallet easier, therefore expanding its popularity and reach over cash and card payment – a key goal for the MAS.
SGQR also presents several benefits to merchants. Firstly, merchants must only worry about displaying one kind of QR code on their fronts. This reduces the time spent updating shop POS’s with new QR codes and allows more space for other items the merchant may wish to display. Creating a more seamless environment can also cut waiting times and ensure faster payments reducing the workload for employees. Furthermore, SGQR also removes the need for bi-lateral negotiations between specific merchants and payment providers. All that is needed is for the payment provider to agree terms with the MAS and then that provider is automatically compatible with all existing QR codes in the country. On top of this, an interoperable QR system not only benefits domestic agents but also provides a succinct gateway for foreign mobile wallets to expand into new regions since foreign providers can be added to the SGQR. In the future, this may generate greater cross-border transaction volume through mobile wallets.
Potential impact on incumbents
For already existing mobile wallet players the standardised QR code may have an ambiguous effect on their market share and revenue. In one case, as mentioned above, it will create a more frictionless e-commerce environment which could increase sales and revenues. However, it is likely to also increase competition. For example, the SGQR system will have 27 compatible mobile wallet payment options available once the launch is complete. This means that for consumers there is a lot of choices and they will probably go with the least cost option. Hence, we expect to see many more consumer deals and bonuses built in to mobile payment platforms to entice customers to use their services. This could harm market share and revenue of established players in the market.
In the last few years QR codes have rapidly changed the way consumers in the region pay for goods and services. In China alone USD$ 12.8 trillion worth of sales by mobile wallet payment was recorded in the first 10 months of 2017. This has left regulators and government playing catch up with the market. Yet, with the SGQR launch and other governments in the region investing in standardised QR systems it looks like the national QR code will be a standard part of the payment infrastructure in the future.