In the early 2010s, quick response (QR) codes were widely viewed as a challenger to NFC-based payments. While that held true in various Asian markets, QR codes remained largely absent from the U.S. and other western markets. This was attributed to the fact that in Asia, QR codes were initially triggered via static method, where the QR code was not generated in real time (or did not change on a per transaction basis). This method was not well aligned with the U.S. and other western markets, where POS system integration was necessary for their efficient widespread use.

Further, the technology required to make the reading and presentment efficient within a consumer’s mobile phone was not readily available. Currently, native camera applications on mobile phones all include default functionality to read and launch QR code-embedded data.

COVID-19 stimulates QR code technology

In the U.S., QR codes had largely fallen out of fashion until the COVID-19 pandemic, when merchants began to introduce QR codes as part of a contactless strategy. Early adopters were primarily from the restaurant industry, which was one of the most impacted by the social distancing measures. Eateries adopted the technology to enable digital menus and contactless payments, as well as to reduce the risk of infection among staff and customers. Tom Green, manager of policy and government relations for the Restaurant & Catering Industry Association, recently said that QR code usage has been “the single most important policy measure” in determining the industry’s survival during the pandemic.

Merchant enablement

Within the U.S., QR codes for payments are now experienced in two primary ways:

  1. Through the merchant’s systems enabling a QR code to launch a payments experience where the payment is completed on the consumer’s own mobile phone
  2. Where the QR code presented on the consumer’s mobile phone through a wallet provider’s application is present to the merchant’s system from where the payment is completed

Notably, Venmo’s new in-store payments experience, which is currently live with CVS, relies on QR codes. Besides CVS, PayPal is working with more than 100 “enterprise” merchants in the U.S. and European markets to introduce acceptance of QR codes for payment. The effort includes talks with payment networks and terminal providers to distribute PayPal QR codes. PayPal Chief Executive, Dan Schulman, stated, “It’s not just about touchless payment, it’s rewards, offers, messaging.”

Additionally, wallet and payment application providers, such as Google Pay and Square’s Cash App, are introducing a similar capability this year. And several installment payment providers, such as Affirm and Klarna, are leveraging QR codes to extend their capabilities in-store. Others have introduced pay-by-QR-code payment experiences, where merchants can present a QR code to shoppers (either via POS terminal or printed) that directs them to a link (e.g., pay by link) to complete their payment. PayPal has unveiled a similar capability in the U.S. and additional payment service processors are likely to follow suit.

Looking to the future

QR codes will long survive the touch-free objective they initially sought to serve during the COVID-19 pandemic in the U.S. QR code use will continue to evolve and play a key role in the payment industry’s future. For payment service providers utilizing QR codes to enable payments, this will just be the tip of the iceberg.

QR codes have a unique opportunity to launch consumers into a digital experience that goes beyond the completion of the payment and helps to keep the consumer and merchant engaged after the sale—whether in-store or online. This continued digital engagement offers an opportunity for increased consumer loyalty and greater merchant insights of aggregated consumer patterns. 

Find out more about ACI’s dynamic, digital in-store payments solution, which integrates with existing Verifone and Ingenico PEDs.

Head of QSR/Restaurant Merchant Subsegment

Amit brings more than 20 years’ experience working in payments to his current role as Head of QSR / Restaurant Merchant Subsegment. Amit joined ACI in 2019 by way of acquisition, when ACI acquired RevChip where he was Founder and President. He is a recognized domain expert in point-of-sale payment technologies, including EMV, NFC, terminal management and related systems. He also has extensive experience working with U.S. payment processors, Visa, MasterCard, Discover, American Express and Debit networks, successfully leading technical and business operations to develop industry leading products. Since joining ACI, he has maintained focus on developing innovative solutions, products and marketing strategy to address the evolving payments landscape. Amit’s specific expertise includes bringing together internal teams and partners to deliver ACI customers with best of breed solutions.