Is QR the future of payments and transactions in India?

QR codes have seen a huge increase in adoption in the last 2 years along with the adoption of UPI. In this post i explore the different payment methods, parallels with China and the different use-cases where QR will get huge adoption in the days to come. Come join me in peering into the future.

Let’s consider the different modes of payment and understand the convenience and cost for each payment mode to understand the popularity of QR codes.

Different types of payment methods

The following are the different modes of payments –

  • Cash
  • Swipe your Card on a POS/m-Pos machine
  • Tap your card (if contact less) on a POS machine
  • Use NFC enabled via GPay
  • Use a QR code to pay
  • Use a SmartPos on mobile

The opinion is divided on your favorite method of payment. And this gets further complicated between debit and credit. However from the table above one can see a clear difference in cost of the processor as a big hurdle for acceptance. As per RBI statistics last updated on Dec 20 and including only bank pos terminals, there are 5.74m machines in circulation with RBL leading the 1.76m machines. This does not include third party terminals. This number increased substantially due to demonetization with the number at only 1.1m in 2015. To give you perspective, there are 2.08m ATM machines in circulation. The RBI data similarly suggests that there are 3.2m Bharat QR deployed by the bank.

The other requirement to have a functional internet connection also makes it difficult for smaller merchants, especially in smaller towns to get the machine. On the other hand, QR codes have no such costs or internet connectivity requirements.

PineLabs recently demoed a new product that seeks to convert your mobile phone to a POS machine. It’s a pretty interesting approach for existing merchants looking to increase their card acceptance.

Now that we’ve understood the existing payment methods, let’s understand the reasons behind the popularity of QR codes.

QR code as a connecting layer between the physical world and you.

If we think of QR codes as the connecting layer between the physical world and you, you come across several interesting use-cases. Add a mix of local and time and suddenly this set increases in a big way. Apps are great if one has to place an order from home or choose from a wide mix of services. However if one wants to interact with a local player — seller or bus service, QR codes win.

We’re currently seeing QR codes being used to pay at merchants or pay people post a cab ride. In the last 8 months, we’ve also seen adoption for ordering at restaurants thanks to Covid. But the possibilities are limitless.

Order a meal in the train or a meal at the theatre

Consider ordering for your meal in the train. Currently someone picks up your order and then comes back for payment. With QR codes, you can just place an order at the appropriate time. And quickly pay for them too. No hassle for change or missing out on the order person. Or consider you’re sitting at the theatre and want to order your favourite pizza. Just scan the QR code on the seat and done!

Or imagine you’re travelling to Vasco and got on the bus. Just scan the QR code next to your seat and book a seat and complete payment for your destination. Or scan the QR code on your way out of the bus station. We’re already seeing adoption for a lot of these use-cases.

App or web & solving for the identity layer

Currently there are 2 ways the QR codes link to your mobile — a. An app b. The browser.

The next layer is the identity layer. Each merchant, store, ordering or ticketing system needs some form of identity management to identify its customers and issue receipts. If the QR code links to the web, currently the phone number verified using otp is the identity layer of choice. What are the different ways one can solve the identity problem?

On apps, this can be auto-signed in or using the existing preferred sign-in layer like Google Sign-on or Apple ID. Truecaller has an interesting solution which can be integrated more deeply to provide a seamless identity layer for both apps and mobile web.

QR codes for Payments

We’ve seen a great deal of adoption for merchants in India. And here’s why QR codes are objectively better:

  • More control — you can enter the amount to be paid
  • No contact
  • Easy to setup
  • Easy to manage — no battery, device servicing or other hardware costs
  • No charges

Let’s look at the stats.

Users did a massive 902m tons on PhonePe in Dec 20 using UPI. And P2M transactions were 42% of the total transactions. While there’s some ambiguity about the classification of transactions, we can see that a huge % of these payments were using QR codes! According to a Bloomberg report from Oct 2020, there are 40m QR codes are deployed.

Bharat QR and interoperability –

NCPI has very proactively mandated an interoperable QR code solution so that there isn’t fragmentation in the merchant and confusion for end user. Thus you can scan any QR code available at the merchant and complete your payment. The Bharat QR code works across banking and third party upi applications. Currently the QR code only features the merchant’s details like their UPI ID and/or their registered Bharat QR identity. And in the interest of protecting the privacy of the customer, details like phone number etc aren’t shared with the merchant.

QR codes for ordering

Pre-covid QR codes were largely restricted to payments. However with the advent of Covid and an increased focus on no-contact interfaces, we’ve seen QR code adoption by restaurants and shops for food ordering too. And new startups like DotPe have aggressively onboarded big merchants to their platform. They’re providing them with a web portal to list their products and a merchant interface to manage orders. Payment methods are further linked to the web app, completing the loop for end users.

Other interesting use-cases

If you check out the post by A16z and look at use-cases in China, we can see that they’re taken QR code adoption a lot further than anyone can imagine. QR codes have become the interface to choose products from a vending machine in malls, to rent a power bank at the mall, to enable offline advertisers interact and close the loop(no more send an sms to phone number, just scan the QR code and done!). If one thinks of use-cases unique to India, we can use it to pay at public restrooms, to book a badminton session at the local sports field or to book your favourite bicycle ride(few providers are already doing this, though it is limited by the identity layer.)

I’m excited by the possibilities in QR, especially solutions for the identity layer. What are the interesting use-cases of QR you’ve seen so far in India? What industries do you think will be re-defined by QR codes? How will QR codes evolve to solve for credit? What adoption will mobile POS see in India? These are some interesting questions to ponder over.

Interesting reads:

If you found the article useful, please feel free to hit the share with your friends. I’m a product builder currently re-defining credit in India. If you’re interested to work with us, please DM me here or on Twitter. I love all things consumer — fintech, social, video and music.

illustration by Dinesh Vernekar

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