QR Codes for Financial Institutions: The Rise of QR Code Payments
Last Updated: October 27, 2020
About a decade ago, no one anticipated that QR Codes would take the world by storm, especially for payments.
QR Code usage has exploded over recent years, especially in China, with the introduction of QR Codes for financial institutions via WeChat and AliPay, offering proprietary versions in 2011. A myriad of nations followed suit, slowly, to introduce QR Codes for their payment system.
However, the QR Code technology pioneered its spectrum with the onset of the COVID-19 pandemic. A majority of financial institutions and merchants aggressively pushed out the technology – for it is safe and easy to troubleshoot.
According to Facts and Factors, the global mobile technology market in 2019 was approximately USD 290 billion and is expected to reach over USD 5,500 billion by 2026.
This poses an excellent opportunity to shake up international payment systems to eliminate unwarranted hidden charges and move to something better.
With RBI, Ghana, and Malaysia constantly promoting QR Codes for financial institutions, QR Code payments are certainly on the rise.
4 unique use-cases of QR Codes for financial institutions for 2020
1. Process loan applications swiftly
Gone are those days when a loan applicant had to wait for weeks to months together to get approval of their loans. With an increase in digital payments, the loan application has shifted digitally too.
Today, several financial institutions are opening up their doors to adopt QR Codes as a part of their loan disbursement process to enhance the customer experience. Several banks and credit unions have started using QR Codes to their potential customers as a way to approve loan applications.
Given that QR Codes are increasingly simple to use, loan applicators can simply scan the unions’ QR Codes to land on their respective loan page and accumulate all their required documents in one go – all with a simple scan.
Financial institutions can use a QR Code to help their loan applicants fill out their forms, submit their documents, and keep track of their application – all in one single gateway.
Switching to QR Codes for loan applications fastens the process for eager loan applicants and boosts the number of loan disbursements, accounting for a higher ROI for the lender.
Tip – Make use of bulk QR Codes for loan applications to fasten the process without printing out individual QR Codes for each application.
With a steady increase in the number of digital payment frauds, QR Codes can provide an end-to-end encryption security feature for financial institutions and its customers to carry out secure transactions.
QR Codes can be used in place of single-time passwords or ATM PINs to withdraw money or even make any account-related changes. Replace QR Codes in place of passwords at ATMs, cash dispensers, and even at the bank’s cash counter.
Encourage customers to scan the QR Code to access their account and withdraw money. This method eliminates the need to enter their biometric ID and password and is also seamless.
OCBC Bank in Singapore has implemented QR Codes in their banks to help their customers withdraw money without any hassle.
3. Seamless payment transactions
Contactless payments are gradually changing the way customers are paying their bills, wire money into bank accounts, and make international purchases.
A few years ago, QR Code payments were not the preferred method because of slower internet, minimal compatibility with smartphones, and overall usage. However, the transition of making payments via QR Codes was so rapid that now, most countries have their own official QR Code payment gateways.
To accept QR Code payments, all merchants must set up acceptance through the merchant for the particular mobile wallet app processing the QR Code, without any costs.
QR Code payment system has been the go-to technology for financial institutions, credit unions, SMBs, retails, fuel outlets, and even restaurants.
To add QR Codes to any payment mix,
Add a QR Code UPI on the posters of the outlet
Place a QR Code at POS terminals
Encourage customers to pay via QR Code UPIs on their respective mobile wallets
Popular payment merchants such as Venmo, Apple Pay, and PayPal use QR Codes for all kinds of payment transactions.
Tip – Always authenticate the payment transaction with a password to avoid fraudulent transactions.
Bank statements are typically used to verify the source of income, proof of net worth, and keep track of money. Usually, the onus is on the user to get the physical statement attested issued by the bank.
However, this can be both time consuming and a three-ring circus for both the bank and the customer.
This problem can be solved by issuing a QR Code exclusive to the customer to access the account’s details. The QR Code can be added as an image and can be password protected by the user to validate authenticity.
QR Codes for bank accounts also minimize phishing since there is no URL involved and can be redirected to maintain a database seamlessly.
QR Code payment was pioneered by China back in 2011 with WeChat and AliPay.
According to eMarketer, half the China population will utilize the QR Code payment system, with this figure rising to 60.5% in 2023.
But, how did QR Codes become the norm for various financial institutions all across the world?
China paved the way for QR Codes for financial institutions
China has been a trailblazer in the cashless movement.
The country’s steady march toward a cashless society is enabled by Alibaba’s Alipay and Tencent’s WeChat Pay,” said Man-Chung Cheung, eMarketer research analyst. “These two leading payment systems have introduced QR code-backed payments into the daily habits of consumers.”
QR Code payment has been installed in every section of the country, including low-income merchants, making it extremely popular among people of all age groups.
Following in China’s footsteps, other Asian countries such as India and Singapore have led the way for QR Code-based payment systems.
In India, QR Code UPI, or a unified QR Code was introduced back in 2014. In 2016, the demonetization movement kickstarted digital payments in India, led aggressively by the government – giving birth to several merchants such as PayTM, Google Pay, and Bharat UPI.
In Brazil, payment companies Cielo, PagSeguro, and Mercado Pago offer QR Code payments at POS terminals.
Similarly, in the Netherlands, iDEAL allows merchants to generate QR Codes on customer receipts, print, and display in their stores, include them in invoices, and offer for online payments.
India’s single interoperability QR Codes leading the way
India’s Reserve Bank announced BharatQR in 2017, the world’s first interoperable QR Code acceptance solution, developed in conjunction with Mastercard, Visa, and National Payments Corporation of India.
This led to the birth of new-age payment merchants – PhonePe, Google Pay, and Amazon Pay, thus catapulting QR Code payment usage.
The most significant development was this year since the wake of the pandemic. In February 2020, India launched its interoperable QR Code barring other merchants from developing their QR Codes to elevate the security of payments.
BharatQR overcomes the limitations of closed-loop QR Code-based acceptance. A new merchant category has been introduced just for BharatQR, with the merchant discount rate (MDR) capped at 0.4%.
India is one of the few countries after China to have entirely digitized its payment system by introducing QR Codes.
QR Codes for a digitally inclusive future
QR Codes have been gaining immense popularity for proximity payments. While ease of use, speed, and reliability are far more superior than cash, the fact that most customers own a smartphone creates a significant factor in the increased adoption of QR Code payments, thus encouraging financial institutions to opt for QR Codes.
QR Codes presents easy and widespread opportunities to complete secure payment transactions. Besides, they can also bring a lasting and profound behavior change among low-income customers and merchants, making QR Codes a part of their everyday lives.
Over time, financial institutions can retrieve transaction histories and alternative data trails to access credit and other formal financial services with the aid of QR Codes, creating a gateway to financial inclusion.
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