The rise of QR code payments in ASEAN

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People are beginning to use QR (quick response) codes to pay for goods. China and Japan lead the way but can ASEAN catch up?

By John Pennington

QR codes have been around since 1994. QR code adoption in Asia still outstrips Europe and the US. Users scan the codes to access data, information and websites using smartphones.

Japanese companies were among the first to bring them to a mass market. They are now very common in China. Their prevalence in ASEAN is also on the rise.

Japan and China were quick to adopt QR codes

QR codes became popular in Japan when smartphone developers included QR-code reading technology. Adoption took off in China in recent years, thanks to Alibaba’s Alipay and Tencent’s WeChat Pay.

Those two companies enabled contactless payments by scanning QR codes. Consumers can now scan a QR code to tip a waiter, buy wedding gifts and even donate money to homeless people.

Using QR code payments has advantages for companies. Terminals that support Apple Pay or Android Pay are expensive. QR code payment systems do not need an internet connection to work. That makes it a more viable model for ASEAN nations as they strive for a cashless society.

China has started to regulate QR codes as a payment system

Regulators had to react in China. There are security concerns. For example, the merchant cannot always guarantee the identity of the consumer. The People’s Bank of China mandated that companies using QR codes self-regulate.

The banks want companies to prevent fraud. One report put the cost of QR code fraud in China at US$13 million.  They advise adding expiry dates to codes and using encryption. Adding expiry dates prevents fraudsters from using old codes to trick people. Encryption adds a layer of protection during the transaction.

Companies must prove they have adequate security measures in place. Otherwise, there is a limit to what consumers can pay using QR codes. The banks want to raise this limit.

It is becoming easier for consumers to access QR code scanners

Users once needed specialist applications to scan QR codes. Apple’s latest smartphones will have built-in QR code scanners. This development will broaden the global appeal of QR codes.

Sources: Newzoo, Statista

The growth of WeChat and Alipay led to the rise of QR codes as part of China’s payment system. Both apps include a QR code reader. QR payments are convenient for consumers. Where there is a good mobile signal, the transaction takes less time than paying by card.

Young people are already comfortable buying products with their smartphones. “The biggest advantage QR codes have is that consumers understand them intuitively,” said Steve Mott, principal of advisory firm BetterBuyDesign. “They’re more intuitive than even Apple Pay.”

Singapore is making moves towards QR code adoption

DBS and OCBC launched QR code payments in April 2017. Their customers can now scan QR codes with their smartphones to pay. The bankers believe the payment system is “ripe for disruption”.

80% of transactions in Singapore – 90% in hawker centres – are cash-based. An option that eliminates costly and complicated payment systems would encourage disruption.

Singapore is also making moves towards implementing a unified QR code standard. Banks, consumers and regulators need standardisation. It helps them move forward without complications.

In Malaysia and Thailand, QR code adoption is also underway

85% of payments in Malaysia are cash-based. Maybank launched a cashless mobile payment system using QR codes in December. The bank wants to promote cashless payments throughout the country.

Mastercard wants all businesses to take payments using QR codes. The Malaysian banks are discussing a new policy framework. Malaysia has a goal of installing 800,000 point-of-sale terminals by 2020. Mastercard is working with Bank Negara to help the country reach that target.

Banks in Thailand gained approval for a QR Code e-payment service. The decision followed a successful trial in Bangkok. The Bank of Thailand is now pushing for a single standardised QR code to maximise its impact. These are positive and forward-thinking policies. They mirror the processes China followed and signal intent to adopt QR codes.

Elsewhere, progress has been slower – but potential is high

In the Philippines, until recently, the use of QR codes remained limited. Some departments exploited QR code technology. The Bureau of Internal Revenue used them to monitor revenues from some products.

However, in October, there was a significant breakthrough. PayMaya Philippines made QR payment technology available countrywide. In the Philippines, where smartphone use is on the rise, QR payments could now take off.

The United Overseas Bank (UOB) outlined optimal conditions for cashless payments to thrive. Those conditions included extensive broadband coverage and a unified payment infrastructure. The bank also recommended harmonised government policies.

In a 2016 report on network readiness, Singapore topped a list of 139 countries. Malaysia (31st), Thailand (62nd), Indonesia (73rd), The Philippines (77th) and Vietnam (79th) trailed. UOB analysts made another critical observation. When combined, these countries represent the world’s fastest-growing internet market.

The UOB estimated there would be 480 million internet users by 2020. The bigger the market, the more demand for mobile payment options will grow. The better connected a country is, the more suited it is for QR code implementation.

Source: Statista

It will take time for ASEAN to adopt QR codes

QR codes will become part of ASEAN nations’ payment systems. However, they are still some way off emulating China and Japan’s adoption of the codes. QR code standardisation and acceptance from the banks is essential.

In China, for example, merchants accept e-payments everywhere. As a result, a cashless society is a realistic ambition. The banks are working with retailers to define regulations.

In Singapore, Malaysia and Thailand, regulatory and standardisation groundwork is ongoing. Mobile subscriptions and internet penetration in ASEAN continue to rise. Southeast Asian banks may learn from China and put proven methods into practice.

Thailand’s banks pushed to introduce QR codes partly because of tourist links with China. Other countries may soon follow suit. Consumers in Southeast Asia may be ready to use QR codes before banks and vendors can meet the demand. They must act quickly to keep pace with the move towards a cashless society.