Standardising QR code payments in Europe
QR codes can be a powerful tool for the ongoing digital transformation of the European payments landscape. They have the potential to accelerate the adoption and use of mobile payments as they represent a versatile touchpoint between merchants and consumers, as well as enable innovative ‘new retail’ and mobile lifestyle use cases seamlessly connecting in store and online experiences.
They also represent an opportunity for financial institutions to expand customer value by facilitating QR code payments directly from their mobile banking apps, with integrated transaction authentication and value-added services. This report explores the economic benefits of standardising QR code payments in Europe.
A single, open European standard for QR code payments can deliver substantial economic benefits to merchants, consumers, and the society as a whole.
This is because:
- QR code payments are quick, secure, and convenient: QR code payments work by scanning a two-dimensional Quick Response code with a mobile app or existing POS equipment. Scanning a QR code quickly, securely, and conveniently initiates a payment and transfer of information between payer and payee. Account-to-account (instant) payments, (dematerialised) card payments, and e-money payments can all be initiated by scanning a QR code, regardless of payment service provider or mobile operating system.
- QR code technology has been successfully adopted for payments in multiple countries, but in Europe its scalability is jeopardised by a fragmented landscape: Within the Single Euro Payments Area, there are several payment services that use QR codes, but they have not gained the same popularity as QR code payment services in many parts of Asia and Latin America. This is partly because the QR codes used by payment service providers in Europe are not interoperable: a merchant wishing to accept QR code payments needs to implement different QR codes for each separate provider. This constitutes a significant barrier to entry and expansion, leaving the market faltering.
- A common, open standard has the potential to:
- Significantly reduce merchants’ cost of accepting QR code payments as they only need to invest in a single mechanism for accepting QR code payments;
- Allow QR code payment providers to enter the market without having to create their own QR code format; and
- Encourage adoption and use by customers, as their chosen QR code payment service would work everywhere where QR code payments are accepted.
The economic benefits from a common, open European standard for QR code payments have the potential to reduce the investment needed to accept QR code payments and the cost of accepting and making payments overall. Merchants would face lower costs, and consumers would face lower prices. At the lower end, with a European QR code standard in place, we estimate the total annual cost savings to be up to €3bn for merchants and €2bn for consumers. If the take-up levels reached the higher end of market observers’ estimates, these savings could be as high as €7bn and €5bn for merchants and consumers respectively. The main sources of these benefits are:
- Introduction of instant payments into bricks-and- mortar retail, for which QR code payments are an ideal supportive mechanism; and
- Bolstering of competition between different payment services, resulting in downward pressure on merchants’ payment acceptance cost and stronger incentives for payment services innovation.
QR code payments are accessible to everyone with a smartphone, which are now ubiquitous in Europe. This means QR code payments can help support financial inclusion for both consumers and merchants by providing easier access to modern electronic payments.
For further information, please contact Antti Lemberg, Head of Financial Services.
The study is commissioned by Ant Group.