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October 2, 2018
Leah Middlebrook | Vice President Business Development, International Payments
Asian economies have surpassed supposedly more advanced markets in the number and value of mobile transactions and it’s all thanks to QR codes. Created in the early 1990s to track vehicles in the manufacturing cycle, Quick Response (QR) codes quickly spread, but were mainly considered a novelty – and all but dead – until being adopted by social media/payment giants AliPay and WeChat. Both companies chose QR codes as an easy way to enable contactless payments. Simply scanning a code now allows consumers to pay for anyone from a street vendor to a restaurant to a retail store and more.
Although Asian markets had much higher usage rates of cash than Europe and the United States, where debit and credit cards are more common, the move to mobile payments has been much faster in the East. This is partly due to more legacy infrastructure in the West, as well as old payment mechanisms, such as checks, which haven’t been retired even as new options moved to the front.
Across the globe, countries are keen to move to a more cashless (and checkless) economy, and mobile payments are a primary enabler. In Asia, where there is a much higher number of underbanked consumers relying exclusively on cash, there is a perceptible need to move more people into the digital economy.With QR codes, huge percentages of the world’s population are bypassing cards and are jumping from cash directly to fully electronic payments.
The convenience, simplicity, and privacy of QR codes is what has made them so attractive in Asian markets. Near-field Communication (NFC), which companies like Apple and Google are pushing in Europe and the United States, relies on enabled terminals at the point-of-sale, and not all smartphones offer NFC. The result is that NFC availability is sporadic. QR codes, on the other hand, do not even need an internet connection to operate, almost any phone can read them, and merchants do not even need a bank account to get paid.
That ease means use of QR codes for mobile payments and coupon redemption will continue to grow. Juniper Research predicts a 300 percent surge over the next five years as more merchants rely on the technology. At that rate, QR codes on mobile devices could surpass five billion by 2022 – up from just one billion last year. But local governments are not relying on simple organic growth to meet their goals of financial inclusion, reduced fraud and the removal of cash. India, for example, forced the issue with the demonetization of larger bills, while also encouraging digital payments with the launch of their unified payment interface (UPI). The result has been massive numbers of merchants and consumers switching to QR codes for mobile instant payments almost overnight – even extending to street vendors on the bustling streets of Indian cities.
China was probably the first to adopt QR code payment initiation in a big way when WeChat and AliPay included the services into their platforms. But, in a highly competitive region, neighboring countries are keen to keep up. Singapore, Thailand and Malaysia are among countries that had 80 percent or more of transactions completed using cash before QR codes dramatically changed things. Indonesia and the Philippines are following the trend and cooperating to introduce a standard QR code solution. In post-demonetized India, with over 80 percent of the cash removed from the economy, the surge toward digital payments has been strong as people face the reality of less cash availability.
While QR codes may be quick and easy, interoperability remains a potential issue since there is no clear set of standards and formats. Some organizations (ISO, EMVCO, etc.) are attempting to standardize globally, but the fact that many Asian nations have already implemented domestic solutions means an overarching standard for QR codes may not happen.
The second coming of QR codes has proven to be a game-changer in Asia. That success may be spreading to Latin America, which has similarly high levels of underbanked consumers. More developed markets like Europe and the United States will likely have to confront this revolution soon, although their legacy ecosystems may make for continued slow progress.
FIS | Vice President Business Development, International Payments
Leah Middlebrook is VP of Business Development for International Payments responsible for global market strategy with a focus on identifying future payments trends, FIS’ Payments Innovation Labs in Brazil, India and Thailand, partnership development and strategic opportunities across FIS’ global footprint. She joined FIS in 2003 and has over 25 years in the financial services and payments industry. In 2017, Leah was part of the award-winning CAO team receiving Gold for Women in Business Awards Management Team of the Year and Women in Payments USA Team of the Year. Leah leads the FIS Women in Payments Leadership Mentor Program team.
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