Before the Covid-19 pandemic, many physical-store merchants considered contactless payments to be a fad. Most did not see a reason to implement contactless systems. They were, after all, expensive to install and difficult to operate with little apparent return on the investment.
Then came the coronavirus. Everything changed for contactless payments. Now consumers are reluctant to touch PIN-pads, cash, pens, and receipts.
My previous article addressed near field communication, the technology that powers most contactless payment methods in North America. Apple Pay, Google Pay, and all plastic tap-to-pay credit cards use NFC to transmit payment credentials from the customer’s phone or contactless card to the point-of-sale card reader — without actually coming into contact with each another.
In this post, I will examine an NFC alternative for contactless payments: QR codes.
A QR barcode can be read by optical scanners and by the cameras in almost all modern smartphones. When a QR code is scanned, the device can quickly respond to the instructions embedded in the barcode. A QR barcode — “quick response” — is two-dimensional because it can organize the info horizontally and vertically. A linear barcode is one-dimensional because the info is stored only horizontally.
In most cases, the QR code will instruct the scanning smartphone to navigate to a website automatically. Instead of asking someone to type a long URL, it’s much easier to point a smartphone camera at the QR code and have the website or app open automatically. It’s this ease of use that makes QR codes an alternative to NFC for contactless payments.
When scanned, a typical QR code will instruct the smartphone to navigate to a URL. Instructions, including the URL itself, are embedded in the two-dimensional barcode image.
NFC is the leading technology for contactless payments in North America. Nonetheless, it has several troublesome issues, including:
QR codes for contactless payments have the potential to overcome these challenges.
Merchants that accept QR codes display that code at the checkout counter or anywhere inside or outside the store (including websites and apps). The display can be a sign, a sticker, a poster, a business card — anything that a phone camera can scan.
When scanned, the QR code triggers the customer’s phone to navigate to a website or open an installed app. A merchant can develop a payment-accepting website, but it’s much more common to use an existing QR-code service from a payment processor or financial institution. A simple, cost-effective solution in my experience is PayPal’s QR code functionality.
When a scanned QR code opens a website, the customer enters the purchase amount, selects a payment method (usually a card or other method on file), and then presses a “pay now” or “send” button.
In most QR-code-based payment systems, the customer and the merchant will both receive a payment-complete notification immediately. Frequently a merchant will ask to see the customer’s electronic receipt (displayed on the phone) at the same time the merchant is checking to see if the payment was received. When both parties are satisfied that the transaction is complete, the customer can exit the store with the item.
Throughout the process, a customer does not have to touch anything except her smartphone. The merchant has only to look at a computer monitor, smartphone, tablet, or any internet-connected device.
QR-code payments, like NFC, face hurdles to widespread adoption. Some of the disadvantages are:
Thus QR-code payments are suitable for occasional transactions during off-peak hours. Markets, pop-up shops, special deliveries, and professional services (e.g., gardeners, plumbers, electricians) are good candidates. But for busy stores with lines at the checkout counter, NFC is a better option for contactless payments.