Barcodes have been around for decades. Popular across a wide range of sectors, they facilitate use-cases ranging from automated check-out at retailers, to patient identification in healthcare, to tracking of parcels.
Smartphones are enabling an even greater range of use-cases as barcodes can be generated in real-time and displayed on individual devices. 2D barcodes, such as Quick Response (QR) codes, are a common way to generate information on mobile devices to be saved or shared easily. A smartphone can also become a barcode reader. Each mobile operating system offers various native and third party applications for this purpose.
There are multiple ways by which QR codes attempt to reduce friction in mobile payments today. The QR code can represent a pre-paid, credit or debit account number via a smartphone application, or the code can contain payment information that can be scanned by consumers’ smartphones. Alternatively, barcodes can be generated to be scanned at check-out with pre-customized orders. For unbanked segments with low smartphone penetration, we see printed barcodes being applied in interesting ways to enable greater financial inclusion.
Fully acknowledging that the value proposition of any implementation must be compelling, irrespective of the technology employed, here we highlight a few innovative applications of barcodes in payments from around the globe.[i]
1. Barcodes with payment card information via mobile apps
The best known application of barcodes in mobile payments in the US is by Starbucks. As of July 2013, more than 10% of its transactions in the US are made with a phone.[ii] Starbucks offers two “scan-and-go” mobile payment methods for customers: a Starbucks mobile app that allows customers to load their Starbucks prepaid account, and the option of using the Square Wallet app containing the user’s credit or debit card.
To make an in-store purchase, the user opens the app on his or her smartphone, navigates the menu to generate a code, and presents the screen to be scanned at the register.[iii] Customer loyalty benefits, a rich user-interface, and personalization are cited as key drivers for uptake of this service.
2. Mobile as barcode readers for payments
Financial institutions in the Czech Republic are betting on QR code mobile payments to simplify payment of invoices, in partnership with T-Mobile and Vodafone. [iv] In this case, smartphones are utilized as code readers by consumers. Mobile applications offered by select Czech banks convert the QR codes into a pre-completed payment order, and the consumer then confirms its transmission. The use of these codes has been enabled by the standardization of the form of the codes within the Czech Banking Association.[v]
3. Barcodes on invoices for bill payments
Bill payments in Brazil are predominantly a banking service, creating the need for highly efficient and distributed collection systems beyond bank branches. Through the nation’s vast network of banking agents, or correspondentes, and standardized barcodes, Brazilians have devised a payment system that is accessible to the mass market. All paper bills have a unique number encoded in a barcode containing the account of the biller, the amount of the transaction, and the validity period for the payment, thereby allowing customers to pay at any bank or banking agent, regardless of the biller’s bank. The high degree of interoperability in the Brazilian payment system and standardization of bar code formats by the Brazilian Banking Association (FEBRABAN) has greatly facilitated the adoption of this bill payment method. New mobile money schemes in the market are poised to further reduce friction in payments.
4. Barcodes to load-up your mobile wallet or engage in e-commerce
The standardized barcodes used for bill payments in Brazil can also be used to top-up mobile money accounts, or to purchase goods online. For instance, the recently launched mobile money service Meu Dinheiro Claro allows users to request a Boleto Bancario online for the cash-in amount desired. The user then takes the pro forma invoice to any banking agent. The barcode on the printed boleto gets scanned by the agent, and the customer pays cash to the agent for the amount owed, the same way as if he or she were to purchase a physical good. In this way, customers can convert their cash into electronic value. Many e-commerce services also allow customers to pay via a Boleto Bancario at a nearby bank agent.[vi]
Similarly, PayNearMe in the US offers an alternative payment mechanism for the unbanked. Through its business partners, the company provides consumers with a payment slip which can either be printed or accessed on a smartphone. Much like the Boleto Bancario, the slip has a barcode which merchants scan to accept the cash payment. Through this platform, unbanked customers can pay their utility bills in cash at their local 7-Evelen convenience store.[vii]
Of course, barcodes are merely an enabler for payments, and there are competing technologies that may offer greater security and usability advantages. [viii] Standards can help to make a solution viable but, more importantly, a clear and compelling value proposition is necessary to drive adoption. Nevertheless, the use-cases discussed above suggest applications of a decades-old technology that, if used creatively, could offer new ways to reach underserved segments. MMU will continue to scan the landscape to spark new ideas and find relevance for unbanked consumers in emerging markets.
[i] This is by no means an exhaustive list, nor is MMU endorsing any particular technology or business
[iii] With geo-fencing features available through Square Wallet (on an opt-in basis), payment card information can automatically be pushed to customer screens when within 100 meters of a participating merchant.
[iv] http://www.telecompaper.com/news/t-mobile-czech-republic-offers-payments-via-qr-code–928587?goback=%2Egde_4545311_member_218799675#%21; http://www.telecompaper.com/news/vodafone-czech-republic-uses-qr-code-on-printed-invoices–929670
[viii] First Data, “Perspective: Pros and Cons of 2D Barcode or QR Code Mobile Wallets”, February 2013. http://www.firstdata.com/en_us/insights/Perspectives_2D_mwallet.html?page=5&cat=All+Other