The use of QR codes in places such as China and India has made accepting payments easier for many small and micromerchants. And payment facilitators have a significant role to play in helping to expand electronic payment acceptance into emerging markets using the codes.
This summer, EMVCo published interoperable specifications for both consumer-presented and merchant-presented QR codes. Consumer-presented QR codes might be more familiar to consumers in the U.S. who use mobile wallets.
When a clerk scans the code presented from within a wallet, the resulting transaction works in much the same way as if the person had presented a credit card. The merchant initiates the transaction and requests the funds from the consumer.
However, it’s merchant-presented QR codes that have opened doors for many small merchants. The ability to create a code that they can simply display at the point of sale for consumers to scan eliminates the need to purchase expensive POS infrastructure to get started accepting electronic payments.
While it’s possible for a merchant with an app on a smartphone to generate a QR code for an individual transaction, at its simplest the method allows the merchant to display a single static code at the point of sale.
A transaction is initiated by a consumer who uses a mobile app to scan the merchant’s QR code and enter the transaction amount for their purchase. The payment is then pushed through the system as shown in the diagram below.
While the simple infrastructure is a key reason for the appeal of these “push” transactions for boosting electronic payments acceptance in emerging markets, it’s not the only one.
Both the shopper and the merchant receive real-time notification of the transaction’s success. The funds can be delivered to the merchant’s account in real or near-real time. Funds availability depends on the acquiring financial institution’s policies.
This rapid acknowledgement and availability of funds is key for many small merchants who like the immediate accessibility they are used to with cash. Another key benefit is what Mastercard refers to as “finality of payment.”
Because the consumer initiates the transaction, and they and the merchant receive the immediate notification that the payment was completed, the card networks say that the risk of dispute over the charge is nearly eliminated. As a result, both card brands limit allowable chargebacks to such scenarios as goods not received.
Mastercard has enabled the payment method through its Masterpass QR solution, which is available in markets across Africa and Asia. Visa offers the capability through its mVisa mobile payments solution in that same region.