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Will QR codes wipe out cash and cards?

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There’s been an interesting but hidden trend taking place. It started in China with Tencent and Alipay and has now gone global. The phenomenon is called QR codes.

QR, or Quick Response if you prefer the longer form, is a code that originated in Japan in the 1990s, and has gradually grown from a system to tag vehicles during manufacturing to an advertising mechanism to a way to download apps to a payment system.

I originally began talking about QR codes in payments when I heard about the success of Tesco in South Korea. This was at the turn of the 2010s, and Tesco launched a virtual supermarket on the Seoul subway. The idea was that commuters could order a basket of groceries using the QR codes under the photographs of each item. These would then be delivered to a place and at a time chosen by the traveller.

It was a big success, with the app becoming the most downloaded in South Korea that year and Tesco’s brand, Homeplus, rising to become one of the largest retailers in the country. However, it seemed a one-off in the context of global activities, with QR remaining very Asian. Then Tencent and Alipay launched payment systems based upon QR codes, and it has been a massive success. Last year, Chinese citizens spent over $15 trillion using mobile payments and QR-codes for example, compared to nothing in 2013. By comparison, American citizens spent $150 billion using mobile payments in 2017, one-hundredth of the Chinese numbers, and China expects their mobile payments to triple by 2020 to almost $50 trillion.

Why has it been so successful?

The answer is its simplicity.

For example, there is a trial taking place in the UK right now, where homeless people are wearing QR codes around their necks in an attempt to increase donations. Passers-by who wish to give money – but have no cash in their pocket – can scan the code using their smartphone, and make a mobile payment direct to the homeless person. The donation goes into an account which is managed by a case worker, who ensures that the money is spent on agreed targets, such as saving for a rental deposit or a new passport.

In other words, the simplicity of a QR code

A merchant just needs a QR code on a piece of paper to be able to take payments. In other words, there is no complex set-up or requirement for new technologies at the point-of-sale. As a result, anyone selling anything in China from the most elite retail stores to hawkers on the streets of Shanghai can be entrepreneurs, taking payments from anyone’s mobile phone. For the consumer, it’s easy too. A consumer just needs to download an app and then can make payments anywhere.

However, unlike Apple Pay or Android Pay, the consumer and merchant also get strong incentives to use the system. Merchants can advertise offers and discounts to targeted customers located near the store and customers get personalised ads at the point of relevance, e.g. as they are in the store. It works beautifully.

There has then been the expansion of this system worldwide, under the shield of tourism. Again, it was a few years ago that I heard about Alipay and WeChat Pay moving into Europe and America through partnerships with firms like Wirecard, Ingenico and First Data. These partnerships were created to enable leading retailers in Europe and America to target Chinese tourists with offers. A great example is the partnership between Alipay and ePassi in Finland.

Finland attracts over 550,000 Chinese tourists every year, whose average spend is €940 during their visit. Alipay wanted to enable these tourists to use the same mobile wallet in Finland as they used in China and found a perfect partner in ePassi. ePassi was running a mobile app for Finnish companies to pay employees fringe benefit programmes using QR-codes. Alipay signed contracts with ePassi in June 2016 to partner for a live service that would enable Chinese tourists to travel to Lapland for Christmas and use Alipay’s QR payments system. The result was that the tourists stayed over for twice as long and spent three times as much as they did the previous year.

The success of the program has now expanded to 1000’s of Finnish merchants, with revenues doubling in 2017. There’s no stopping there either. By way of example, Alipay estimate that up to eight million Chinese tourists will be coming to Finland in 2020. That’s a lot for a country that has a population of five million people and this is strategically important to the country, which hopes to become the hub for all Chinese tourists coming to Europe.

What I then felt is that the Alipay and WeChat Pay story of enabling QR-code payments could be a stealthy way of creating a new global payments system. For example, the day after I heard the Lapland story, I chaired a meeting of people in Stockholm discussing the key Nordic payments wallets which are MobilPay (Denmark), Siirto (Finland), Swish (Sweden) and Vipps (Norway).

What I realised as we talked, is that Nordic citizens cannot travel the 43 kilometres from Copenhagen, Denmark to Malmo, Sweden, with the same mobile payments app. Yet Chinese citizens can travel over 6,000 kilometres from Beijing to Lapland and pay for everything with the same app. If Alipay put a local language front-end on their service, they could rapidly displace the local bank apps and, potentially, all of the point-of-sale systems without a blink of an eye. That’s an interesting thought.

Chris Skinner Author Avatar

Chris M Skinner

Chris Skinner is best known as an independent commentator on the financial markets through his blog,, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal's Financial News. To learn more click here...

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