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Lok Sabha TV: Public Forum: QR Codes-The Future of Payments

 

 


Lok Sabha TV: Public Forum: QR Codes-The Future of Payments


 

The launch of Bharat Quick Response Code to enable people to pay for things they buy without swiping plastic cards is a welcome step. It was launched on February 20th 2017 which makes digital payments seamless and convenient for customers and helps Government’s push to move towards cashless economy. Using Bharat QR Code one does not need to swipe the credit card or debit card at any point of sale terminal. Only QR code has to be scanned to transfer the payment.

About QR Code:

QR code  is a two dimensional machine readable code made up of black and white squares and are used for storing URLs or other information. These can be read by camera of a smartphone. Mobile wallet companies like Paytm have already been working with QR codes for sometime. Now it plans to further its investment to the tune of Rs.600 crores in the next 10 months in order to enhance its QR code based payment solution. The QR code has been developed by National Payment Corporation of India. It would require the merchants to only display only that QR code instead of multiple ones. Over the past few months the Government has launched the BHIM App and has worked towards increasing penetration of the point of sales machines in order to push digital transactions.

How QR Code works:

  1. Bharat QR Code can be linked to all the banks.
  2. Customer can easily make payments from any bank.
  3. Bharat QR Code works on Android and iPhone.
  4. It removes the user’s dependence on cards
  5. There is no need to install point of sale machines at shops where QR code is used which makes it cost effective.

Challenges:

In a country with 98% cash in circulation, electronic payments replacing cash will not be easy and will take time as the Government presses ahead from cash to less cash to cashless economy. But QR code has a potential to do so due to its simplicity of use. Cash is so popular because it is the simplest form of exchange. Now for anything to come close to cash or replacing cash, it has to be as simple and attractive if possible. QR code is simple in comparison to online payment as the later requires several steps. A reasonable bandwidth is required for online payment as well. A QR code can be scanned even on a 2G connection and takes only about three steps to make the payment. This system is extremely popular in China.

Paytm has invested a huge sum of money because it has to do some sort of evangelism. The first mover advantage also comes with first mover responsibility. Therefore, making QR code popular and increase awareness among people is where Paytm’s interest lies. But at the same time it has to be mindful of the usability of QR code. For example: if someone goes to a merchant establishment that is in the basement of a mall, trying to scan QR code might be very difficult even on a 3G or 4G connection. It is well known that internet connectivity in India is still sparse and has not reached every citizen. QR code is effective but it requires a sound supportive environment.

However, QR codes may be highly vulnerable to cyber attacks. The merchant here is more vulnerable than the consumer. Essentially, what a QR code does is when it is scanned on smartphone, all the black and white squares are converted into a URL or connects it to a website. Fraudsters may ask the merchants to sign up with their company or bank which they might create for a fraud with a QR code which is not a genuine one ensuring them a part of certain percentage of the commission they earn. This QR code can be linked to a website which is the clone of original website of any bank. This way all the money from the merchant will come to the person committing this fraud.

Conclusion:

The success of any device or process lies in the benefits it provides to its consumers. Since the demonetization was announced, digital payments have surged primarily because there was no cash and as a compulsion people had to take this way. But once cash comes back theoretically on 13th March 2017 when all limits are lifted, people may prefer to again get back to cash transactions. 40-50% of the population is still away from the banking network. Therefore, Bharat QR app mandatorily asks for having a bank account. The digital divide that prevails has to be bridged because a vast population in India is away from digital literacy, internet literacy and most importantly digital payment literacy. This has to be taken into consideration because this a move to migrate a vast population from one way of living to other. Method of payment is not just a transaction but a way of life.