To Prabuddha, scanning of bar codes of products while billing was a common sight at large retail stores. However, he was a bit surprised when he saw his neighbour scanning a QR code and paying at a mom and pop grocery shop. It was 2010. Paytm arrived in the Indian market.
QR codes or Quick Response codes has revolutionised digital transactions in India. An owner of a small stationery shop informed BE, “Earlier, in case of an odd amount like `13 or `37, customers would often say they would pay later and forget. But now, they can scan the QR code and transfer the money into my account immediately.”
QR code was developed in Japan in the mid-nineties and can store up to 4,296 alphanumeric characters. Unlike a barcode, it can be scanned in any direction for facilitating payment. The government’s decision of demonetisation in 2016 axed India’s cash transaction based economy and forced people, especially small merchants, to look for alternatives. The Paytm wallet was the simplest answer and people opted for it. It went from 125 million wallet customers before demonetisation to 185 million three months later and has continued to grow, hitting 280 million users by November 2017.
QR code transactions thriving due to demonetisation According to the report, ‘Fintech in India - Powering mobile payments’, “The mobile payment revolution with its evolving form factors has led to a boom in the number of merchants adopting digital payments. From close to 1.5 million digital payment acceptance locations in 2016-17, the number of merchants accepting digital payments modes has increased
to over 10 million, in a short span of two to three years.” The global digital payments market is expected to touch $10.07 trillion by 2026.
The report further said that QR-code based wallet acceptance points with low setting up costs have been instrumental in driving mass adoption among merchants, thereby increasing convenience for customers as well, creating a virtuous cycle. The report stated, “Paytm QR is seen at different retail stores, hotels, small merchants, etc. and has become ubiquitous to cash in India.”
Amit Veer, Vice President, Paytm, in an interview to BE in March, 2018, had said, “The merchants receive payments directly into their bank accounts without any additional charges. They do not need to submit any form or document. Also, there will be no monthly limit on receiving payments.”
Advantages and challenges
According to a business analyst from HSBC Bank who refused to be named, private banks like ICICI, HDFC, Yes Bank, and Amex have started using QR codes in their mobile wallet applications. She added, “It enhances the usability of the apps as merchants are accepting wallet payments from customers. Sometimes it is even used for recommending tailored banking services to customers. Some banks are planning to use it in their multi-utility cards in place of the EMV chips as these are less costly and more secure.”
She said, “It is often used for uniquely identifying the customers much like the CIN and provides high-capacity encoding of data and a structured appending feature, which makes it more secure than the OTP and the user-defined passwords.”
As for the disadvantages, she informed that a scanner-based device is required to make use of it and hence cannot be used for services like commercial banking or in everyday branch-based banking services as it can increase the operation cost.
According to a Paytm source, “The easy use of QR code is just the tip of the iceberg that normal users see. There are challenges involved and one of the challenges is to keep this technology simple yet secure. With the rise of so many cyber criminals, it takes a lot of hard work and dedication to retain a reliable environment for the users.”
The Paytm source added, “QR codes continue to improve in the wake of technological breakthroughs. Direct QR codes have been largely replaced by indirect QR codes, meaning that retailers now have to scan temporary QR codes generated by users to complete payments, a development that has reinforced user safety. In contrast, near-field communication (NFC) has seen only marginal technological progress in recent years. Emerging biometric technologies may make QR codes and NFC largely irrelevant. Likewise, other cutting-edge technologies including block chain, virtual reality, and Internet of Things (IoT) are being applied to payments, which may further hasten the exit of NFC and QR codes. Until then however, QR codes and NFC are the two models that have proven to be reliably successful for conducting mobile payments and will continue to play a leading role in its widespread adoption.”
A leading English daily reported in September, 2019 that members of the National Payments Corporation of India (NPCI) have approved a proposal where GST benefits are extended to merchants and consumers willing to share their GSTIN and PAN details while making such payments. The idea is to offer a percentage of the GST being paid on a purchase back to consumers which in turn will boost digital payments. The NPCI will reportedly submit an implementation plan to the government. This move by the government is in line with its agenda to move towards a cashless economy. In fact, it has set a target of 40 billion digital transactions by March 2020 and UPI transactions will account for a major part of it.