QR Payments Loosing Ground

I am a fan of QR payments. Not because there is anything special about the technology, but because it returned competition to the payment market.

QR payments wrestled the true meaning of the word “open” from the so-called “open-loop” systems, which are as open to new players as the Berlin Wall was to the citizens of East Germany.

Unfortunately, some of the main beneficiaries of the new market have grown complacent and seem to think that their success has made them invulnerable to the old, card-based systems fighting back. GCash, the largest consumer-side player in the e-wallet market in the Philippines, is an unfortunate case in point (also see my post on the GCash user experience).

For a while I have observed a strange fraying of the edges of the GCASH business which still commands a large market share in e-wallet accounts.

For a long time there was no stoping the success of GCash. The name became synonymous with QR Payments, and even today most people will ask for Gcash payment even so they are using QRPh.

The payment acceptance market exploded on the basis of simple printed QR codes and cheap mobile phones. Traditional payment cards lost market share or did not grow. Bill payment via mobile phone became ubiquitous. GCash even challenged the credit card giants on their home turf, the online payment market (Apple Store, Lazada).

Banks disappeared from the payment market and were relegated to international transactions and to being the funding sources for topping up e-wallets.

Nobody thought that the traditional credit and debit cards can recover from this perfect storm.

But then a couple of things happen that now seem to put GCash (and other wallets) in danger of becoming the Nokia phone of the payment world.

First, QRPh happened. It was meant to be the saviour, but may turn out the grave digger of QR payments. Companies such as PayMaya rediscovered the acceptance market for themselves. With the national QRPh standard, acceptance was not locked into multiple proprietary QR standards anymore. One POS terminal was enough to open up acceptance to all existing and new QR payment participants.

Overnight, merchants could dispense with all the different QR codes for different e-wallets and put one single QRPh code up instead. At the same time, new consumer-side QR providers could offer a payment instrument to their customers without worrying about building an acceptance network.

Unfortunately, because companies like PayMaya put out payment terminals with NFC capabilities, the acceptance market for contactless EMV also started to grow at the same pace as QRPh acceptance.

The e-wallets suddenly have to compete with the convenience of the simple “tap-and-go” transaction flow of contactless EMV. And, E-Wallets cannot just turn to EMV as the foundation of their payment functionality. EMV was built by the banks and their global payment systems as a prison to keep banks in and competition out. EMV might be a comfortable cage, but it is a cage nonetheless.

Together with the added functionality of ApplePay and GooglePay on the mobile phone and the unmatched suitability of contactless EMV for account based ticketing, e-wallets and their QR payment systems have to move fast, or they will end up as a footnote in the history of electronic payments.

Second, the e-wallets, and I am using GCash as an example, forgot who they are. Instead of constantly making their core products more convenient, more reliable and faster, they keep introducing unnecessary features and "products" that may make a few Pesos in the short term but destroy the unique value proposition - easy access, reliability, speed and simplicity ( see)

Third, there does not seem to be any risk management involved in the transaction processing. A ten-thousand Peso transaction works exactly like the 150 Peso coffee payment. You have my transaction history, you know a lot about my purchasing habits, I am positively authenticated through your application, and still you treat me like you know nothing about me. Is it really so difficult to make a small QR payment as fast and painless as a contactless credit card payment?

Fourth, the bill payment functionality has not evolved at all. There does not seem to be any progress. Why am I not getting a list of pending bills with the dates and actual amounts? Why is it not possible to simply click one button “Pay full amount”, maybe even for multiple bills, to take care of the monthly bill? Why can’t I see a list of paid bills with a receipt and original invoice for download? None of this exists. Instead, I have to work all of this out by hand. And if I am a few days late with the payment (which easily happens with the current system), I get a supremely unhelpful error message and have to go and pay my bill over the counter instead. I really do not want to go back to handing out my credit card details to more companies for regular automated payments. I like the control I have over the bill payment process, but the eWallets have to fix this! There is an opportunity to wrestle the subscription payment market away from the traditional payment card industry!

Finally, international acceptance. There have been attempts in the past to create a standard that would enable cross-border payments in Asia. This has not gone anywhere. National QR payment systems have started to sign bi-lateral agreements with each other. This spider web of one-to-one connections is ineffective and not sustainable. Either one single player such as AliPay will take over and become the “Visa/MasterCard” of the cross-border QR payments industry, or QR payments will wither away and customers will go back to the existing legacy card based systems.