NextMoney asked Justin Xiao, COO of Railsbank APAC, for a view on the spread of the QR Code throughout SE Asia. This is what he had to say:
I get asked all the time, just why is the QR code payment becoming so important throughout Southeast Asia? There are three big drivers behind it gaining traction and these are setting the pace. The first is in the push for digitalisation and a cashless economy, governments have set national QR code standards. Second is the influx of Chinese tourists and merchants catering to their preferred method to pay through QR. Third is the burgeoning payment ecosystem ripe with e-wallets which have embedded QR code payment capability as a standard feature.
National QR Standard
Southeast Asia regulators are setting the pace in driving the digitalisation of cash. They witnessed the momentous event in India when demonetisation shocked the financial system in 2016 and how the national QR code standard – the first in the world was called Bharat QR – supported the sudden shift to electronic payments.
Encouraged by the heads of government and industry heavyweights, the regulators in Southeast Asia galvanised and set an equitable playing field by establishing their own national standards: Thai QR (in 2017), SG QR (in 2018), QRIS (in 2019).
More critically, the QR code offered a CX interface and an onramp for retail payments on top of the national real time payment rails, a critical component that deserves a writeup on its own. An example of government-supported adoption is the recent example in Thailand where COVID subsidies were distributed through an app to ten million registrants and the only way to spend the money was by scanning a Thai QR.
The hand of the government has perhaps the most critical role to play in fostering adoption. When regulators start calling industry leaders softly asking how they are contributing to the national agenda, this influences focus and sets pace.
Chinese tourists introducing new behaviour
When Chinese tourists arrive in Southeast Asia en mass they do not leave home without their e-wallets. What’s more, along with their arrival came a familiarity with QR code as a payment modality. Alipay and WeChat Pay worked quickly to add their acceptance marks at all favoured destinations of these tourists. This, in effect, “trained” merchants on how to operate QR code payment and spurred an ecosystem of payment facilitators and banks that supported QR enablement. In Thailand and elsewhere, when acquirers upgraded payment terminals, they opted for the newer generation, 5 in 1 android powered terminals, that can easily present QR codes, or scan ones flashed on smartphones.
Symbiotic growth with e-Wallets
A key factor for consumer adoption of e-wallets is the ability to make payment at physical merchants and the quickest way to build acceptance points at scale is through QR code deployment.
The digital savvy population of Southeast Asia has been quick to adopt e-wallets with a plethora of offerings from banks and non-banks. It started in 2010s with telcos looking to improve average revenue per user (ARPU) – inspired by mobile money operators in Africa – then eCommerce and ride-hailing platforms followed, inspired by China, and then bank incumbents came along playing defence.
Now it is commonplace for operators in this region to have embedded QR code payment capability as one standard feature. As a result of the current level of adoption, the chasm between early adoption and early majority has narrowed significantly. It is also fair to claim, the adoption of e-wallets has had a direct impact on the utilisation of QR codes as a payment method.
Broadly speaking, however, cash is still the dominant method in Southeast Asia with the cash penetration spectrum differing market by market and use case by use case. I do not envisage the QR code to become the dominant payment method anytime soon.
However, its versatility has a critical role to play in solving specific payment use cases, whether it be everyday low value transactions at a wet market, bill payments, or payment on delivery.
As for the future, a combination of factors including the continuous drive by governments to create level playing fields, the adaptation lessons learned from the super-apps in China and the growing number of e-wallet players, will continue to propel adoption and eventual ubiquity across Southeast Asia.
