QR code-enabled payments in Canada

Introduction

Quick response codes (QR codes) serve multiple purposes, from marketing signage to restaurant menus. Increasingly, QR codes are being used to facilitate payments in regions such as Australia, Brazil, Jordan, China and India.¹

Compared to other regions, QR code-enabled payments have yet to experience significant uptake in Canada. However, with the demand for contactless payments growing during the pandemic², there appears to be interest amongst consumers, merchants, and financial institutions (FIs) on QR code-enabled payments in Canada.

To deepen the understanding of QR code-enabled payments, this payment perspective explores QR code-enabled payments: what they are, what they offer, standardization and the potential role of Payments Canada.

What are QR code-enabled payments?

QR code-enabled payments are not a payment itself; rather, they function as an initiation tool. QR codes are most commonly used to initiate credit and debit card payments but can also be used for other use cases such as account-to-account³ payments.

QR code-enabled payments are either merchant or customer-presented: 

• Merchant-presented: A vendor presents their unique QR code to a consumer. The consumer scans the QR code with their mobile device and confirms the payment amount. 
• Customer-presented: A customer displays their unique QR code generated by a payment app on their mobile device. The merchant then scans the QR code to request and receive a payment.

There are two types of QR code-enabled payments:

• Static: The QR code remains the same for each transaction. This is commonly displayed as a sticker and requires the transaction amount to be entered.
• Dynamic: The QR code changes per transaction, requiring a terminal or mobile device to produce a new code. Specific transaction information, such as the transaction amount or customer loyalty number, is captured.

The benefits of QR code-enabled payment cases

Merchants, consumers, FIs, and payment service providers (PSPs) can all benefit from the use of QR code-enabled payments. Some of these benefits include:

• Optionality: QR code-enabled payments offer an alternative way to make payments.
  • QR codes remove the need for physical cards or cash, allowing for ease of payments from the comfort of a consumer's mobile device.
  • QR code payments allow shoppers to pay by snapping a photo of a merchant-displayed code or presenting their own code on their mobile device.⁴
  • Merchants can offer an alternative way for consumers to pay. 
• Access and affordability: QR code-enabled payments provide access to digital payments through existing or minimal technology.
  • The use of static QR codes can eliminate the set-up and maintenance costs associated with point-of-sales (POS) terminals. This is especially beneficial for smaller merchants that solely rely on cash and are unable to transition to digital payments due to costs.
  • Existing terminals or cellular devices can be leveraged to generate dynamic QR codes.
• Innovation: QR code-enabled payments are an innovative tool that can be used to enhance existing or to develop new payment products and services.
  • While QR codes are primarily used to facilitate credit and debit card transactions, they can be leveraged for other payment methods such as account-to-account payments.
  • FIs and PSPs can explore creative ways to leverage a QR code for the use of payments.
  • QR codes can be used to enhance existing services such as combining payment and loyalty programs. Merchants such as Dunkin’ have implemented this, allowing customers to pay with the QR code on the Dunkin’ app and collect points simultaneously.⁵
  • QR codes capture rich data that can support innovation.

QR code-enabled payments landscape and standardization

Canada at a glance

Cards continue to dominate payments for consumers in Canada, especially with functionalities such Tap-and-Go, allowing for a quick and seamless payment experience. This strong presence of cards may be a contributing factor to the minimal uptake of QR code-enabled payments in Canada.

Despite its minimal uptake in the payment space, QR codes in Canada are not new.⁶ The use of QR codes soared during the pandemic as a result of the growing need for a contactless experience. Retail and food services leaned on QR codes as a solution for consumers to, for example, view menus on their mobile devices.⁷

Beyond the retail and food services industry, 43% of Canadians noted that the pandemic changed their payment preferences to digital and contactless for the long term.⁸ In fact, since the pandemic started, 45% of Canadians stated that they were using their mobile wallet more than they did pre-pandemic.

This growing level of comfort and need for contactless payments from consumers may present a window of opportunity for merchants, FIs, and PSPs to innovate with QR code-enabled payment products. Canada currently lacks an overarching framework to guide usage, creation and safety of QR codes for the use of payments. A Canadian standard may facilitate comfort and curiosity, potentially encouraging greater uptake and adoption.

Across the globe

Adoption of QR code-enabled payments
Regions such as Australia, Brazil, Jordan, Singapore, China and India have all adopted QR code-enabled payments. The adoption of QR codes has been particularly successful in Asian economies with organizations such as Alipay, WeChatPay and Paypal.⁹ These regions tend to have low card usage and are digitally advanced, which may contribute to such success.

More specifically, in China, convenience is a huge driver for QR code-enabled payment usage. Food, clothing, housing, transportation, education and entertainment can all be paid for with a QR code.¹⁰ The Payments and Clearing Association of China states that 95.7% of Chinese mobile payments are done through a QR code.¹¹ Beyond making payments, QR codes are used in China to search for jobs, make complaints and more. This has allowed Chinese consumers to become well accustomed and comfortable with QR codes, making the transition to QR code-enabled payments seamless.

In Singapore, great strides have been made to launch a cross-border QR code payment. In March 2023, Singapore officially launched a cross-border QR code payment linkage with Malaysia that allows customers of participating FIs to make retail payments.¹² There are ongoing efforts to build a similar payment linkage between Singapore and Indonesia, which is expected to be ready at the end of 2023.¹³

In Brazil, the Central Bank introduced the PIX real-time system that enables the sending and receiving of A2A payments that do not require a credit card or bank account. PIX leverages QR codes, referred to as PIX QR codes, that can be used for a range of transactions like peer-to-peer and person-to-business. While there are parallels between the PIX QR and e-wallets, the key difference is the PIX QR is linked to the PIX real-time payment infrastructure, which is fully compatible between banks.¹⁴

With benefits, however, come drawbacks. In some instances, QR codes have been used to conduct fraudulent and illegal activities. For example, legitimate static sticker QR codes may be replaced with malicious ones, making consumers unable to differentiate between a legitimate and illegitimate QR code. As a result, users may unknowingly scan and input their personal information into a malicious QR code.

In response to these concerns, regions such as China have invested in anti-fraud systems and mechanisms. Jordan, for example, has outlawed static QR codes to eliminate fraud and security risks, opting for dynamic QR codes exclusively.

Standardization of QR code-enabled payments
Regions such as Australia, Brazil, Jordan, Singapore, China and India have introduced standards to govern the use of QR code-enabled payments that are compliant with EMVCo’s QR specifications.¹⁵ EMVCo is a global technical body that facilitates worldwide interoperability and acceptance of secure payment transactions by managing and evolving the EMV Specifications and related testing processes.¹⁶ EMVCo has developed two standards to contemplate merchant- and consumer-presented QR codes. Each standard outlines specifications such as data fields and payload objects.

The EMVCo QR standard is intended to provide baseline specifications that regions can use to build their own QR standards. Minimal customization is needed as the EMVCo QR standard is flexible enough to add multiple data fields. EMVCo does not own any of the adaptations made by regions; however, it is interested in learning from regions that do adopt the EMVCo QR standard.

India introduced the Bharat QR code that is based on EMVCo’s merchant-presented QR standard. Adoption of this standard has promoted interoperability across banks and card schemes in India. Likewise, in Hong Kong, China, the HKQR standard was introduced to ensure interoperability and transition PSPs QR codes to one common QR code.

There is some variance amongst the standards. Some regions allow dynamic and static QR codes, with instances of regions such as Jordan only allowing dynamic QR codes for security and fraud reasons. Some standards are also binding and others are voluntary guidelines. In Brazil, the standard is binding for schemes that compromise the Brazilian Payments System. Brazil also introduced a binding standard to promote standardization at a similar level for payment terminals that accept payment formats in the same equipment.¹⁷

The future of QR code-enabled payments in Canada

The future of QR codes:
It is unclear whether Canada will experience the same level of adoption as its international counterparts. However, the growing need for contactless payments, the drive to digitization and the increasingly innovative nature of Canada’s payment ecosystem may motivate the widespread adoption of QR code-enabled payments. As seen in other regions, there are various benefits and unique ways QR codes can be leveraged.

Considerations
As the Canadian markets continue to evolve and explore the possibilities of QR code-enabled payments, there are considerations to keep in mind:

• Market dynamics
  • Canada does not experience the same low card usage as Asian economies, which is one of the contributing factors of their QR code success. 
  • QR code-enabled payments are not a faster alternative to Tap-n-Go. It takes longer to scan a QR code than to tap a card. Therefore, it is unclear whether it can become the preferred payment method. 
• Fraud and security
  • Static sticker QR codes could present fraud and security risks.
    • Canada should consider whether it should only support dynamic QR codes. 
    • Despite its risks, limiting the market to dynamic QR codes may hinder uptake. Smaller merchants may not have the technology to produce dynamic QR codes. 
• Required mobile access
  • A limitation of QR code-enabled payments is that consumers require a mobile device to scan a QR code. Not every consumer may have access to a cellular device. 
• User comfort and knowledge
  • Appropriate education is needed to ensure comfort and awareness of QR code-enabled payments.

Standardization
Canada currently lacks an overarching standard for QR code-enabled payments. As seen in other regions, QR code standards have been adopted to promote interoperability, security and efficiency. Given the uptake in other jurisdictions and the interoperability that can be achieved with a standard, Ernst and Young (EY) embarked on a process to develop a Canadian QR code standard in 2020.

EY facilitated a working group of banks, processors and networks that worked together to develop an EMVCo-compliant CANQR standard. Similar to QR standards in other regions, the CANQR outlines baseline specifications to build QR payments infrastructure in Canada.

Payments Canada’s role
Payments Canada is currently exploring how it can support the facilitation of QR code-enabled payments in Canada. QR code payments are an easy and smart alternative payment method that helps to facilitate the interaction of new payment methods on Payments Canada's systems.

Particularly, Payments Canada has been exploring the feasibility of assuming a role with the QR code-enabled standardization. As part of this process, Payments Canada has conducted ecosystem engagements to assist in determining what role — if any — it could take.

Ecosystem engagements thus far reveal that:

• QR code-enabled payments are an innovative tool to enhance existing or develop new payment products.
• A QR code-enabled standard in Canada promotes safety and can achieve interoperability domestically as well as potentially internationally in the future.
• A QR code-enabled standard can increase interest and usage of QR codes for payments.

Payments Canada continues to explore its potential role in relation to QR code-enabled payments in collaboration with members, stakeholders, and regulators.

¹ See ‘Across the globe’ section of this payments perspective for more details

² Payments Canada 2022 CPMT Report

³ Account-to-Account payments (A2A) are a push or pull payment that moves funds directly between accounts as an alternative to debit or credit cards.

⁴ “QR could fuel business recover” Article

⁵ “QR Code Payments” Deloitte Report

⁶ For more information.

⁷ “QR codes are not going away anything time soon, experts say” Article

⁸ Payments Canada 2022 CPMT Report

⁹ Alipay users have access to merchant-presented QR codes for in-store checkout. WeChatPay users have access to merchant-presented QR codes for websites, physical stores, media advertising and more. Paypal offers merchant- and customer-presented QR codes primarily used for retail purposes.

¹⁰ “The rising popularity of QR codes in China why you need them” Article

¹¹ “QR code makes life of Chinese people more convenient” Article

¹² “Launch of Cross-border QR Code Payments Connectivity between Singapore and Malaysia” Article

¹³ “Singapore-Indonesia QR payment link to be ready by end-2023: Bank Indonesia” Article

¹⁴ “Local Payment Methods in Brazil: How PIX QR Works in an International Payment Gateway” Article

¹⁵ “The Use of Quick Response Codes in Payments” World Bank Toolkit

¹⁶ Overview of EMVCo.

¹⁷ “Brazil launches national standard QR code” Article

Authors

Miles Obille

Miles Obille is an Analyst at Payments Canada on the Lynx and Emerging team supporting various policy projects. Before joining Payments Canada, Miles completed her Masters in Public Administration (Policy Studies) and was the Policy Coordinator at the Greater Kingston Chamber of Commerce. Miles is interested in the intersection of social and economic policy, with a keen focus on financial inclusion and emerging payments.

Ify Idigbe

Ify Idigbe is a Senior Policy Analyst at Payments Canada on the Retail Payments Products team, where she has successfully led multiple policy projects. Ify has a wide range of experience with her degree in Economics and a Master's in Public Administration, as well as experience in the financial sector and public policy in government.