Ideas & Updates

How to shape inclusive financial ecosystems with interoperable QR codes

© ©Better Than Cash Alliance

In the pursuit of digital inclusion, the need for interoperability is paramount. Worldwide, more than 25% of adults are benefiting from government payments, whether they are in the form of public sector salaries, pensions, sector-specific subsidies, or social safety net programs, marking a 400 million increase in just the past four years. The recent surge in digital payments adoption is a promising trend. There was a sharp 20 percent rise in overall digital payments between 2014 and 2021, according to The World Bank. However, it has, at times, left many users isolated in restrictive silos, unable to transact seamlessly across multiple providers.

Such isolation diminishes the convenience, affordability, and utility of digital payments. To address this, it is essential to uphold the UN Principles for Responsible Digital Payments, particularly Principle 7, which emphasizes the importance of user choice through interoperability.

Imagine a world where we can reduce financial fraud, bridge the digital divide, and foster cross-sectoral innovation, while ensuring that even the most remote populations have access to essential financial services. In a landscape where financial transactions are often limited to physical cash or traditional cards, there is an increased risk of counterfeiting and theft, and public systems can become less responsive during crises. Moreover, isolated digital payment solutions can exacerbate exclusion, leaving certain segments of society underserved. To address these challenges, the key lies in embracing interoperability standards for digital payments, so people can make secure, real-time transactions from anywhere, using a variety of mobile payment apps, regardless of the merchant’s choice. By establishing standards that promote interoperable Quick Response (QR) codes, it is possible to create a more unified financial ecosystem, benefiting banks, financial institutions, mobile money services, wallets, and other payment methods.

The recent workshop, “Advancing Financial Innovation: Interoperable QR Codes,” co-hosted by the Better Than Cash Alliance in collaboration with the Centre for Digital Public Infrastructure, sought to address the “why,” “what,” and “how” questions of interoperable QR codes. The event attracted participants from over 30 countries, including Nigeria, Brazil, the Philippines, India, and international organizations like the Bank of International Settlements, The World Bank, International Monetary Fund, and the Cambridge Centre for Alternative Finance.

Advancing Financial Innovation: Interoperable QR Codes

The workshop gathered distinguished speakers from a wide spectrum, including central bank officials, switch operators, regulators, financial service providers, innovators, and thought leaders. This diverse group actively contributed to the shared mission of shaping a more inclusive and equitable digital future for all.

Notable speakers and highlights included:

  • Filipe Correa Lima da Silva from the Central Bank of Brazil, who shared insights into the PIX experience, Brazil’s digital payment system.
  • Premier Owoh of the Nigeria Inter-Bank Settlement System, who guided participants through Nigeria’s QR code evolution over the past two years.
  • Bridget Rose M. Mesina-Romero from the Central Bank of the Philippines, who shared the Philippines’ payments digitization journey.
  • Anubhav Sharma from the National Payments Corporation of India, providing insights into India’s Unified Payments Interface journey.
  • Prerna Saxena, Head of Asia-Pacific at Better Than Cash Alliance, who set the stage by introducing the UN Principles for Responsible Digital Payments.
  • Kamya Chandra from the Centre for Digital Public Infrastructure, who discussed the benefits of interoperable QR codes and how CDPI is advancing the agenda for economic growth.

Key insights from the workshop:

  1. QR Code Design for the Future: Dr. Pramod Varma, Chief Architect of India’s Aadhar, stressed the significance of designing QR codes that are future-proof, network-driven, and agnostic. These QR codes should accommodate various form factors, source accounts, and authentication modes, emphasizing their adaptability and long-term relevance.

  2. Inclusive Financial Ecosystems: Bridget Rose M. Mesina-Romero from the Philippines and Premier Owoh from Nigeria underscored the importance of trust in digital payment infrastructure and QR code design. Their commitment to offering zero-cost solutions for low-value payments demonstrates a significant stride toward achieving accessible financial inclusion.

  3. Digital Transformation in Nigeria: Nigeria’s NQR platform has made notable progress in enhancing payment experiences, bolstering security, and reducing operating costs. This achievement is a testament to the power of interoperability and standardized QR codes.

  4. QR Code Advancements in the Philippines: The Philippines’ QRPh standard has played a pivotal role in their digitalization journey, particularly in the realm of digital retail payments. Despite substantial growth, ongoing challenges in digital payment adoption highlight the importance of making merchant fees more affordable for micro-merchants.

  5. QR Implementation Success in Brazil: Brazil’s successful implementation of QR codes in its instant payment system, Pix, since 2019, has brought numerous benefits. The introduction of a nationwide standard QR code, coupled with the usage of static and dynamic QR codes for various payment methods, has enhanced the digital payment landscape. Furthermore, strict adherence to security measures and protocols has ensured the reliability of the system.

  6. QR Code Revolution in India: India’s National Payments Corporation (NPCI) has harnessed QR codes effectively through its Unified Payments Interface (UPI). By incorporating QR codes with URL specifications, they have encouraged nearly 10 billion financial transactions and almost 20 billion non-financial transactions, with a strong focus on merchant payments. This flexibility has allowed various participants, including fintechs, to thrive, ultimately contributing to a more inclusive digital payment ecosystem. The impact of these efforts has been positive for merchants, providing real-time liquidity and benefiting both organized and unorganized segments of the economy, such as small grocery stores and roadside vendors.

The Better Than Cash Alliance remains committed to advancing responsible digital payments and financial inclusion. We look forward to further partnerships and collaborations to shape a more inclusive and innovative digital financial landscape. Together, we can drive positive change in the world of digital finance.