Will QR Codes Be the True Future of Retail Payments?, By ‘Tope Fasua

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This is where the world is going. It sometimes sounds cold – not having to contact anyone – but in an age of innovations and disease – it is a necessary path we must have to pass through. Many of our young ones will readily embrace this innovation, even though the debates may come up later about whether we should create avenues for more human contact.

I started my banking career at Citizens Bank, Plot 130, Ahmadu Bello Way, Victoria Island, Lagos on the 13th of October, 1992. Those were days of innocence for almost everyone. The June 12, 1993 election was just around the corner, but the military ruled, and no one was sure of what would pan out. We worked rather hard but looking back today, things were generally slow. My typical day at work started around 6.45 a.m. in the morning, as I had to be well-coordinated and ready to roll by as early as 8 a.m. In the earlier days, I closed late – sometimes by 10 p.m., but averagely by 9 p.m. I was a Clearing Officer. I had a famous ‘portmanteau’ (briefcase) stuffed with bank cheques that I carried about, to and fro the Clearing Office on the 6th floor of the old Central Bank building at Tinubu Square. The Clearing Officer’s work starts when others have finished, and somehow never stops. You had to rush your cheques drawn on other banks to clearing in the morning and bring back those drawn on your bank. Your figures had to ‘balance’ and the entire clearing house must ‘be in proof’ before anyone left. A one kobo difference was a big deal, so it demanded that you understand precision and accuracy at all times. A good day was one in which your outgoing numbers was a lot more than your incoming ones.

In those days of yore, local cheques required five working days to have value. Those drawn outside the location (State) where they were presented (otherwise called ‘upcountry cheques’) would require all of 30 days. I recall a few frauds happened back in the day as a result of people ‘teeming and lading’ – playing fast and loose – with upcountry cheques. Those days are long gone. Computers have replaced many of the manual functions that we engaged in, and the Nigerian Interbank Settlement System (NIBSS) Plc, established in 1993 through a collaboration between banks and their regulator, the Central Bank of Nigeria, has seen momentous innovations that have greatly transformed the space and positioned Nigeria as a linchpin for continuous modernisation in finance. I recall that when Nigeria managed to achieve a two-day cheque clearing cycle, the same transaction still required five days in the United Kingdom. Whereas I understand that the UK has altogether gotten rid of the use of cheques today, there are many innovations that we have in our financial economy that many developed ones do not have. Perhaps our economy is peculiar in some ways – many small payments get made peer-to-peer, 41 million micro and small enterprises exist, and so on. 

NIBSS’ achievements need to be chronicled very briefly here. Established in 1993, by the year 2002 Nigeria managed to reduce the cheque clearing cycle to T+3 (today plus three days), down from T+5. We were already on our way to financial market excellence. Let me pause a bit to note one unique thing about innovation – it is all about making improvements even when most people will wonder whether such improvement is needed. Many would have thought: ‘why the hurry? Who says we cannot wait for 5 days to clear a cheque?’ back then. But look at the world today, moving at such a frenetic pace, with ‘no time to check time’, as the say on the streets today! And so, by 2007, Nigeria was able to achieve a T+2 turnaround on cheque clearing (this is the point I mentioned above, where UK lagged behind). By 2009, Nigeria was already standardising the use of prepaid cards, and in 2010, a limit of N10 million was set on cheques, with a view to encouraging the use of electronic transfer channels, thereby providing more information to curb money laundering and the finance of terrorism. Cashless society was taking hold.  By 2012, cheque clearing in Lagos became a T+1 affair and by 2013 this went national! These are great achievements that we have come to take for granted.

NIBSS and its partners seized the moment in 2020 to standardise the use of Quick Recognition codes in payment systems in Nigeria, just as some other innovative countries have been doing. The need for contactless payment systems has been enhanced by the still ongoing pandemic, thus necessitating rapid innovation from a health and efficiency angle.

The Future of Payment Systems

Today, Nigerians also use USSD (Unstructured Supplement Service Data) codes routinely to send money among themselves and to make payments in retail transactions. Everyone with a bank account in Nigeria today carries a debit card and there are credit cards issued to prime customers by some service providers. There is even what is called mobile money or mobile wallets, which are monies stored in mobile phones. What is more? Millions of savvy Nigerians have installed apps in their phones and other devices, from which they can make payments and do transfers for sundry reasons. Even the erstwhile restrictions that Nigeria-issued bank cards used to have are disappearing. Could it be said that we have now fully integrated with global finance? Of course, there are grey areas and a large room for improvement but these achievements in our payment systems are worthy of commendation.

As the world went into a painful lockdown in the year 2020, NIBSS did not go to sleep as it worked on the development of a National QR code. Invariably, a few closed schemes existed, which have not been able to leverage national acceptance. NIBSS and its partners seized the moment in 2020 to standardise the use of Quick Recognition codes in payment systems in Nigeria, just as some other innovative countries have been doing. The need for contactless payment systems has been enhanced by the still ongoing pandemic, thus necessitating rapid innovation from a health and efficiency angle. Innovations can never be too much, and thinking organisations much achieve that pedestal where they are always ahead in terms of thinking. So, having a T+1 cheque clearing cycle, debit and credit cards, electronic banking, USSD code for payments, mobile money and other innovations in the bag, could never be enough. Nigeria could do with even more. In comes QR codes. What are they?

Well, QR – or Quick Recognition – codes are like barcode tokens which mask data. The masking provides one level of security. However, QR codes are even more important in the payment systems space because they are a sure way of providing immediate value to merchants (sellers) for their transactions. As payments are made, the retailer receives immediate value, rather than have their funds being warehoused by a third party until settlement is done at the close of business. This makes for real-time planning and decision-making. Transaction costs are also reduced marginally, just as the platform provides more interactive reporting, accounting and reconciliation services. It is even more enthralling that merchants (retailers) could set up this system themselves and with very little hassle, just by downloading the NQR (Nigerian QR) app on playstore, and that is the same thing payers need to do. I recall how much hassle retailers sometimes went through trying to obtain POS (Point-of-sale) machines. The banks have invested a huge sum on these machines and some are complaining of not having recouped their investments. The customers are also complaining that the machines are being rationed. So, imagine a situation where all the brouhaha about the issuance of machines, set-ups, constant calls to know if your machines are still working, reconciliation snafus, accounting nightmares and whatnot, suddenly disappears? Imagine that this QR codes could be set up by anyone on their phones, such as to permit peer-to-peer, not only peer-to-business exchange of money? I believe that this will enhance the growth of legitimate transactions. Imagine that a creditor could easily collect his debts by linking his QR with his debtor’s QR! This is one less excuse for not paying up. However, this system allows for more transparency as regulators could continue to have a handle on financial flows within the system.

How it works? Simple. To make a payment in the supermarket, all you have to do is get to the counter/cashier and scan the QR code of the store. The account details of the organisation will be displayed and all you have to do is enter the sum total of your cart and pay through your bank.

How it works? Simple. To make a payment in the supermarket, all you have to do is get to the counter/cashier and scan the QR code of the store. The account details of the organisation will be displayed and all you have to do is enter the sum total of your cart and pay through your bank. I read also that in some instances, a shopper could continue scanning as they pick items such that by the time they get to checkout they already know how much to pay. This way, shoppers could also control how much they spend (remember those instances you had to return items to the shelf just because you had already spent more than you could afford?). This latter scenario also reminds one of those Amazon contactless supermarkets where once you pick an item off the shelf, that item drops into your virtual shopping cart and without contacting anyone, once you leave the shop, the total amount of your shopping gets taken out of your account virtually. There is more! It is also comforting to note that QR codes can be used in withdrawing cash at ATMs without touching the screen, or for payment and collections at toll booths.

This is where the world is going. It sometimes sounds cold – not having to contact anyone – but in an age of innovations and disease – it is a necessary path we must have to pass through. Many of our young ones will readily embrace this innovation, even though the debates may come up later about whether we should create avenues for more human contact. For sure and for now, NQR codes will add good value when it debuts and mainstreams in our payment systems.

As I type this, I cannot help but wonder: Are we staring into a future of payment systems bliss with the NQR codes?

‘Tope Fasua, an economist, author, blogger, entrepreneur, and recent presidential candidate of the Abundant Nigeria Renewal Party (ANRP), can be reached through topsyfash@yahoo.com.

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